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nshin
New Member

I have excessive utility expenses for my home business, that far exceed my home office deduction limit. Is there another way I should approach deducting it?

Note that the electricity is a necessary expense and cost of the high-powered equipment used in this home business. This is billed together with my home utilities, but I have power meter tracking to prove which portion is related to the business.

Example: The home office deduction limits the yearly deduction to $1,000 but the home business related electric bills for 2017 totaled over $10,000. 

This seems like the wrong approach. At 5 years of this, you'd be carrying over $1k of home office deductions for the next 50+ years.

Is there a separate category of expense where these utility bills should be deducted? 

1 Best answer

Accepted Solutions
Coleen3
Intuit Alumni

I have excessive utility expenses for my home business, that far exceed my home office deduction limit. Is there another way I should approach deducting it?

Some home office expenses are indirectly related, meaning they apply to the entire house and must be prorated. Usually electricity is one of these expenses. If you have proof that the expense is separated and applies strictly to the business, you can take the entire amount as a direct expense.

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7 Replies
Coleen3
Intuit Alumni

I have excessive utility expenses for my home business, that far exceed my home office deduction limit. Is there another way I should approach deducting it?

Some home office expenses are indirectly related, meaning they apply to the entire house and must be prorated. Usually electricity is one of these expenses. If you have proof that the expense is separated and applies strictly to the business, you can take the entire amount as a direct expense.

nshin
New Member

I have excessive utility expenses for my home business, that far exceed my home office deduction limit. Is there another way I should approach deducting it?

Hi Coleen - that is what I did, as a direct home office expense. However, that home office deduction limit still essentially limits 90% of the deduction.

I thought I'd instead list it as a utility expense outside of home office utilities, but TurboTax explicitly says that separate utility expenses are only for separate business buildings.

So I'm not sure which is the right way to go about this, or if there's a different way.

Thanks for your time.
Coleen3
Intuit Alumni

I have excessive utility expenses for my home business, that far exceed my home office deduction limit. Is there another way I should approach deducting it?

You may be limited because you can't create a loss with a home office expense.
nshin
New Member

I have excessive utility expenses for my home business, that far exceed my home office deduction limit. Is there another way I should approach deducting it?

I see, thanks.

That being the case, if power is such a large expense but key to the business, should it be deducted through another method/category? Or does it still stay within the home office deductions?
Coleen3
Intuit Alumni

I have excessive utility expenses for my home business, that far exceed my home office deduction limit. Is there another way I should approach deducting it?

Per Pub 535: Utilities. Business expenses for heat, lights, power, telephone service, and water and sewerage
are deductible. However, any part due to personal use isn’t deductible.
It is permissible to include it here, but I would have excellent records that prove without a doubt that this is a legitimate expense in case of audit. If you already have a home office and deduct this outside the parameters of the office, there may be questions.
nshin
New Member

I have excessive utility expenses for my home business, that far exceed my home office deduction limit. Is there another way I should approach deducting it?

Got it, thanks Coleen!
Coleen3
Intuit Alumni

I have excessive utility expenses for my home business, that far exceed my home office deduction limit. Is there another way I should approach deducting it?

You're welcome. I'm glad it was helpful.
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