You're in good company with running your business from home. Recently a growing number of self-employed individuals manage their business from home for the convenience and fixed-cost savings. As such, the Internal Revenue Service has taken note of this and has scrutinized home-office deductions. Still, there are several deductions that you may be eligible to claim on your tax return, which may include your rent.
Generally, you can deduct the business portion of these expenses: real-estate taxes, qualified mortgage-insurance premiums, deductible mortgage interest, rent, casualty loss, utilities, insurance, depreciation, security systems, and repairs.
How do you calculate the business portion of these expenses such as rent? You would divide the total amount of square feet used for business purposes by the total square footage of your home. For instance, if your business office was 500 square feet and your entire home was 2,000 square feet, you would be able to treat 500/2,000 or 25% of your rent expense as a business expense. Please note that the business must be up and running to treat this expense as business expense. Therefore, if you launched your business in September, you could claim only the business expense from September onward.
Ryan Himmel, CPA and registered securities analyst, is the founder and CEO of BIDaWIZ.com, a professional network for small businesses and entrepreneurs to obtain trusted advice and services from a team of CPAs, Enrolled Agents, Financial Planners & Tax Attorneys. His team provides answers to the many finance and tax questions that small businesses encounter every day. Ryan has been quoted in The Wall Street Journal, Forbes, Fox Business and Crain's New York, among other publications. Ryan also regularly contributes to the community with his finance and tax blog.