What needs to be included for split use property (business vs. personal use)?

[EveWolters]

I recently moved my accommodation into my business’s building. Roughly 10% of the buildings space is for my personal accommodation and 90% of the building is the business. Other than rent and utilities, what business expenses do I need to apply the 10% to for personal use (I.e. wood pellet purchase for the pellet stove which provides heat in the building)?

[Katie-P]

Hi @EveWolters,

Thanks so much for participating in our Ask the Experts Event today. I'd be happy to help you!

Your question relates to the Home Office Deduction. I will provide a resource below to a great article, but first, I want to highlight a few areas:

• In order to claim this deduction, the area you use for the business must be used exclusively and regularly for the business; it also needs to be the principal place of business.
• Taxpayers who qualify to take this deduction are allowed two choices: the simplified method or actual expenses.
• The simplified method will not provide a deduction if the business has a loss in a given tax year. The actual expense method will not increase a loss, but any amounts that can't be deducted in the current year due to a loss will at least carry forward to a future tax year.
• If you use the simplified method: the deduction is $5 per square foot of office space, up to a maximum of 300 square feet.
• If you use the actual expenses and rent the space, you can deduct the rent and utilities (including pellets purchased for the stove). The actual deduction will be calculated based on the business square footage vs. the total square footage of the space you are renting.

Here are two great resources for you to check out:

• The Home Office Deduction 
• How small business owners can deduct their home office from their taxes 

I hope this information is helpful! I'll keep an eye on this thread in case you have any follow-up questions. Thank you again for your question @EveWolters!

[EveWolters]

Thank you for your quick response, I have reviewed the two options and I am not sure how to apply either. My business is a gym and I moved into a room at the back of the gym. So the primary use and space used is by the gym. My personal room takes up 84sq ft of the building square footage which is 1600sq feet. I don’t think I could use the simplified method because the business takes up more than 300sq. Ft, and I am not sure if the second option is applicable since I moved into the business instead of having the business in my home… 

thank you for your help. @Katie-P 

[Katie-P]

Hi @EveWolters,

You can still take the deduction. If I were you, I would use the actual expense method, not the simplified. You will then be able to deduct the majority of your rent and utilities. Does that help?

[EveWolters]

Yes, thank you, Katie