If my wife runs a small business from home, and I am the one who pays the utilities from my own funds, can she deduct those costs on her taxes?
I disagree. She can deduct those expenses. Your payment was a gift to her, which has no tax consequences. Furthermore, if you live in a community property state, there is no such this as your vs her account. Regardless of whose name is on the bank statement, it's both of yours.