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Category: Finding Deductions

What is the difference between "Direct Expenses" and "Indirect Expenses"?

There are 2 types of expenses that you can deduct related your home office/business:  Direct Expenses and Indirect Expenses. 

  • Direct Expenses:  Direct expenses are those expenses that are paid only for the business part of your home.  For example, if you pay for painting or repairs only in the area used for business, this would be a direct expense. 
  • Indirect Expenses:  Indirect Expenses are those expenses that are paid for keeping up and running your entire home.  Examples of indirect expenses generally include insurance, utilities, and general home repairs.  Since these are expenses you would pay for the entire home, these are considered indirect expenses. 

NoteIf you paid one of these separately and specifically for the part of your home you are using for business, these could be considered "direct expenses".  For example, if you paid separate utilities that were specifically for your home office, this could be considered a direct expense.  If any part of that bill included utilities for the whole house, though, that would be an indirect expense.