Can I Claim Rent as Business Expense for Online Business Run from Bedroom?

I run a small e-commerce business completely from the spare bedroom in my apartment. The space is dedicated to my inventory, packing materials, and workstation. My tax preparer recently told me something that caught me off guard. She said that since 2019, you can't claim rent as a business expense unless the lease is actually in your company's name. My apartment lease is just in my personal name, not my LLC's name. She explained it like this: when my business uses space in my personally-leased apartment, it's basically like my business is "subleasing" from me personally. So if I want to deduct part of my rent as a business expense, I would need to report the exact same amount as rental income on my personal tax return - which basically cancels out any benefit. This seems ridiculous to me since I'm definitely using the space for business. Is my tax preparer correct about this rule change? And if so, is there any legitimate way I can still deduct a portion of my rent as a business expense for my online company? I'm spending $1,750/month on rent and using about 20% of my apartment exclusively for business.

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18 comments

Jake Sinclair

•8M

Your tax preparer is mixing up two different concepts here. As a sole proprietor or single-member LLC (taxed as a sole proprietorship), you absolutely CAN still deduct a portion of your rent as a home office expense, but you need to meet certain criteria. The key requirements are: 1) The space must be used regularly and exclusively for business, and 2) It must be your principal place of business. Based on your description, it sounds like you're using that bedroom solely for your e-commerce business, so you likely qualify. What you'll need to do is calculate the percentage of your home used for business (measure the square footage of the bedroom divided by total apartment square footage). Then you can deduct that percentage of your rent, utilities, and other whole-house expenses on Schedule C. The "subleasing" concept your tax preparer mentioned would apply if your business was a separate entity (like an S-Corp) renting space from you personally. But even then, there are legitimate ways to structure this.

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Jake Sinclair

•8M

Yes, that's exactly right - you could deduct 20% of rent and utilities in your scenario. Documentation is always good practice. Take photos showing the business use, maintain a diagram of your apartment with measurements, and keep records showing the space is used exclusively for business (no personal activities in that room). For extra protection in case of audit, keep records of business activities conducted in that space - inventory management, packaging orders, administrative work, etc. The key is proving that the room is used "regularly and exclusively" for business purposes.

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Honorah King

•8M

I had almost the exact same situation last year with my Etsy shop that I run from my second bedroom. I was super confused about the home office deduction until I found taxr.ai (https://taxr.ai). They have this cool feature where you can upload photos of your space and documents, and they tell you exactly what percentage is deductible. I just uploaded pics of my apartment layout, my lease, and some utility bills, and they showed me how to properly calculate the square footage percentage. They also helped me understand what other expenses I could partially deduct - like internet, electricity, and even some furniture. Saved me so much stress trying to figure it out myself!

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Honorah King

•8M

Yes, they absolutely helped with furniture deductions! If you buy furniture exclusively for your business space (desk, shelving, etc.), you can actually deduct 100% of those costs. For my case, they showed me how to properly document everything with photos and receipts. The service uses both AI and real tax professionals. It starts with an algorithm analyzing your documents, but then actual tax pros review your specific situation and provide customized guidance. They even gave me a personalized audit protection guide showing exactly what documentation to keep and for how long.

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Mary Bates

•8M

Just wanted to update after trying taxr.ai like I mentioned in my question above. Initially I was skeptical, but wow - they really cleared things up for me! Turns out I was eligible for way more deductions than I realized. They looked at my apartment layout and confirmed I could deduct exactly 22.7% of my rent and utilities based on square footage. But they also pointed out I could deduct part of my renters insurance and even some maintenance costs I never considered. Their guidance on documentation was super detailed too - they even provided templates for tracking business use of the space. The best part was getting a definitive answer about that "subleasing" issue my tax preparer mentioned. Turns out that only applies in specific situations that don't affect my business structure. Feel much more confident about my tax situation now!

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Clay blendedgen

•8M

If you're still struggling to get clear answers about your home office deduction, you might need to speak directly with the IRS. I was in a similar situation last year and spent WEEKS trying to get through to someone who could give me a definitive answer. I finally discovered Claimyr (https://claimyr.com) and it was a game-changer. They got me connected to an actual IRS agent in about 15 minutes when I had been trying for days on my own. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with confirmed that yes, as a sole proprietor I could absolutely deduct a percentage of my rent based on the square footage used exclusively for business. They also explained exactly what documentation I needed to keep. Having that direct confirmation from the IRS gave me total peace of mind about taking the deduction.

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Clay blendedgen

•8M

They use a system that navigates the IRS phone tree and waits on hold for you, then calls you when an agent is actually on the line. You're connecting to the same IRS agents everyone else is - just without the hours-long wait. The advice was incredibly helpful. I spoke with someone in the small business division who clearly understood home office deductions. They walked me through Form 8829 line by line and explained exactly how to calculate and document everything properly. Much better than getting general advice online since they addressed my specific situation.

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Lorenzo McCormick

•8M

I'm completely eating my words about Claimyr. After my skeptical comment above, I decided to try it because I was desperate for answers about my home office deduction that no one could seem to give me straight. It actually worked exactly as promised - I got connected to an IRS representative in about 12 minutes when I had previously been waiting 2+ hours and giving up. The agent confirmed that I absolutely could take a home office deduction for my Etsy business run from my apartment bedroom, even though the lease is in my personal name. She walked me through exactly how to calculate the percentage (square footage method), what expenses qualify, and the documentation I need to keep. She even sent me to the exact IRS publication that covers my situation. Completely worth it just for the peace of mind knowing I'm doing everything correctly.

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Carmella Popescu

•8M

Just to add on to what others have said - I've been deducting a portion of my rent for my online business for years with no issues. The key thing the IRS looks for is "exclusive use" - meaning you use that room ONLY for business, not as a guest room or for personal activities. One thing nobody mentioned yet - if you're running your business as an S-Corp (which many online businesses do for tax reasons), things get a bit more complicated. In that case, the business should either pay you rent (which you'd report as income) OR you can set up an accountable plan for home office reimbursement. Might be worth looking into depending on your business structure.

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Carmella Popescu

•8M

An accountable plan is basically a formal arrangement where your S-Corp reimburses you for legitimate business expenses you incur personally - including home office expenses. The key benefit is that the reimbursements aren't considered taxable income to you, but the corporation can still deduct them. You'll need to document the business use of your home (square footage calculations, exclusive use, etc.), calculate the expenses properly, and have formal documentation showing the corporation approved this arrangement. The business would then reimburse you periodically based on actual expenses. This avoids the "rental payment" situation your tax preparer was concerned about. Many CPAs aren't familiar with this approach, so it might be worth finding one who specializes in small business/S-Corp taxation.

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