water well repair or upgrade?

[jklcpa]

10 minutes ago, Lee B said:

This discussion is now to the point where I have a huge smile on my face

  I'm waiting for it to go to a second page!

[DANRVAN]

And I have been looking at this from the perspective of my personal OIH as well, and admit I have been doing it wrong.  There is no way I can justify allocating a personal expense.

[Slippery Pencil]

3 hours ago, DANRVAN said:

 I have referred to the code throughout this thread which refers to an "allocable" expense.

You referred to the code once, then I asked about it.  In your response to that question, you referred to a pub, not the code.  Based on your answer, your conclusion, "Bottom line, water is not a cost of using a OIH so it is not allocable", doesn't logically flow from your premises.

14 hours ago, DANRVAN said:

On the other hand, how much water is used as an ordinary and necessary expense in a home office?  

How much gas is used as an ordinary and necessary expense in a home office?  Most of a house's gas is used to heat water for showers and laundry, to cook, and to heat the rest of the house 8760 hours a year compared to 2000 hours the home office is used.  Yet the gas is allocated based on floor space.  A 150 sq ft office in a 3000 sq ft home doesn't use 5% of the gas, yet 5% gets allocated to it.  Same with electricity.  How much electricity is used by the washer, dryer, oven, fridge, kids gaming computers, etc compared to a home office.

Stop taking water & sewer on your clients' home offices if you want, but please don't choose this hill to die on.  Unless something like a pool was involved, the irs has not disallowed water & sewer deduction for a home office, so why would you?

[BulldogTom]

16 hours ago, DANRVAN said:

Unlike electricity, gas, or heating oil, water is not allocable to an area used exclusively to the home office.

There is direct benefit from the the utilities used to power, heat or cool the home office as ordinary and necessary expenses; the home office consumes a portion of those utilities and they are rightfully allocated per the code section.

On the other hand, how much water is used as an ordinary and necessary expense in a home office?   

Notice that pub 587 does not include water as a utility allocable to a OIH:

Utilities and services.    Expenses for utilities and services, such as electricity, gas, trash removal, and cleaning services, are primarily personal expenses. However, if you use part of your home for business, you can deduct the business part of these expenses. Generally, the business percentage for utilities is the same as the percentage of your home used for business.

Bottom line, water is not a cost of using a OIH so it is not allocable.

Without water, how does a client flush the toilet when they go to the restroom?   Just asking for a friend. 

Tom
Longview, TX

[Lion EA]

A client walks through the livingroom to get to the OIH, but we can't use the sq' of the LR as part of OIH. Regular and exclusive. My clients can use my hall bath, but it's not part of my OIH, so I wouldn't allocate the bathroom part of my water to my OIH.

I keep changing sides on this. Probably 'cause I'm too sleepy to read the code. 

[Margaret CPA in OH]

Who could imagine this would get into such detail?  Thanks, Catherine, for providing this 'fun' diversion in these last grueling days of the season.  It's certainly led us into some interesting rabbit holes (just in time for Easter)!

[BulldogTom]

Is it "ordinary and necessary" to "do your business" during working hours?   Asking for another friend.

Tom
Longview, TX

[Lee B]

1 hour ago, BulldogTom said:

Is it "ordinary and necessary" to "do your business" during working hours?   Asking for another friend.

Tom
Longview, TX

 

Only if you keep a contemporaneous log

[BulldogTom]

33 minutes ago, Lee B said:

 

Only if you keep a contemporaneous log

Good thing there is a handy supply of paper right there to document your business purpose...

Tom
Longview, TX

[Margaret CPA in OH]

Okay, now we're getting silly but isn't this a fun 'relief' at this season's point?

[Catherine]

On 4/11/2025 at 2:50 PM, jklcpa said:

  I'm waiting for it to go to a second page!

Your post did it!

[Catherine]

For reference, this home based business does use water, including a steamer table that uses quite a bit.

[Jim Oh Bkkr]

10 hours ago, Catherine said:

Your post did it!

I started to accuse her of "post counting"

[DANRVAN]

On 4/14/2025 at 6:00 PM, Catherine said:

For reference, this home based business does use water, including a steamer table that uses quite a bit.

Then for sure an allocable expense per the code.

On 4/11/2025 at 3:05 PM, Lion EA said:

to read the code.

280A - Disallowance of certain expenses in connection with business use of home, rental of vacation homes, etc.

Paragraph (c)(1) allows an exception per legislative grace:

"Subsection (a) shall not apply to any item to the extent such item is allocable to a portion of the dwelling unit which is exclusively used on a regular basis"

That is very straight forward in saying if a certain utility is not used in the business, and in the exclusively used area, it is not allowed.

The author of this article takes the same position https://www.journalofaccountancy.com/issues/2020/may/deduct-home-office-expenses-coronavirus-remote-work/ :

"Not all indirect expenses may be included in the allocation. For instance, utilities and services not used in the business, lawn care, and the first telephone line to the house all must be excluded. An example of an excluded utility would be propane gas supplied for cooking on the kitchen range."

Another article, same position, https://www.wolterskluwer.com/en/expert-insights/expenses-related-to-your-home-office-are-deductible

And that article goes on to say "If you believe that your business accounts for significantly more (or less) of a particular utility, you should increase (or decrease) your business percentage of that utility bill accordingly"

I agree with that, if for instance your client has a business that consumes 40% of their water usage, but only exclusively uses 20% of the residence; then use 40% as the allocable portion per the code.  The code is the authority, the IRS worksheets and pubs are not.

This thread has changed how I look at the OIH utility allocation on both a professional and personal level.  I don't anticipate any of my clients jumping ship as I bring them into compliance with the code.

 

 

[DANRVAN]

On 4/11/2025 at 3:57 PM, BulldogTom said:

Is it "ordinary and necessary" to "do your business" during working hours? 

I am thinking about doing all my business in the "other office" down the hall, and use it exclusively,  that will resolve the issue.

[Lion EA]

On 4/14/2025 at 9:00 PM, Catherine said:

For reference, this home based business does use water, including a steamer table that uses quite a bit.

I think you should've led with that !! Dan really sums it up.