If you have a job, you probably have to pay income taxes. If you own a home, you probably have to pay property taxes. If you buy just about anything, you probably have to pay a sales tax in most states. You can deduct some expenses from your taxes, such as your mortgage interest and charitable contributions. But you can't deduct stuff you bought for your house -- with a few exceptions.
Personal vs. Business
The Internal Revenue Service looks at stuff you bought for your house as either a personal expense or a business expense. Stuff you bought for your personal use is typically not deductible, but if you use that same stuff for business purposes, it might be deductible. If you bought stuff for your personal use, but you use it for business part of the time, you might be able to deduct a portion of the cost. It all depends on how you use the item, and how you file your taxes.
Business Use of Your Home
You can claim a deduction for the business use of your home whether you work as an employee or are self-employed. The IRS maintains some pretty tight rules about what qualifies as business use. You must use a portion of your home regularly and exclusively either to conduct your business or to meet with clients. If you use the space for both business and personal purposes, you can't claim the business use of your home deduction. You can include the portion of your real estate taxes, mortgage interest, utilities, insurance, maintenance and repair costs in your deduction for business use of your home.
Business Equipment
Expenses that are common and accepted in your industry, and that are helpful and appropriate for your trade or business, are deductible business expenses even it you bought them to use at home. For example, you can deduct the cost of a desktop computer that you bought for your home, to the extent that you use it for business purposes. If you use the computer 40 percent of the time to play games and check your social network status, you can deduct 60 percent of the cost of the computer.
Sales Taxes and Interest
You can't deduct the cost of the materials you buy to improve your home, but you can deduct the sales taxes you paid for the building materials. If you took out a loan to make a capital improvement on your home, such as putting on a new roof or adding a bathroom, you can deduct the interest on the loan along with your mortgage interest.
Where to Deduct
Where you deduct your interest depends on whether you work as an employee or are self-employed. Claim employee business expenses as an itemized deduction and report your deductions on IRS From 1040 Schedule A, Itemized Deductions. If you are self-employed, report your deductions on IRS From 1040 Schedule C, Profit or Loss From Business,
References
- Internal Revenue Service: Publication 535, Deducting Business Expenses
- Internal Revenue Service: Topic 509 - Business Use of Home
- Small Business Administration: Small Business Expenses and Tax Deductions
- Internal Revenue Service: Publication 936, Home Mortgage Interest
- Internal Revenue Service: Schedule C (PDF)
- Internal Revenue Service: Schedule A (PDF)
Resources
Writer Bio
Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.