Many business owners have been struggling during the pandemic. Imagine struggling with your business expenses while also struggling with your home expenses. What to do? No, you don’t need to shut down your business. You could find some relief by moving your business to your home.
This article will show you how you get to save a lot from your business expenses and get many home-based business tax deductions. It’s definitely a win-win situation for you.
You just have to comply with two IRS requirements. First, you must use the area you designate as your home office exclusively and regularly for your business. That means you cannot work in your living room or dining room. Instead, you can assign one bedroom, the attic, or the basement. Second, you must conduct your business primarily from your home office. If you continue to have a business office and only use your home office when you get home from work, that does not qualify.
Get a Business Tax Deduction from Your Mortgage
When you move your business into your home, you can get a tax deduction based on your home mortgage payments, mortgage interest, and mortgage insurance. The deduction will be a percentage of the year’s mortgage corresponding to your business’s portion of the house area.
For instance, let’s say your business now occupies a fourth of the total area of your property. Your annual tax deduction will be equivalent to a fourth of your home’s annual mortgage payment, mortgage interest, and mortgage insurance.
Think about it. Wherever you base your business, you still have your mortgage-related payments monthly. Separately, you pay office rent. When you move your business to your home, you no longer pay rent. That alone is already a considerable saving. In addition, you get to deduct a percentage of your mortgage-related payments from your business taxes. Isn’t that amazing?
Get a Business Tax Deduction from Your Home Utility Bills
The same thing happens with your utility bills. You still pay your home utility bills monthly wherever you base your business. Separately, you pay utility bills for electricity, water, and more at your office.
When you move your business to your home, you no longer pay for business utility bills. Again, you save on your business costs. On top of that, you get a tax deduction corresponding to the percentage of the house area occupied by your business. Using the example above, that’s 25 percent of your annual home utility bills. That includes electricity, any gas you use, heating, water, garbage collection fees, cleaning fees, and even any homeowners’ fees you pay to your subdivision.
Get a Business Tax Deduction from Your Internet and Phone Bill
You probably already had an internet connection and a phone at home even while you had a separate business office. So you were paying two separate bills.
When you move your business to your home, you stop paying for the internet and phone services you left at the office. And you don’t have to get new connections for the home. You can piggyback on your home connection.
Again, you save on your internet and phone bills and get a tax deduction. Using the same example, that’s 25 percent of your home’s annual internet and phone bills.
Get a Business Tax Deduction from Your Maintenance and Repair Bills
You can claim the same percentage as your business tax deduction for general home maintenance and repairs. That includes maintenance and repair of your heating, ventilation, and air conditioning system (HVAC), plumbing, electricity, gutters, roof, etc.
However, if you do maintenance and repair directly within your home office, you get a 100 percent deduction on the costs. For instance, if you need to renovate the basement you will use as your home office, all expenses are deductible.
Get a Business Tax Deduction from Your Home Insurance
When you move your business to your home, your business is now covered by your home’s property insurance. You no longer have to pay for separate commercial property insurance. Again you save that money. You can then deduct the same percentage of your annual home property insurance.
Get a Business Tax Deduction from Your Car Mileage
If you use your personal car for business, you must accurately log the miles used for business. You must then compute their percentage against the total miles driven for the year. You can then choose between the standard mileage rate or actual expenses.
For actual expenses, you compute your total expenses for gasoline, oil, tires, repairs, registration, licenses, insurance, and depreciation. From there, you get the percentage corresponding to the percentage of miles used for business.
For the standard mileage rate in 2022, you can get a tax deduction equivalent to 58.5 cents per mile times the number of miles used for business.
Your Financial Gains
Clearly, moving your business to your home will result in significant financial gains. Your home expenses may stay the same but your business expenses will be cut drastically. On top of that, you get a lot of new business tax deductions. This may be just what you need to save your business and even make it more successful than before.