Utilities

Emily is a sole proprietor lawyer who rents a small office for her business. She was required to pay $600 of deposits for electric and cable when she moved into her space. During the year she spent an additional $4,000 on telephone, internet and electric for her office space. Emily will not be able to deduct the $600 of deposits as a business expense (she should instead classify the deposits as assets on her balance sheet), however, she can deduct the $4,000 of utility operating costs on line 25 of her Schedule C.

Daisy owns a second home which she rented through Airbnb for 300 days last year. Daisy and her family did not use the home for any personal purposes all year. Since her personal use was not more that the greater of 15 days or 10% of the total days rented to others, her second home would be considered a rental property and she could deduct 100% of her the utility expenses associated with this property (to the extent not paid by long-term tenants and allowed based on passive activity rules).

Dwight is a graphic designer who operates his business out of the guesthouse of his primary residence. The guest house (1,500 sqft) meets IRS requirements to be considered a home office. Throughout the year Dwight used Hurdlr to keep track of his home utility expenses, which totaled $8,000, and he can attribute 20% these costs to his guest house. When Dwight prepares his tax return he could deduct $1,600 ($8,000 x 20%) of home office utility expenses on Form 8829, then on line 30 of his Schedule C. Note that if he instead used the simplified method to deduct his home office expenses utility costs would be included in the $5 per square foot standard rate.

Karim is a full time Lyft driver who pays $99 per month for cell phone service. Karim uses this phone solely for business purposes. When Karim prepares his tax return at the end of the year he could deduct all $1,188 ($99 x 12 months) of his telephone expenses on like 25 of his Schedule C.