Schedule C Deductions Paid for someone else’s account

[iEngineer]

I’m self employed and live with my fiancé.  House is in her name and I don’t pay any “rent” so I don’t take any deductions for a home office space. 

I pay for most of the utilities though and some other expenses so our household budget is split 50/50. Some utility bills are in my name only, some are in her’s and others are in both.

Payments are made directly to the utility company through the banks online bill pay or auto pay from the utility. 

Can I deduct the business portion of any utilities (internet/electric/phone)? How do I compute the business portion for some things without going through the home office deduction? The electric/phone could end up being negligible, but the internet we had to upgrade to pro internet, which we wouldn’t have had to do if not for being self employed. 

Also what records do I need to be keeping to prove my deduction in case I ever have to? Just the utility bills and bank statements?

[JohnB5677]

You have the right idea, and you do have a home office space.  

• Post the home office space as usual utilizing the interview.  
• This will provide a percentage of the house that you use as an office.
• Use this percentage to allocate the bills that you pay.

Bank statements that reflect the payments is the best proof.   If you also have the receipts, or a summary of your expenses, it would be helpful.  

[iEngineer]

Thanks @JohnB5677 ! Is the simplified method still an option for the square footage of the office, even though I don’t “rent”? 

[DianeW777]

Yes, you can choose to use the simplified method for your home office deduction. Count only the square feet used exclusively for business if you do not have another office location for your self employed business. There can be no personal use of the same space, regular and exclusive are the key components to qualify.

For more details about the home office deduction you can view IRS Publication 587. TurboTax will walk you through the deduction.

Selecting a Method

• You may choose to use either the simplified method or the regular method for any taxable year.
• You choose a method by using that method on your timely filed, original federal income tax return for the taxable year.
• Once you have chosen a method for a taxable year, you cannot later change to the other method for that same year.
• If you use the simplified method for one year and use the regular method for any subsequent year, you must calculate the depreciation deduction for the subsequent year using the appropriate optional depreciation table. This is true regardless of whether you used an optional depreciation table for the first year the property was used in business.