- What Percentage of Expenses Are Tax Deductible for a Home Business?
- The Tax Deduction for a Home Office & Telecommuting
- How do I Get Approved for a Mortgage for a Second Home?
- Can You Double Count the Energy Efficient Deduction With a Home Office Deduction on Taxes?
- Can I Use a Small Area of My Apartment Home As a Deduction on My Tax Return?
- Can Rent and Utilities Be Used as a Tax Deduction?
If you are self-employed and regularly use part of your house exclusively for business, you can deduct a certain percentage of rent, utilities or other costs on your federal tax return. This is known as a home office exception. In order to do so, you'll need to figure out how many square feet your home office occupies, and how that compares to the square footage of your entire house.
Total House Area
In order to correctly calculate the square footage of your home, you need to measure the dimensions of each room. This can be done by measuring the length and width of each room with a measuring tape. Then, multiply the length and width of each room to find the square footage. Add the square footage of every room together, and you've arrived at the total square footage for your house.
Home Office Area Percentage
You should have already calculated the square footage of your home office in the process of finding the total area of your home. The key figure for your home office deduction is the percentage of your home that the home office occupies. This can be found by dividing the area of the home office by the total area of the home. For example, if the home office was 100 square feet and your home measured 700 square feet, the percentage would be 100 divided by 700, or about 14 percent.
Figuring Your Deductions
Any costs associated solely with your home office -- a second phone line, for instance, or improvements made to the office -- may be deducted in full. The percentage of space your office occupies in your home comes into play when you want to deduct costs associated with the upkeep of your entire home. For example, if your office occupies 14 percent of your home, you can deduct 14 percent of the rent or mortgage, and 14 percent of utilities such as heat and electricity. These deductions are figured on IRS FORM 8829.
Exceptions to the Rule
In addition to home office space, you may also be able to deduct space in your home that is set aside solely for the storage of products or supplies for your business. For example, if you use an area of your basement that is 6 percent of your home for storage purposes, the deductible area of your home rises from 14 percent to 20 percent. There is also an exception for home daycare businesses. Because home daycares typically do not use much space exclusively for business, they are allowed to deduct expenses for living room and other areas used by both the business and the home occupants based on the percentage of time an area is used for business purposes.
- Ryan McVay/Photodisc/Getty Images