Question by sheldon_koggs: What is reasonable for a home based business to charge itself for rent?
I am 1 of the 2 partners in a home based business which currently is run out of my partner’s home. The business consumes space and also utilities. I am trying to come up with a fair rate for rent and a fair calculation for the use of utilities based on what is used for the business. Can someone suggest a guideline here?
I personally don’t feel that the company should be charge full fair market value for rent since I believe it’s a convenience to be able to work at home. Does anyone agree or am I way off here?
Answer by tidww
The IRS guidelines basically say add up the total square footage of the home and then the space for the business. Divide and you get a percentage. Multiple the total utilites and mortgage/rent by that percentage. The space has to be used only for business and some utilities are not deductable, primarily phone if memory serves because you would have it with or without the business.
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