how would you recommend deducting utilities for my reselling business home office?

[zombitroid]

I have an ebay reselling business at my dad and I's house. he pays all the utilities but doesn't deduct them on his taxes at all. My home office is 162 square feet, plus a storage unit in the basement for materials and products which is 186 sq feet, plus the entry way where i stage shipments ( 100 square feet ).

total: 448 sq feet used for the business

First off, do you recommend taking the standard home office deduction or entering in expenses individually ( separate utilities, rent, internet expenses, etc., ) ? Turbo tax recommends individual expense deduction, not the standard home office deduction

Assuming the individual expense deduction, what can I deduct? We have concluded that the internet is used for 70% business purposes, and the power bill 33% ( because i'm about half the power usage here and approximately 17% is used for personal purposes ). Then we have water, gas/heating, garbage and recycle ( which I use all the time for the business, and sewage. I work probably 12-14 hours per day most days.

Can I deduct water / sewage / trash / gas? What percentages do I assign?

The way I've been calculating it this year is to take the total home expenses and multiply by the percentage of time I use them ( if there is 1500 in power bill expenses and we use it 33.33% of the time for business then my deduction is 500 ) - correct ?

I don't pay my dad rent, technically. If we are calculating home office expenses individually like this how do we account for the cost of storage? Because this 448 sq feet of business use room is not free.... and its really higher than 448 sq feet because I work all over the house.

[AmeliesUncle]

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@zombitroid wrote:

he pays all the utilities but doesn't deduct them on his taxes at all.

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Any chance you are still a minor (or have special circumstance that you are over age 18 but your father is still your legal guardian)?

If not, I suspect you probably want to take the Simplified Method for the Home Office deduction.

You can only deduct expenses that YOU pay.  You can not deduct expenses that your father pays, even if he is not deducting them on his tax return (unless you are a minor).

[zombitroid]

he is not my guardian, and i'm over 21 years old. 

so you're saying take the simplified deduction because my father pays the utilities?

the utilities are a cost / expense for doing my business.. storage, heat, power, internet, all of it is an expense.

[AmeliesUncle]

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@zombitroid wrote:

so you're saying take the simplified deduction because my father pays the utilities?

the utilities are a cost / expense for doing my business.. storage, heat, power, internet, all of it is an expense.

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Yes.

YOU can't deduct any "actual" expenses if YOU don't pay for it. 

[zombitroid]

where are you hearing / learning that information? can you send links  or explain? i'd like to read more on it

it sounds like i should take the simplified deduction. if i was to deduct expenses individually, do i take the square footage of my home office and divide it by the total square footage of the house to get the percentage of the house that is my office? and then multiply by things like my power bill, gas bill, water sewer garbage, to get the percentage of that bill that is deductible?

also, what about shared spaces? like we store lots of my boxes in the shop, the entryway by my front door is constantly used for staging shipments / etc., can we add these areas to the home office deduction square footage? or is it just where my computer desk is?

[SusanY1]

For business use of home, you cannot include shared spaces.  You can only use places used exclusively for the use of business, with some exceptions for individuals who operate in-home daycare centers.  You can find more about that HERE.

With all tax deductions, including the actual expense home office deduction, only items that you personally pay (and are obligated to pay) are deductible by you.

If you are using the actual expense method for your home office expenses you can enter the square footage of your exclusive office space into TurboTax along with the full square footage of the home.  You then enter the expenses broken down by category for you in the software.  The software will do the math for you - but yes, it is much as you describe- the percentage of the bills attributed to the percentage of space that is office are used to create the deductible amount.