How to deduct home office in a house in which mortgage is paid off?
April 29th, 2010 | 
Author: Situation:
1) Small business owner has his only office in his home.
2) He paid the mortgage off. House is totally debt free.
3) He uses one room as his only office that he otherwise would use as another family room if he would for example rent space for his business in a business building not belonging to him.
4) Can he bill his business with rent for that room in his own home?
5) Can he deduct rent for that office room?
6) If he ever would sell this house one day, would it still be a private house sale?
Posted in Mortgage FAQ
I believe you can deduct a percentange of the home/room you use for an office.
I don’t believe he can charge himself rent – obvious reason.
He may be able to deduct some of the electric and or heating/cooling.
Don’t forget about business equipment, furniture, supplies, etc.
I would consult a CPA for the best source of information other than trying to do it myself. Plus, when they sign the tax returns they answer any questions if it is audited. Worth the extra $$ to have them.
he can deduct that portion as a business expense. Yes if he is incorporated then he can lease this portion to the corporation and take the deduction that way as well. When sold it is still a private sale as it is not mixed use property and a normal mortgage can be obtained at point of sale as long as the home is not zoned mixed use and he has no signs in the yard to confuse an appraiser
There are deductions for home office, has nothing to do with the house being paid for.
Yes, if your business is incorporated (thus a legal entity on its own, unlike a sole proprietorship), you could charge “rent” to your business.
Then the business could write it off, BUT, YOU would personally have to claim the “rent” as income on your personal taxes.
The IRS & Congress have made our tax laws so complex that I recommend that ALL businesses use a CPA to make sure you are compliant and/or get all the deductions due to you.
I used to run a public accounting office, now own a manufacturing business and there is NO WAY I would do my own taxes.
Good luck
This is one of the hardest most complex deduction of the IRS. The IRS tightened the rules on what you can deduct, what can be in the room to call it an office. For instance you might not have a TV in that room, even though if you had a commercial office you could have a TV in your lobby or waiting room.
I understand you can take a certain percentage of the utility bills, since there is no mortgage, I am unsure how this would be deducted since there is no percentage that you can come up with to deduct.
This question is best answered by a competent CPA that has experience with home offices. Home offices are more common now, but the requirements to take this deduction is very stringent.
I hope this has been of some benefit to you.
“FIGHT ON”