Deduction for business use of my home

[GildaPrice]

I am running business in my basement, how do I calculate the deduction for electricity? Can I deduct the whole electric bill?

[steven]

No, you can only deduct the portion that applies to your business, and you also need to consider that some portion of your electric bill is for other consumption than light, for example loundry, etc.

You take your bill figure, and subtract the portion of your electric consumption that is for laundry, dishwasher, and other consumption that does not relate to your business. This is "usually" around 5/8 of the bill (your situation may be different, do the math). The remaining 3/8 is light and other consumption that is reasonable for determining the consumption for your business. In the next step, you multiply this figure by the percentage of the area of your home that you use for business.

Example: Your electic bill is 100, and you use 50% of your home for business. Your electric bill that you can deduct for business use of your home is 100 * 3/8 * 50% = 18,75. This is the deduction for lighting, perform a similar logic for hearing and airconditioning.

[GildaPrice]

This is awesome help, thanks very much!

[steven]

You are welcome. For more details about how to calculate the deduction for business use of your home, see form 8829 instructions, page 2, right column, paragraph titled "Exception".