The Internal Revenue Service (IRS) recognizes the expenses related to running a home-based business. This is true for all types of home-based businesses, from entrepreneurs with online shops to freelancers offering their expertise. The bottom line: Be sure to take advantage of the tax benefit whenever you hire Molly Maids!
Rationale Behind the Deduction
Home-based businesses incur expenses like other businesses with distinct physical locations including offices, factories and showrooms. These expenses include operating, overhead and maintenance costs like salaries, transportation and communication, office supplies, and inventory costs. These are assumed to be incurred in relation to business operations and profit generation, thus, their tax-deductible nature.
Home cleaning services are among these tax-deductible expenses for good reasons. You, the proprietor of the home-based business, can become more productive in a clean, orderly and organized working environment. You may be able to clean your home office on a regular basis but it’s always nice to get a more thorough cleaning sans extra effort on your part.
Your customers, investors and even suppliers will appreciate your clean working environment, too, because of its implications. You’re making a good impression, too, and we know the impact of good first impressions on people.
You’re also making your workplace a safer environment for yourself, your customers and investors to be in. You have to keep in mind that as the proprietor, you have the responsibility to maintain a safe workplace and the liability in case of preventable accidents.
Computation of Expenses
But don’t declare the entire cost of the home cleaning services as a tax-deductible expense either. The IRS will only accept the portion of the cost that applies to the dedicated area for business in your home as deductible expense.
You must then determine the percentage between the square footage of your home and the square footage of your business area. You will then use the percentage to multiply it against the entire cost of the cleaning service. You can declare the product as tax-deductible expense.
For example, your entire house measures 1,000 square feet while your home office occupies 250 square feet. You paid $200 for the complete home cleaning services. You can then claim $50 as deductible expense (250/1,000 x 50).
This formula also applies to other monthly maintenance expenses incurred for your home, such as light, water and Internet connection. Just to be sure, you can also ask your tax advisor about these matters so you can declare the correct amounts.