Home Based Business Tax Deductions
New Hampshire home based businesses have many tax advantages. One of the best tax advantages being that of the
home business office. Business owners can offset the costs of their home office as long as the area in which it is
placed within the home is used frequently for business purposes.
For a home based office to qualify as being a tax deductible expense then the IRS has stated that it must meet one
of the conditions:
* The home office should be the primary place of business.
* Meetings are held with your customers and clients in the home based office.
* The home office is still deemed part of your home, even though it may be detached.
Deductions are still valid to be claimed should you rent the home or apartment. A portion (approximately 10%) of
rent is allowable to deduct as long as it relates in proportion to the space that is occupied by the home based
office. Costs relating to home repairs may be deducted if they were related to the home based business. The IRS
only permits deductions for maintenance and repair to the area in use for the home based business.
To workout the space allocated to the business office; you first should calculate the square footage of it and then
divide that by the total living space of your home.
Utility type costs may also be deducted that are in direct relation to the upkeep of the home based business. A way
to calculate the utility bill cost is to determine the cost of the utility bill should you not work from the home.
For example if the home is not occupied during the day then heating and air conditioning may not be operational or
set only on low levels. Other electrical items like computers and lights would likely be off too.
Workout the energy that these items use; this will be your allowable tax deduction. The best way to calculate this
figure is to record the total amount of time spent working in the home based office and then calculate the utility
costs associated with that time.
The allowable tax deductible costs are:
A portion of your garbage collection costs may also be deducted if they are directly attributed to your
It’s wise to not over claim on these sorts of deductions, the IRS has some very specific rules on home office
space uses. For example if you have a 6’x 6’ room, all items in the room should be for business related purposes.
You cannot have some furniture for storing personal things like clothes, books and decorations for instance.
That space should be taken outside of the office space and should not be included for the deduction. The IRS often
“red flag” these types of tax deduction because of the abuse that is often found by them when home office users
claim their deductions! You should fill in the IRS form 8829 for inclusion with the tax return.
David Picchi will be pleased to advise you on all matters relating to tax deductions.