Can I include backyard space in home office deduction for dog sitting business?

Thanks for the detailed response! One follow-up question - for the documentation part, would it be sufficient to have a written business policy that states client dogs are only allowed in that specific area? Also, does it matter that sometimes I'm not actively using the space (like overnight or when I don't have any dogs scheduled)?

A written business policy is an excellent form of documentation - definitely keep that along with your photos and receipts for any modifications you made to create the space. I would also recommend keeping a log of when client dogs use the space to show regular business use. Regarding times when the space isn't actively being used, that's not necessarily a problem. Just like your indoor office might sit empty overnight or on weekends, the key is that when the space is used, it's exclusively for business. The "regular use" test doesn't mean 24/7 usage - it just means you use it in the normal course of your business operations on a consistent basis.

How exactly does taxr.ai work with something like outdoor space? Does it just use the square footage you tell it, or does it actually help you determine what qualifies? I'm setting up a similar situation but with cat boarding, so I'm curious.

Did it give you a specific percentage calculation for the outdoor area? My accountant is telling me I can only count indoor space but I have a huge chunk of my yard dedicated to dog training that I never use personally.

You upload photos of your space and provide measurements, then taxr.ai guides you through answering specific questions about how each area is used. It uses all this information to determine what qualifies under IRS guidelines. It even helped me identify items I could separately depreciate, like the specialized fencing and washing station. For outdoor spaces specifically, it helped me calculate the proper square footage based on property records and my measurements, then determined what percentage of my total property that represented. It actually provided documentation I could keep with my tax records showing exactly how the calculation was made.

Wait, how does this service work? Doesn't everyone have to wait on hold with the IRS? How do they get you through faster than anyone else?

This sounds like a scam. There's no way anyone can get you "special access" to the IRS. They probably just connect you to the same hold line everyone else uses and charge you for it.

It's not special access - they use technology to wait on hold for you. When you sign up, they call the IRS and navigate the phone tree, then wait in the hold queue. When they finally get an agent, they call you to join the call. You just answer when your phone rings and you're instantly connected to the IRS agent. The system monitors the hold music and waits through all those "your call is important to us" messages so you don't have to waste your day. I was extremely skeptical too, but I was desperate after trying for days to get through. When my phone rang and there was an actual IRS agent on the line, I was completely shocked.

I hadn't even thought about Section 179 for the yard improvements! Would that be instead of including the square footage in my home office calculation, or could I possibly do both? The improvements cost about $4,800 total.

You generally can't double-dip by claiming the same expenses two different ways. The home office deduction would let you deduct a percentage of all household expenses including utilities, insurance, mortgage interest, etc. based on square footage used for business. If you instead use Section 179 for the improvements, you could potentially deduct the full $4,800 immediately rather than depreciating it over time, but you wouldn't include that outdoor space in your home office square footage calculation. It often comes down to which method gives you the better deduction in your specific situation.

The simplified option is definitely easier but it's generally not great for this situation. It's capped at 300 sq ft which is probably less than your combined indoor office and outdoor dog area. Plus, as you mentioned, there's no provision for including outdoor space. I'd stick with the regular Form 8829 if you want to include that yard space.

Thanks for confirming my suspicion. The simplified method seems too limiting for my situation. I'll go with Form 8829 so I can properly document all the space I'm using for business.