Are Utilities Tax Deductible for Businesses?

Running a successful business means understanding every possible financial advantage, especially when it comes to small business tax deductions. Businesses routinely miss deductions on basic expenses. Utilities are one class of those expenses. Keep reading. You may be surprised.

Utility expenses are the no-brainer deduction even big businesses miss.

Essential expenses for a physical business location—such as water, electricity, and gas—are tax-deductible. That’s pretty clear.

Here’s another way to say it: If the business expense keeps your enterprise operational, it’s likely deductible.

Trash disposal and recycling keep businesses running, do they not? Then, add waste disposal to your list of tax deductions.

Take a look at some common business utilities that are tax-deductible.

  1. Electricity and gas
  2. Water and sewage services
  3. Trash disposal, dead appliance removal, and recycling services
  4. Internet and phone services used for business purposes
  5. Security system installation for commercial properties

What’s the difference between commercial business utilities and home office utilities?

Are utilities tax deductible for businesses? The “where” matters. Take water and gas. Let’s look at the distinction between utilities for business offices and home offices.

If you own or rent a brick-and-mortar business or office space, you can deduct 100% of the necessary utilities such as gas, electricity, trash, and water. For those claiming the regular home office deduction, you can only subtract the portion used for business.

Visit the IRS publication on Business Expenses.¹ You’ll find additional detailed information and updates on allowable business income and expense deductions. Or, you can give me a call.

Here are three tips to maximize tax deductions for utilities.

1. Don’t overlook the deductibility of your phone and internet bills.

Your phone and internet expenses are potential tax deductions when used for business purposes in a store, business property, or office setting. This is particularly relevant if these services are mainly used for business operations. Claiming these expenses can effectively reduce your overall tax liability.

2. Utilize the home office deduction to maximize your tax benefits.

The home office deduction is invaluable for those operating businesses from home. This deduction includes a portion of your mortgage interest, utilities, rental property expenses, and other related expenses crucial for maintaining your home office. Proper allocation of these costs is key to optimizing your tax benefits.

3. Maximize deductions for business equipment and office supplies.

In addition to utilities, you can also deduct expenses for business equipment and office supplies. If these items are ordinary and necessary expenses, from computers to office furniture, they are deductible.

What do you need to know if you’re a commercial renter?

Are utilities tax deductible on rental property? Good question. Business expenses for rental properties, including electricity and other essential services, are indeed deductible, provided they are operational or capital expenses necessary for the property’s operation.

Leasing brings unique considerations for utility deductions.

You must understand the terms of your lease and how they impact your deductions. Some leases may include utilities as part of the rent, while others may require tenants to pay utilities separately. Ensure you’re clear on these terms, as they will guide how you claim these expenses on your taxes.

Document and claim your utility expenses.

Accurate and thorough documentation is essential when claiming utility expenses as deductions. I’ll say it once if I say a thousand times: keep detailed records of expenses.

Utility expenses will lower your tax bill. Use them.

From the electricity that powers your business to the internet services that keep it connected, utility costs, when managed and documented properly, will lower your taxable income significantly—more than you think.

The question is, what are you missing?

Talk soon,
Jeremy A. Johnson, CPA


  1. Guide to Business Expense Resources | Internal Revenue Service [Internet] Irs.gov [cited 2024 Feb 13] Available from: https://www.irs.gov/forms-pubs/guide-to-business-expense-resources
Meet the Author
Jeremy A. Johnson, CPA, is an expert in strategic tax planning, accounting, CFO services, and thought leadership.

Jeremy writes for small business owners who need actionable information on tax strategy, efficient accounting practices, and plans for long-term growth.

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