Working From Home: Which Expenses Belong in Your Books and Which Ones Your CPA Decides

What belongs in your books when you work from home

When you run a business from home, some costs clearly belong to the business. A desk you bought for work. A second phone line for business calls. Software you use to bill clients. These go in your books as business costs, the same way they would if you had a separate office.

The rule is simple. If a cost belongs to the business, it goes in the business books. If it is personal, it does not. The trouble is that some costs are a mix. The power bill covers the whole house. The internet serves your home and your work. Those are the ones that need a line in your books but a share that your CPA figures out.

Here is what clearly belongs in your books.

Each one gets its own line. When the month closes, the totals are already in the right spots.

What your CPA decides, not us

Some costs are real, but the share that belongs to the business is a tax question. The power bill. The internet bill. The rent or mortgage on the home. These costs show up in your life because you work from home, but the rules for how much counts as a business cost are set by the tax code and your CPA.

We record the full bill in your books and keep the statement on file. We do not pick the share. We do not tell you what percent of your home to claim. We do not prepare taxes or give tax advice. Your CPA decides the share. Our job is to make sure the bill and the cost are in the books so your CPA has something to work from.

A clean record has three parts. The full bill. A note that says the share is your CPA's call. And the transaction in your books tied to that bill. When your CPA asks how a number was figured, the answer is right there.

Here is what your CPA decides, not us.

We keep the bills on file and the lines in your books. Your CPA takes it from there.

How to tell the two apart

The clean way to think about it is this. A cost that you would have even without the business is shared. A cost that exists because of the business is a business cost. The power bill would be there whether you worked from home or not. The desk would not. The desk is a business cost. The power bill is shared.

Some costs fall in the middle. A cell phone you use for both. A laptop your kids also use. In those cases, you record the cost in your books and add a note that the use is mixed. Your CPA can then decide what share to claim. We help you draw the line each month so the business books hold the right costs and the shared costs have the notes your CPA needs.

Here is how to sort a cost that could go either way.

• **Ask if the cost exists because of the business.** If yes, it is a business cost.
• - **Ask if the cost would be there without the business.** If yes, it is shared. Record it and note the share for your CPA.
• - **Ask if the cost is part personal and part business.** If yes, record the business part and note the split. Keep the receipt.
• - **Ask if the cost is clearly personal.** If yes, it stays out of the business books.
• - **When you are not sure, record it and flag it.** We review every line each month and flag the ones that need a CPA call.

The records that make it easy

Good records start with proof. A bill, a receipt or a statement shows the cost was real. We tie that proof to the transaction in your books, so nothing is missing at year end. When your CPA asks for the records, the books and the proof are already in order.

For a home office, the proof is often the full bill plus a note. The power bill covers the whole house. What you keep is the full bill and a note on how the share was figured. We do not pick the share. Your CPA does. We make sure the bill and the cost are in the books so your CPA has something to work from.

Here is what to keep on hand.

• **The full bill for each shared cost: ** power, water, internet and the rest.
• - **A note on how the office share was figured: ** square feet, hours used or the method your CPA prefers.
• - **Receipts for office supplies and small equipment: ** each one tied to the transaction.
• - **Receipts for bigger items: ** desk, chair, computer or monitor.
• - **The rent statement or mortgage interest line: ** the housing cost that covers the office space.
• - **A record of any repair: ** what was fixed, when and the amount.

Keep the proof in one place. We tie it to the books as we go, so nothing is missing at year end.

What we do not do

We keep books and run payroll. We do not prepare taxes. We do not give tax advice. We do not tell you what share of your home to claim or what counts for your return. Those are calls for your CPA or tax preparer.

When the tax questions come up, we point you to your CPA. We keep the lines clean so they have good numbers to start from. You can read more about how we keep the books on our bookkeeping page, and about payroll on our payroll page.

A situation we clean up

The shared bills that had no notes

A small business owner works from home. Power, internet and rent all go to one line called office expenses. There are no notes on how the share was figured. No receipts are tied to the bills. At year end, the CPA asks what was business and what was personal, and the owner can not tell from the books.

Here is how we handle it. We set up separate lines for the home office costs. We pull the bills for the open months and tie each one to its transaction. We keep the full bill on file and add a note that the share is your CPA's call. We sort the past costs and close each open month one at a time, from the oldest forward. Then the routine runs every month, so the next year end starts with clean books.

Common questions

What costs go in my books when I work from home? Any cost that belongs to the business goes in. A desk, work software, a work phone line and office supplies each get their own line. Shared costs like power and internet get recorded too, but the share is your CPA's call.

Which costs does my CPA decide? Your CPA figures the business share of shared costs like power, water, internet, rent or mortgage interest and repairs to the home. We record the full bill and keep the statement on file. We do not pick the share. Your CPA does.

What if a cost is part personal and part business? Record the cost in your books and add a note that the use is mixed. Keep the receipt. Your CPA can then decide what share to claim. We review every line each month and flag the ones that need a CPA call.

Do you tell me what to claim on my taxes? No. We do not prepare taxes or give tax advice. We keep the bills and the costs in the books, and your CPA decides what to claim. You can reach us on our contact page if you want a team that keeps your home office books clean.