How to deduct home office in a house in which mortgage is paid off?
Situation:
1) Small business owner has his only office in his home.
2) He paid the mortgage off. House is totally debt free.
3) He uses one room as his only office that he otherwise would use as another family room if he would for example rent space for his business in a business building not belonging to him.
4) Can he bill his business with rent for that room in his own home?
5) Can he deduct rent for that office room?
6) If he ever would sell this house one day, would it still be a private house sale?
This is one of the hardest most complex deduction of the IRS. The IRS tightened the rules on what you can deduct, what can be in the room to call it an office. For instance you might not have a TV in that room, even though if you had a commercial office you could have a TV in your lobby or waiting room.
I understand you can take a certain percentage of the utility bills, since there is no mortgage, I am unsure how this would be deducted since there is no percentage that you can come up with to deduct.
This question is best answered by a competent CPA that has experience with home offices. Home offices are more common now, but the requirements to take this deduction is very stringent.
I hope this has been of some benefit to you.
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