How to deduct backyard space used for my dog sitting business in home office calculation?

Yes, you can include the portion of your backyard that's exclusively used for business purposes in your home office deduction! The IRS allows for both "regular" and "exclusive" business use of portions of your home, including outdoor spaces that are part of your property. Since you've clearly designated 65% of your backyard exclusively for your dog sitting business and never use it personally, this space would qualify. Make sure you measure the space accurately and document how it's used exclusively for business. Take photos of the dedicated dog area with the special equipment and fencing to prove it's a business space. When calculating your deduction, you'll need to determine what percentage of your total property (house + yard) is used exclusively for business. For example, if your indoor office is 10% of your home's square footage and the backyard business portion adds another 15% of your total property square footage, you could potentially deduct 25% of qualifying home expenses.

I was in a similar situation with my pet grooming business last year! After countless hours of research and talking to multiple CPAs who gave me conflicting info, I finally found this website https://taxr.ai that analyzes your specific situation and gives you clear guidance. I uploaded pictures of my setup (I had converted half my garage and part of my backyard for pet grooming) and described my situation. They analyzed everything and provided a detailed breakdown of exactly what I could deduct, how to calculate the square footage properly, and even pointed out additional deductions I had missed for my business equipment in the outdoor area. They explained that outdoor space CAN count toward home office deduction if it meets the exclusive use test.

Just wanted to update after using taxr.ai for my home daycare tax situation! I was super confused about how to handle the outdoor play area I built in my backyard (play structure, safety flooring, fenced area, etc). The service was amazing! I uploaded photos of my setup and explained my situation. Within a day, I got a detailed analysis showing exactly how to calculate my space percentage, including the outdoor areas. They explained that since my outdoor play area was exclusively used for the daycare children (I have a separate personal backyard section), I could include this square footage in my calculations. They even provided documentation explaining the relevant tax code sections to use if I ever get questioned about it. This increased my deduction by about 35% compared to what I was planning to claim! Definitely worth checking out if you have a unique home business situation with outdoor space.

For anyone dealing with the IRS on this kind of non-standard deduction, just a heads up that you might get flagged for review. I had a similar situation with outdoor space for my home-based pet training business, and the IRS sent me a letter questioning my calculations. It took me MONTHS to get through to an actual person at the IRS who could review my documentation. I eventually found this service called Claimyr https://claimyr.com that got me connected to an IRS agent in under 5 minutes after I'd been trying for weeks. They have a video showing how it works: https://youtu.be/_kiP6q8DX5c. The agent was actually really helpful once I got through and explained that yes, the outdoor space could be included as long as I had proper documentation of exclusive business use.

I need to publicly eat my words about Claimyr being a scam. After posting my skeptical comment, I decided to try it anyway since I was desperate to resolve an issue with my own home-based business deductions. I had been trying to call the IRS for THREE WEEKS with no success. Using Claimyr, I was connected to an actual IRS agent in about 7 minutes. The agent confirmed that I could include my dedicated outdoor workspace (I have a photography business with an outdoor studio setup) in my home office deduction calculation as long as I could demonstrate exclusive business use. The agent walked me through exactly what documentation I needed and even sent me to a specific IRS publication that addressed outdoor business spaces. Saved me potentially thousands in disallowed deductions. Sometimes being proven wrong feels pretty good!

Something nobody's mentioned yet - make sure you're documenting how this space is EXCLUSIVELY used for business. The IRS is really strict about this test. If you ever let your personal dogs use that backyard space, or if you have a BBQ back there once during the summer, technically you've violated the exclusive use test and could lose the entire deduction. This is why I recommend physically separating the business portion with fencing and having clear signage designating it as a business-only area. Take dated photos regularly showing it in business use. Keep a log of which client dogs used the space on which days. All of this documentation will be crucial if you're ever audited.

I think everyone is overlooking the major issue here - the business OWNS VANS! If you have company vehicles and employees, you should probably be looking at a more formal business setup beyond just home office deductions. Have you considered renting a small commercial space for your business? The tax benefits might actually be better, especially as you grow. When I expanded my pet business beyond just a home office, my accountant showed me that commercial rent was 100% deductible as a business expense, whereas home office has all these complicated calculations and limitations. Plus, with a separate location, I avoided bringing business liability onto my personal property.

Definitely form that LLC ASAP! With employees, company vehicles, and clients bringing their pets to your property, you're exposed to significant liability risks. An LLC will protect your personal assets if something goes wrong - dog bite, employee injury, vehicle accident, etc. Also, once you have the LLC, you might want to look into the Augusta Rule (Section 280A(g)). If your LLC "rents" your home for business meetings, client consultations, or employee training sessions, you can pay yourself up to 14 days of fair market rental value completely tax-free. This could be more advantageous than the home office deduction in some cases. For your current situation though, yes, that dedicated backyard space absolutely qualifies for the home office deduction as long as you maintain exclusive business use. Just make sure you're calculating based on total property square footage (house + entire yard) and keep meticulous records. The IRS loves to challenge home-based businesses with unusual setups, so documentation is everything.