When it comes to your business, your house is no different than any other business expense you pay for personally.(link to previous article about “Personal Expenses”) If you use part of your house to run your business, you are able to write-off a portion of the house and some of the costs to operate and maintain the house.
Let’s say you use a 10 foot by 10 foot spare bedroom of your 2,000 square foot house to run your business. You can deduct 5% (100/2,000) of certain household expenses. These expenses typically include some or all of the following: mortgage interest, real estate taxes, rent, utilities, insurance, general maintenance & repairs, and depreciation of the house itself. Keep in mind the deduction has to be related to your business, so if you make improvements to another room in your house that is not used for the business, the costs of the improvements are not deductible to your business.
In order to qualify for these deductions, the area of your home must be used exclusively for your business. If you store out of season clothes in the room or have people stay in the room when they are over, you can’t say the entire spare bedroom is your office. This doesn’t mean you can’t deduct the 5 foot by 5 foot area of that room that is used exclusively for your business.
If you are wondering if your space qualifies ask yourself, would I have this “stuff” in my office if the office were not in my house? If so, you are probably on the right track for being able to deduct the expenses associated with the space.
Each person’s situation is unique, so it is always a good idea to consult with a CPA prior to sending in your tax return with these deductions to make sure it is the right solution for you. Make it happen!
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