Are utilities for a home office deductible?

What the publication says

Publication 587 starts from a restrictive default: you generally cannot deduct items related to your home, such as mortgage interest, real estate taxes, utilities, maintenance, rent, depreciation or property insurance, as business expenses. The exception is the business use of part of your home, which can make a share of those items deductible if you meet specific requirements. Utilities appear on the list of expenses that are deductible only if you use your home for business, alongside insurance, rent, repairs, depreciation and a security system.

In the Utilities and services entry, the publication says electricity, gas, trash removal and cleaning services are primarily personal expenses, but if you use part of your home for business you can deduct the business part. Generally, the business percentage for utilities is the same as the percentage of your home used for business. The word generally is worth noticing: it is the default, not a mandate, and the publication allows any reasonable method for the percentage itself.

Why utilities are an indirect expense

The publication’s Table 1 defines three types of expenses. Indirect expenses are for keeping up and running your entire home, are deductible based on the percentage of your home used for business, and list utilities as an example. A single electric bill covers the kitchen, the bedrooms and the office alike, so it cannot be a direct expense even if the office has a space heater. The rule is to allocate, not to guess which kilowatts belonged to the work.

Table 1 reserves the direct category for expenses only for the business part of your home, and its examples are painting or repairs only in the area used for business. A whole-home utility bill does not fit that description. If you believe a particular utility serves only the business area, keep records that show why and ask a tax professional before treating it as direct.

A worked example

This example is not from the publication. Suppose your office is 12 feet by 15 feet, which is 180 square feet, in a 1,800 square foot home. The business percentage is 10%. Over the year you paid $2,400 for electricity and gas, $480 for water and sewer, and $360 for trash and recycling. The total is $3,240, and at 10% the business part is $324. The other $2,916 stays personal. The calculator above does this arithmetic with the total and the percentage you enter.

That $324 is not automatically deductible. It becomes part of the home office total, which is then tested against the deduction limit: when gross income from the business use of the home is less than total business expenses, the deduction for otherwise nondeductible expenses such as insurance, utilities and depreciation is limited to the gross income from the business use of the home minus certain other amounts. The excess carries over to the next year in which you use actual expenses.

Telephone is different

The publication gives telephone its own rule. The basic local telephone service charge, including taxes, for the first landline into your home is a nondeductible personal expense. Charges for business long-distance calls on that line, and the cost of a second line used exclusively for business, are deductible business expenses, but you do not include them as a cost of using your home for business. They are deducted separately; for Schedule C filers that means line 25, Utilities, rather than line 30, Expenses for business use of your home. The same page of the publication contains a related caution for daycare: no deduction is allowed for the cost of a basic local telephone line provided to the home.

Where utilities go on your return

For a self-employed person who files Schedule C, the entire deduction for business use of the home is reported on line 30 of Schedule C. Whether Form 8829 is attached depends on how the deduction is figured; the Schedule C instructions cover that. For a farming business on Schedule F, the deduction goes on line 32 with Business Use of Home written on the dotted line. In both cases utilities are one component inside that single line, not a separate line item. The related self-employment tax calculator can show what the deduction does to your bottom line.

When you cannot deduct actual utilities

If you elect the simplified method for a year, you cannot deduct actual expenses for the business use of the home except business expenses not related to the use of the home. Utilities are home costs, so they are covered by the flat rate of $5 per square foot, up to 300 square feet, and are not deducted separately. The election is made each year on a timely filed original return and is irrevocable for that year. Use the simplified vs regular home office deduction calculator to compare. The publication also says that if you rent only part of the year or begin business use mid-year, you consider only expenses incurred during the period you used the home for business.

Sources

• IRS Publication 587, Business Use of Your Home (2025): Actual Expenses: Utilities and services; Telephone. Read November 2, 2026.

Edition read: Publication 587 (2025), for use in preparing 2025 returns. Dollar figures and rates in the publication are for 2025; check IRS.gov/Pub587 and the instructions for Schedule C and Form 8829 for your tax year. This page summarizes the publication and does not replace it. Marked for human review.