Publication 587 - Business Use Of Your Home - 2002 Page 9
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27Security System
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Direct expense. If the loss is on the portion of the
property you use only in your business, use the
If you install a security system that protects all the doors
entire loss to figure the business use of the home
and windows in your home, you can deduct the business
deduction.
part of the expenses you incur to maintain and monitor the
•
system. You also can take a depreciation deduction for the
Indirect expense. If the loss is on property you use
part of the cost of the security system relating to the
for both business and personal purposes, use only
business use of your home.
the business portion to figure the deduction.
•
Unrelated expense. If the loss is on property you do
not use in your business, do not use any of the loss
Utilities and Services
to figure the deduction.
Expenses for utilities and services, such as electricity, gas,
trash removal, and cleaning services, are primarily per-
If you are filing Schedule C (Form 1040), get Form 8829
sonal expenses. However, if you use part of your home for
and follow the instructions for casualty losses. If you are an
business, you can deduct the business part of these ex-
employee, a partner, or you file Schedule F (Form 1040),
penses. Generally, the business percentage for utilities is
use the worksheet near the end of this publication. You will
the same as the percentage of your home used for busi-
also need to get Form 4684, Casualties and Thefts.
ness.
For more information on casualty losses, see Publica-
tion 547, Casualties, Disasters, and Thefts.
Telephone. The basic local telephone service charge,
including taxes, for the first telephone line into your home
Insurance
is a nondeductible personal expense. However, charges
for business long-distance phone calls on that line, as well
You can deduct the cost of insurance that covers the
as the cost of a second line into your home used exclu-
business part of your home. However, if your insurance
sively for business, are deductible business expenses.
premium gives you coverage for a period that extends past
You can deduct these expenses even if the expenses for
the end of your tax year, you can deduct only the business
the business use of your home do not qualify for the
percentage of the part of the premium that gives you
deduction. Deduct these charges separately on the appro-
coverage for your tax year. You can deduct the business
priate schedule. Do not include them in your home office
percentage of the part that applies to the following year in
deduction.
that year.
Depreciating Your Home
Rent
If you rent the home you occupy and meet the require-
If you own your home and qualify to deduct expenses for its
ments for business use of the home, you can deduct part of
business use, you can claim a deduction for depreciation.
the rent you pay. To figure your deduction, multiply your
Depreciation is an allowance for the wear and tear on the
rent payments by the percentage of your home used for
part of your home used for business. You cannot depreci-
business.
ate the cost or value of the land. You recover its cost when
If you own your home, you cannot deduct the fair rental
you sell or otherwise dispose of the property.
value of your home. However, see Depreciating Your
Before you figure your depreciation deduction, you need
Home, later.
to know the following information.
•
The month and year you started using your home for
Repairs
business.
•
The adjusted basis and fair market value of your
The cost of repairs that relate to your business, including
home at the time you began using it for business.
labor (other than your own labor), is a deductible expense.
•
For example, a furnace repair benefits the entire home. If
The cost of any improvements before and after you
you use 10% of your home for business, you can deduct
began using the property for business.
10% of the cost of the furnace repair.
•
The percentage of your home used for business.
Repairs keep your home in good working order over its
See Business Percentage, earlier.
useful life. Examples of common repairs are patching walls
and floors, painting, wallpapering, repairing roofs and gut-
ters, and mending leaks. However, repairs are sometimes
Adjusted basis defined. The adjusted basis of your
treated as a permanent improvement. See Permanent
home is generally its cost, plus the cost of any permanent
improvements, later, under Depreciating Your Home.
improvements you made to it, minus any casualty losses or
depreciation deducted in earlier tax years. For a discussion
of adjusted basis, see Publication 551.
Permanent improvements. A permanent improve-
ment increases the value of property, adds to its life, or
Page 9
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