My wife runs a freelance writing business out of our house, and we have a separate area for her to do her work out of, so we deduct that as part of our income taxes. Now, the hard part comes when calculating repairs to the home.
We had the roof fixed over the part of the house covering the addition. 50% of the addition to the house is office, and 50% is a kitchen nook, so we deducted 50% of the roof repairs.
The really tricky part is the plumbing. We had MAJOR plumbing issues last year, to the tune of around 7 grand. I am trying to tell my wife that an office wouldn’t be a very productive place if you had to drive down the street to use the bathroom, so we should deduct these expenses proportionally (ie relative to the square footage of the rest of the house). She insists that because we don’t have plumbing in the office itself (unlike heat and electricity), that we shouldn’t get any deduction for it. The IRS documents are unclear.
A qualified tax professional is the only one that can help you here. The IRS is wise to the home business game and likes to trigger audits based on them. Tax strategy is based not only on the exact rules but also professional judgement when the rules aren’t clear.
Have you tried a tax preparation software like TurboTax? I used TurboTax Deluxe this year and it has some very detailed instructions for these exact same issues, including repairs.
What the exact answers are I cannot recall, but they are there.
I am using tax preparation software, which goes into detail about roofing repairs or painting, but not about plumbing repairs unless you are talking about using your house as a home base for your plumbing business.
This is one of those questions that should only be answered by a qualified tax professional.
My understanding is that home office deductions are an area that is a major red flag for IRS audits and enforcement. If you’re going to take deductions in this area, make sure you do it right.