For us that work from home, there are a few tax deductions we can claim – regardless if you rent or own.

As entrepreneurs, a lot of us work from the comfort of our coach homes.

Today we’ll explore 2 tax deductions available for small business: Home Office and Utilities

Home Office:

Most of us start our business from our homes. IRS has the “home office deduction” that we can take advantage of. This means that the space you use exclusive and is the main place of your business can be tax deducted.

Put it simply, it must be a place that is used only for work. A dining area converted to an office (my case) counts. Using the kitchen counter for work does not.

There are two ways we can calculate the home office deduction:

  • Percentage of Home Method: We calculate the % of the home/apartment that is used for the business. Let’s say, your home is 1,500 square feet and your office nook is 200 square feet, the percentage would be 13.33% (200/1,500).
  • Simplified Method: In 2013, the IRS implemented the simplified method as an alternative, where each square feet is $5 and there’s a maximum of 300 square feet that can be deducted. In this case, for your 200 square feet office nook, you’d be able to deduct $1,000.

Your tax professional will be able to advise you on which method you should be using. (We use the Simplified Method at home – it’s just simpler – no pun intended)

Utilities

Anything you pay to have your business running:

  • Electricity/Gas
  • Internet (for the business and on the go)
  • Water/Sewer
  • Phone – if you use your personal phone for business as well, you can deduct a percentage (an estimated of how much usage is personal x business)
  • etc

So, let’s make sure (if not for productivity sake, for tax deductions) to have a dedicated office space in our home and to track our business-related utilities.

Don’t forget to talk with your financial professional to strategize for tax season. If you don’t have one – schedule a discovery call with us!