What Tax Deductions Can I Claim if I Have a Home-Based Business?

tax deductions

There are almost 30 million small businesses operating in the United States alone.

While running a small business can be a liberating experience, it can also bring with it complicated tax codes to navigate. Estimating quarterly taxes, tracking income, managing write-offs… the whole process can be overwhelming for many.

Expanding on the subject of write-offs, one of the biggest tax advantages business owners get over non-self-employed individuals is the expanded number of deductions they can take advantage of.

For people running their business from their home, that list is even more robust.

To help you maximize your tax savings if you run a home-based business, our team has put together the following article outlining some of the most important small business tax deductions you need to be aware of.

1) Home Improvements/Maintenance

If you’re a business owner who works from home, many of your home upkeep costs may qualify as a tax deduction. There are some limitations, however.

For starters, home repairs to the household that you run your business in are not tax deductible. Home improvements are.

That’s a difficult distinction to make but as a general rule, if you’re performing something like a roof leak repair or any other activity that’s restoring your home to its previous level of worth, it’s generally not considered tax deductible. If you’re doing something that’s raising the value of your home beyond what it was like purchasing a new and improved roof, that would be tax deductible.

This gets even trickier if you qualify for a home office expense (more on that in a moment). If you have a space in your home you use solely for business purposes, repairs and improvements to that space both would qualify as tax-deductible business expenses.

2) Home Office Expense

Another important tax deduction people who operate businesses from their home should be aware of is the aforementioned home office expense. Put simply, if there’s a room or partitioned off section of a room used exclusively for business in your residence, you can deduct the square footage of that space from your taxes.

For most people, they’ll be able to simply multiply the square footage of their home office space by $5.00 to come up with their full, deductible amount.

So, if someone asks you “can you write off home repairs on your taxes”, the answer is it depends.

3) Utilities

Rounding out our list of special deductions those that run their business from their home qualify for are utility write-offs. If you pay for water, electricity, gas and/or internet then you can deduct a percentage of those expenses. The deduction will equal the percentage of your house your home office takes up.

For example, if your home office accounts for 10% of the total square footage of your home, you can deduct 10% of your utilities.

Wrapping Up Home-Based Business Tax Deductions

If you’re running a home-based business, you qualify for a handful of unique tax deductions.

Three of the primary ones include home improvement/possible repair costs, home office deductions, and utility deductions. Be sure to talk to a qualified accountant. They will help you maximize your tax-related deductions and ensure your diligence in claiming all of the money you’re entitled to come tax season!

Want to know more about the latest and greatest business tips, tech advancements and beyond? If so, check out more of our expert-created content on Jcount!

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