Kerry: Okay, be honest—how many of us treat tax season like that thing we’ll “deal with later”? I get it. But I also know that the smartest business owners I talk to are already thinking ahead—especially about the deductions that can make a real difference next spring. So I asked Tom: What’s one of the most overlooked tax strategies for small businesses that we should be paying attention to now?

Tom: I know we’re not in tax season anymore. But that doesn’t mean you can’t start thinking about the actions you’re taking now to help set you up for those tax filings that always seem to be right around the corner.

Let’s get some important stuff out of the way first though: I’m not a CPA. If you have any questions about how this information specifically applies to you, I’d suggest you speak with your CPA or tax preparer. The Tax Code can be very confusing, and making sure you apply it correctly to your situation is something best done by the person who knows your specific tax circumstances.

Now that’s out of the way, let’s talk about one of the least-used tax write-off strategies for small business owners—The Business Use of Your Home Tax Deduction. This is almost always one of the first tax deductions I talk about with new business owners, especially those that are just getting started or running a side hustle. It’s highly underutilized and, if done right, can help offset a good chunk of that side business or primary business income.

Here’s how eligibility works: if I’m a homeowner or renter and I use a part of my home specifically for my business, then I’m allowed to take a write-off for expenses related to my home—like mortgage interest, rent, utilities, property taxes, repairs, maintenance, and other related costs. Wait…so I can write off part of my garbage bill, sewer bill, and that big flooring project I did on my house last year? Yup. At least a portion of those expenses, if a few simple circumstances apply.

As far as how the calculations work, you have two ways to look at this. First, with the Simplified Method, you calculate the square footage of the home that is used for business and multiply that by $5 per square foot, up to 300 square feet. However, most business owners benefit from using the Actual Expense Method. Under this method, you take the total square feet used for your business and divide it by the total square footage of your home. This gives you the percentage of your home used for business, which you then multiply by your actual home expenses for that tax year.

Kerry: Wait—so if I’m working out of a spare bedroom and have a little equipment set up in the living room, that could really add up? What if I haven’t officially “claimed” the space before—can I start tracking that now?

Tom: So, let’s look at an example. Say I’m an independent contractor with a business license and a home office. I also have some business stuff filling up the closet in one of my bedrooms. And I’ve got a corner of my living room dedicated to printer space and a few other pieces of equipment. Sure, my wife absolutely hates all this stuff in the house. But hey—since I haven’t opened an office I can afford yet, I might as well make the most of these deductions. Altogether, that business space takes up 500 square feet of my 2,000 square foot home—25% of my total space.

Last year, I paid $18,000 in mortgage interest, $2,000 in insurance, $2,000 in property taxes, $4,000 in utilities, and $4,000 for a floor repair job. That’s $30,000 in total home expenses. I’d take that $30,000 and multiply it by 25%, which gives me a $7,500 deduction I can use to offset my net business income. Sweet!

Now let’s talk about a few ground rules for this deduction. First, it applies to business owners only. If you’re sewing mittens out of a spare room for fun and selling them here and there without a business license, this doesn’t apply to you. But honestly? A quick online application with the Department of Revenue and a $50 filing fee might be all it takes to turn that hobby into a business.

Second, your home must be your principal place of business. If you have a rented office space outside your home, you’re not eligible. But most small business owners—especially those working in the field—don’t have an official office. Good news: that means you probably qualify.

And finally, your workspace must be dedicated. That means no taking a deduction for the corner of your couch if you’re answering emails while watching Netflix. If a room is used for multiple purposes, it gets tricky—so again, check with your CPA for the details.

A couple last notes: W-2 employees (those who work for someone else) aren’t eligible. And if you’ve elected to be taxed as an S-Corp or partnership, you can’t use this method in the same way. That said, there are still workarounds your tax pro can help with. This deduction is primarily designed for sole proprietors filing a Schedule C.

So, keep this one in your back pocket as you consider those extra projects around the house. For many sole proprietors, this ends up being an unexpected bonus that helps make those early years in business just a little easier. And let’s be real—when you’re running a business, every bit helps.

Kerry: Not so scary after all, right? The Business Use of Home deduction might not be flashy, but it’s one of those practical tools that can put real money back in your pocket—especially in those early years when every dollar counts. We’ll be back in two weeks with another round of Business Banter with Tom & Kerry, tackling the next challenge you didn’t even know you had. Until then, keep asking great questions and keep building smart.

Kerry Solmonsen is the Executive Director of the Enumclaw Chamber of Commerce and community advocate with a passion for helping local businesses grow and thrive. With a background in leadership, sales, nonprofit development, and business development, she brings both heart and hustle to her work. Whether she’s organizing a parade, launching a community initiative, or championing small-town entrepreneurship, Kerry is all about connection, collaboration, and creating momentum that matters.

Thomas Sauvageau is a lifelong entrepreneur and seasoned business coach with a passion for helping small business owners succeed. Over the past 20+ years, he’s owned or partnered in more than 30 businesses across industries like finance, real estate, and hospitality, many of them right here in our community. While he’s no stranger to the highs and lows of entrepreneurship, Tom’s true calling is helping others grow thriving, values-driven companies. As a Certified EOS Implementer®, he now works with business owners across the region to bring structure, clarity, and momentum to their vision. www.eosworldwide.com/thomas-sauvageau