Renting home based business

Not all home based business owners own a home. Some home based business owners rent a home or an apartment and use some part of it for home based business purposes. If you are a home business owner and you rent your home for your home based business instead of owning your home, tax laws are different for renting home based business.

Example of tax deduction when renting home based business

If your home business percentage is 20 percent, and instead of owning your home you rent a home and uses it for your home based business. If your annual rent is $12,000, you may treat $2,400 ($12,000 x 20%) as part of your home office deduction. The balance of your rent is not tax deductible, since it is a personal expense.

Compare to mortgage tax deductions

If you have mortgages on your home, you apply the home business percentage against your deductible mortgage interest. You can include a second mortgage and deductible points in this figure. The portion of your mortgage interest not treated as part of your home office deduction continues to be tax deductible as an itemized tax deduction on Schedule A of your tax return.