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Ways to Maximize Your Home Office Deduction and Split Expenses

For many entrepreneurs, the home office is a necessary place to work. It can be hard to Deduct Home Office Expenses if you’re not sure what qualifies. Here are some ways to maximize your deduction and split expenses.  Read on for more tips!

Home Office Deduction

Home offices are one of the most deductions that people fear to take, even though it provides major savings for self-employed folks. If you have a home office and work from there regularly then nothing can stop your ability! The biggest mistake someone could make is NOT claiming their deduction which means they’re missing out on all those tax benefits.

An ideal home office should be a dedicated area of your house where you can conduct business without interruption. Your child’s playroom, dining room table or couch will not qualify as an official “home” for this purpose since they also double as secondary living spaces that are sometimes used while working from home.

Regularly means that you have to use it on an ongoing basis. It’s all about consistency. If you consistently use your home office once a week, that’s regular. But if you use it once a year you can’t say it’s a home office.

You can deduct a percentage of your home expenses like rent, mortgage, utilities, and insurance. The rate you claim depends on what percent of room or space is used for an office in the total house–so if I have 15% worth then this would be deducted from all these items as well!

The easiest way to figure out what percentage of your expenses you can write off is by measuring the square footage or area size of your home and your home office.

Let’s do some math! If our home is 2,500 square feet and our office 500 sq ft then we can deduct 20% from all home expenses.

How to Track Your Home Office Deductions

The use of spreadsheets for tax tracking is a great way to make sure you’re deducting all your home office expenses. It can be tricky though, as these deductions come out from personal accounts.

You should not be paying your personal rent or mortgage out of your business account. Neither utilities, renter insurance, home repairs and other home office expenses. 

All of these expenses come out of your personal account. It gets overwhelming, which is why so many people just give up on the whole idea!

Keep records of your home office expenses and you will be able to accurately calculate the amount that should go towards taxes.

Our free spreadsheet will help you track your Home office expenses each month so that at the end of the year, all is recorded and ready for tax time.

Cell Phone

Cell phones are now an essential part of life for many people, especially those who work. Whether you’re checking your Slack messages or calling a client from the office phone- there’s always something going on with our mobile devices! Here is the problem we use your cell phone for both personal and business.

The cell phone bill is only partially deductible because you’ll use it for personal reasons at least some of the time. You can only write off your business-use percentage. That means that, if you use your phone for work 50 % of the time, you will be able to write off 50 % of your phone bill.

If you buy a separate mobile phone and cell plan for business use, that would be 100% tax-deductible. The same goes with having an office landline in your home.

Figuring out the business-use percentage of your phone

Let’s say you use my phone for business from 8 am to 1 pm Monday through Friday. That is 25 hours per week. Let’s say your normal waking hour is 6 am to 9 pm which is 12 hours a day.

Take your 12 waking hours per day and multiply it by seven to get your total waking hours per week. Which comes to 84 hours each week. Then divide that by 25 business hours you keep per week. That gives me the percentage of of  30% business use and 70% personal use.

Your phone bill is $125 per month, you can take a tax deduction of $37.50 per month.

How to document your cell phone write-offs

Keeping records of your phone bill itself is slightly more involved- you’ll have to account for, not only the cost but also personal use. You will need documentation for your cell phone bill should include:

  • Cell phone Bill
  • Tracking sheet showing the split between your business and personal use

Our free spreadsheet will help you track your cell phone expenses each month so that at the end of the year, all is recorded and ready for tax time.

Internet

Just like your cell phone, you write off the business use percentage of your home internet. Regardless of if you take home office or not.

Figure out what portion of your bill is the internet portion most people’s intent is bundled with your TV so calculate what portions in the internet only.

The next step is the same as a cell phone bill example.Then you will track the deductible percentage of the internet portion of the bill.

Figuring out the business-use percentage of your internet bill

Let’s say you use my internet for business from 8 am to 1 pm Monday through Friday. That is 25 hours per week. Let’s say your normal waking hour is 6 am to 9 pm which is 12 hours a day.

Take your 12 waking hours per day and multiply it by seven to get your total waking hours per week. Which comes to 84 hours each week. Then divide that by 25 business hours you keep per week. That gives me the percentage of  30% business use and 70% personal use.

Then you look at your bill and your bill is $175 and $100 of that bill is for cable.  $175 – $110 = $75 is what you are paying for your internet bill. Now the calculation is $75 x .30 (30%) which comes out to $22.50 per month. The course of the year that comes to be $270 a year. 

How to document your internet bill write-offs

Just like cell phone ou will need documentation for your cell phone bill should include:

  • Internet Bill
  • Tracking sheet showing the split between your business and personal use

Our free spreadsheet will help you track your cell phone expenses each month so that at the end of the year, all is recorded and ready for tax time.

The home office deduction, cell phone deduction, and internet deduction can save you a lot of money on your taxes. However, it can be tricky to track these deductions. That’s why we’ve created a free spreadsheet that will help you keep track of your home office expenses and split the costs. All you need to do is download the spreadsheet and follow the instructions. We hope you find this resource helpful!

about the blogger

Hey there!

Hi! I'm Marinda Broadbent!

I’m an expert QuickBooks Online Bookkeeper, a nerd when it comes to the numbers, and my obsession is teaching business owner their numbers so be confident on grow their business (without it taking over their life).

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For many entrepreneurs, the home office is a necessary place to work. It can be hard to Deduct Home Office Expenses if you’re not sure what qualifies. Here are some ways to maximize your deduction and split expenses.  Read on for more tips! Home Office Deduction Home offices are one of the most deductions that […]

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Ways to Maximize Your Home Office Deduction and Split Expenses

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