So I start working from home tomorrow. My parents and I set up this one room as my office. I will be paying them rent. Can I deduct the whole amount off my tax? How much should I pay them for the rent

[brotherr]

I will be working 40hours a week. How much can I deduct off the electricity and internet?

[DoninGA]

Are you working for an employer from your home?  Or are you self-employed sole proprietor/independent contractor?  

If you are a W-2 employee working for an employer, you cannot deduct any employee business expenses, including a home office, on a federal tax return due to the tax code changes in effect for tax years 2018 thru 2025.

[brotherr]

Independent contractor, i think. I received 1099, not W-2

[brotherr]

But I need help to figure out how much can I deduct off electricity and internet? Also, if I could deduct the whole amount of the rent off my tax? And I am still figuring out with my parents how much should I give them for the rent

[xmasbaby0]

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[Opus 17]

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@brotherr wrote:

But I need help to figure out how much can I deduct off electricity and internet? Also, if I could deduct the whole amount of the rent off my tax? And I am still figuring out with my parents how much should I give them for the rent

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If you use the room exclusively as an office and for no other purpose, you can deduct the rent as a work expense.  You can't deduct anything else (electricity, depreciation, etc.) because those bills are in your parent's name -- as they will be required to report the rent as taxable income, they may be able to deduct part of the household electric bill but that is their problem, not yours.  You could only deduct electricity if you had a separate meter. 

Likewise, you can't deduct anything for internet unless you have a separate business use-only connection in that room that is billed in your name.  You can't deduct a partial amount of your parents' bill because it is not in your name.  Your parents should set the rent to cover all the expenses of the space you are renting.

Incidentally, you'd better get this all in writing and do everything by the book, same as if you were renting an office from an unrelated third party.  It needs to be a fair market value rent (what an unrelated landlord would charge for the same or similar premises) and your parents must report the rent as income.  For example, if you were to "pay" your parents a large rent so as to create a large business deduction, and your parents did not report it as taxable income, the IRS would not be friendly to either of you.

[Carl]

So I start working from home tomorrow. My parents and I set up this one room as my office. I will be paying them rent.

Since you do not own the property where the home office is, you can not claim a home office expense on your taxes. That's because you're required to depreciate a home office, and you can not depreciate that which you do not directly own.

However, whatever rent you pay for that home office is a valid business deduction as a rental expense. There is a spot on the SCH C specifically and explicitly for rents paid (line 20 on the SCH C)

Can I deduct the whole amount off my tax?

If the entire amount of rent you pay is for that office space only, then yes.

How much should I pay them for rent.

That's between you and your parents. But understand just the fact that the rental agreement is between blood related relatives, that alone will at least raise eyebrows at the IRS. Your parents are expected to report the rental income from you on SCH E as a part of their personal joint tax return. Additionally, if your parents do not rent to you for "at least" the fair market rental value, that will limit their deductible rental expenses to the rental income and no carry over losses will be allowed.

How much can I deduct off the electricity and internet?

If the utilities are not in your name, then you can't claim or deduct a penny. Assuming your parents will charge you rent at the fair market rental value, they can add to that an additional (preferably fixed) amount for utilities and you just include that in the rent you pay and claim on line 20 of the SCH C.  But if the utilities are not in your name you can't claim a single penny on line 25 of the SCH C.