Home Business Tax Deduction: Mortgage Payments

It’s time to start working out your home business tax deduction options, and one of those is a portion of your mortgage payments. When you have a home office, you can deduct a portion of your mortgage payment.

Here’s how you do it:

1. Check to see how many square feet your home has.

2. Figure out how many square feet your home office has. If you have a whole room for your home office, then use that. If your home office is only a 5 foot x 4 foot area, figure that up.

3. Divide the square feet of your home office by the total square feet of your home.

4. Multiply that number by your mortgage payment.

This will give you an idea of how much you can take as a tax deduction for your home office. Here is an example:

1. My home is 1750 square feet.

2. My home office takes up 6 feet by 4 feet in one room of my home, or 24 square feet.

3. 24/1750 = .014

4. .014 x $1,350 (my mortgage payment) = $18.90

That’s really not much. But if I had a whole room dedicated to my home office, I’d be looking at pretty close to $80, which might be enough to push me down a little bit. And some people believe that every little bit matters.

And, of course, you can also take the percentage of your utility bills. For instance, if I paid $1,200 a year in utilities, I can take another deduction of $16.80 (.014 x 1,200), for that portion of my utilities. This also works if you are renting.

But you have to use the home office space strictly for your home business. This is why I don’t get to count the entire room; I use part of the room for storage. However, you should speak with a tax professional before doing anything, just to make sure that everything is as it should be.