What Percentage of Utility Bills Can You Claim on Home Business Tax?

by Craig Berman; Updated September 26, 2017
Mature man sitting at desk looking at bills, smiling

If your home office qualifies as a business expense under Internal Revenue Service guidelines, you can deduct expenses associated with maintaining that space. Expenses directly associated with that space alone -- such as the cost of a security system that alarms just the office door -- can be deducted from business income. However, expenses associated with the entire house also may be deducted on a proportional basis.

Playing the Percentages

Deducting a home office requires determining how much of the dwelling the space takes up, on a square footage or per-room basis. A 100-square-foot office in a 1,000-square-foot home, for example, takes up 10 percent of the space. Utility bills can be deducted in that same percentage. In the above example, for an electric bill that comes to $200, $20 could be deducted as an office expense. Consider all utilities in such calculations. For example, don’t neglect Internet service that covers the whole property, as long as your business takes advantage of the access to email and use the web.

Make Sure It Qualifies

The IRS has specific requirements for home office deductions, so make sure yours qualifies. The space must be used for business exclusively and regularly; if you send out invoices at your kitchen table in between meals, that would not qualify. Employees can’t claim an office space that’s for their convenience; they can only claim it if they are directed by their employer to set aside part of their home as office space. Utilities can’t be deducted if they don’t pertain to the office space; if your water bill rises in the summer because you fill your swimming pool regularly, deducting that can get you in trouble if the IRS decides to audit your return.

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