Are home improvements tax deductible when I have a home based business?

[sarahjanep4]

I'm curious about home improvements being tax deductible when I have a home-based business. I am a food blogger with an office space in our home, and I use the kitchen a lot for recipe testing, photos, and videos. We are planning on replacing the floors in our entire home soon, and I was wondering how much of that would be tax deductible since it would include the space where I work as well as the kitchen where I also work. 

[Mark_5]

Home office/business operation deductions by using the actual cost method are in two parts direct and indirect. The direct expenses that are applied 100% would be the ones that are occurring within the 100% dedicated office/business space. The indirect would be the expenses that occur in the rest of the home and yard. Since you also use your kitchen for your own personal use (unless you have a separate one) it would be part of the indirect expenses. The indirect expenses are determined by a percentage of the square footage use for the 100% dedicated space divided by the total square footage of the home. This calculation is done on the tax return so you will need totals of all of your home expenses . Your home improvement will still be subject to the standard tax treatment; capitalization and depreciation if required.

For the home office deductions you will need to have used regularly and exclusively for the business, and Is your principal place of business. 

Your business with its records on not only the improvement but all the other expenses will need to be organized and verifiable. Just have a blog is not enough on its own. Needing to be able to show a profit-making motive and business plan to substantiate your deductions. Deductions without comparable income or verifiable potential income puts the deductions at risk and the entire amount disallowed as being just a hobby.

[sarahjanep4]

Thank you for your reply. My website is not a hobby in our case, it generates a profit each year (though the level of profit varies) and has generated a taxable profit for multiple years, and it is a registered LLC. We organize receipts, expenses, and income for my business in Quickbooks. So we are able to prove to the IRS that we have an established home business in our case.