Direct Expenses When Computing the Home Office deduction

These are expenses that directly affect only the part of your home used for your business. For example, repairs done in your office or having it painted. You deduct 100% of these expenses.

Examples of Direct (deduct 100%):

  • Painting and decorating the office
  • Maintenance and repairs
  • Hiring or furnishing maid service for the office

Indirect Expenses When Computing the Home Office Deduction

These are expenses that relate to the entire home, such as, utilities, insurance, and rent. They must be allocated to the portion of your home used for your business.

For example, if you use 10% of the total square feet of your residence for your home office you would allocate 10% of the total annual cost of each indirect expense to your home office deduction.

Examples of Indirect Expenses:

  • Mortgage interest
  • Property taxes
  • Telephone
    • If you have only one line in your home you may not deduct the cost of the standard monthly charge. Keep a record of all business calls made from your home.
    • If you have a separate line for your business, costs are fully deductible.
  • Electric
  • Gas
  • Water
  • Insurance
  • Depreciation (for homeowners)
  • Rent
  • Painting the outside of the house
  • Repairing the roof
  • Monthly maintenance fee for an alarm system installed to protect all windows and doors.
  • Depreciation for the business portion or your cost for the alarm system.

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