Can I Write This Off?

Can I write off power bill

TL;DR

You can write off a portion of your power bill if you use part of your home exclusively for business purposes, subject to specific IRS rules and calculations.

Detailed Answer

The power bill can be partially deductible if you qualify for the home office deduction, which requires that you use a portion of your home regularly and exclusively for business. This deduction is available to both homeowners and renters. The deductible portion is based on the percentage of your home used for business. For example, if your home office takes up 10% of your home's square footage, you can deduct 10% of your power bill. However, if you do not have a dedicated space used exclusively for business, you cannot claim this deduction. It's important to note that the home office must be the principal place of your business or a place where you meet clients regularly.

Where to Put It on the Tax Form

Schedule C, Line 30 for sole proprietors or Form 8829 for detailed home office expenses.

Real World Example

A freelance graphic designer uses a spare bedroom as a home office, which is 150 square feet of her 1,500 square foot home. She can deduct 10% of her annual power bill of $1,200, which amounts to a $120 deduction.

Calculation Required

A calculation is required for this deduction.

Calculate the percentage of your home used for business by dividing the square footage of your home office by the total square footage of your home. Multiply this percentage by your total power bill to determine the deductible amount.

Audit Risk & Documentation Tips

Moderate audit risk. Keep detailed records of your home's total square footage and the square footage of your home office. Maintain utility bills and any documentation showing the business use of the space, such as a floor plan or photographs. Ensure the space is used exclusively for business to support your claim.

IRS Reference

IRS Publication 587, Business Use of Your Home (Including Use by Daycare Providers)

Relevant Industries

FreelancersConsultantsHome-Based Business OwnersRemote Workers