Certain expenses are deductible whether or not you use your home for business. If you qualify to claim business use of the home expenses, use the business percentage of these expenses to figure your total business use of the home deduction. These expenses include the following.
Real estate taxes.
Deductible mortgage interest.
Casualty losses.
Other expenses are deductible only if you use your home for business. You can use the business percentage of these expenses to figure your total business use of the home deduction. These expenses generally include (but are not limited to) the following.
Depreciation (covered under Depreciating Your Home).
Insurance.
Rent.
Repairs.
Security system.
Utilities and services.
Real Estate Taxes
To figure the business part of your real estate taxes, multiply the real estate taxes paid
by the percentage of your home used for business.
For more information on the deduction for real estate taxes, see Publication 530, Tax Information for First-Time Homeowners.
Deductible Mortgage Interest
To figure the business part of your deductible mortgage interest, multiply this interest by
the percentage of your home used for business. You can include interest on a second
mortgage in this computation. If your total mortgage debt is more than $1,000,000 or your home
equity debt is more than $100,000, your deduction may be limited. For more information on
what interest is deductible, see
Publication 936, Home Mortgage
Interest Deduction.
Casualty Losses
If you have a casualty loss on your home that you use for business, treat the casualty
loss as a direct expense, an indirect expense, or an unrelated expense, depending on
the property affected.
Direct expense.
If the loss is on the portion of the property you use only in your business, use the entire loss to figure the business use of the home deduction.Indirect expense.
If the loss is on property you use for both business and personal purposes, use only the business portion to figure the deduction.Unrelated expense.
If the loss is on property you do not use in your business, do not use any of the loss to figure the deduction.
If you are filing Schedule C (Form 1040), get Form 8829 (pdf) and follow the instructions for casualty losses. If you are an employee or a partner, or you file Schedule F (Form 1040), use the worksheet. You will also need to get Form 4684, Casualties and Thefts (pdf).
For more information on casualty losses, see Publication 547, Casualties, Disasters, and Thefts (pdf).
Insurance
You can deduct the cost of insurance that covers the business part of your home. However,
if your insurance premium gives you coverage for a period that extends past the end of
your tax year, you can deduct only the business percentage of the part of the premium
that gives you coverage for your tax year. You can deduct the business percentage
of the part that applies to the following year in that year.
Rent
If you rent the home you occupy and meet the requirements for business use of the home, you
can deduct part of the rent you pay. To figure your deduction, multiply your rent
payments by the percentage of your home used for business.
If you own your home, you cannot deduct the fair rental value of your home. However, see Depreciating Your Home.
Repairs
The cost of repairs that relate to your business, including labor (other than your own labor),
is a deductible expense. For example, a furnace repair benefits the entire home. If
you use 10% of your home for business, you can deduct 10% of the cost of the furnace repair.
Repairs keep your home in good working order over its useful life. Examples of common repairs are patching walls and floors, painting, wallpapering, repairing roofs and gutters, and mending leaks. However, repairs are sometimes treated as a permanent improvement. See Permanent improvements, under Depreciating Your Home.
Security System
If you install a security system that protects all the doors and windows in your home, you
can deduct the business part of the expenses you incur to maintain and monitor the
system. You also can take a depreciation deduction for the part of the cost of the
security system relating to the business use of your home.
Utilities and Services
Expenses for utilities and services, such as electricity, gas, trash removal, and cleaning
services, are primarily personal expenses. However, if you use part of your home
for business, you can deduct the business part of these expenses. Generally, the
business percentage for utilities is the same as the percentage of your home used for business.
Telephone.
The basic local telephone service charge, including taxes, for the first telephone
line into your home is a nondeductible personal expense. However, charges for business
long-distance phone calls on that line, as well as the cost of a second line into your
home used exclusively for business, are deductible business expenses. Do not
include these expenses as a cost of using your home for business. Deduct these charges
separately on the appropriate form or schedule. For example, if you file Schedule C
(Form 1040), deduct these expenses on line 25 (instead of line 30).
Types of Expenses
Examples of Expenses
Information courtesy of the Internal Revenue Service.
