In certain instances, utility costs can turn into a tax deduction when filing your tax return. Let’s take a look at some common examples where utilities may be deductible.
You may be able to claim utilities on your taxes if you work from home and are self-employed.
You can deduct a portion of your home-related expenses, including utilities, if you use your home office exclusively for self-employment or business use. This is true whether you’re a homeowner or a renter. However, you cannot deduct these expenses if you are an employee who works from home. This deduction is only for self-employed individuals and does not cover home office expenses for employees.
The portion of your deductible utility costs would depend on what percentage (in square feet) of your home you use exclusively for business purposes.
In addition to deducting a portion of your utility costs, you may also be able to deduct other home-related expenses using the home office deduction such as mortgage interest or rent, insurance, depreciation, or home repairs and maintenance.
You must meet specific requirements to claim home expenses as deductions. The IRS goes into more detail on these requirements in this article. And don’t forget, it’s also important to maintain thorough records of your business expenses to support your claim of this deduction in case the IRS asks.
You can deduct utility costs for your rental properties.
Landlords are allowed to write off operating expenses for their business, including utilities. If you cover utility bills like gas, water, electricity, internet, or cable for your tenants, you can deduct those costs from your taxes.
You might be able to deduct renewable energy upgrades made to your home.
Investing in renewable energy upgrades for your home in the U.S. can save you money on utilities and give you a nice tax break.
The Residential Clean Energy Credit and Energy Efficient Home Improvement Credit are available to homeowners making clean energy updates to their homes. The Inflation Reduction Act of 2022 made some changes to these tax credits, which we cover in more detail in 3 Ways the Inflation Reduction Act Could Impact Your Taxes. The credits cover upgrades like installing electric or natural gas heat pumps, updating your exterior doors and windows, and installing clean energy systems (including solar, wind, geothermal heat pumps, and fuel cells).
To apply for these tax credits when filing your taxes, you’ll need IRS Form 5695.
Note: Tax credits for energy-efficient home improvements — like upgrading windows, insulation, or HVAC systems — will expire after Dec. 31, 2025, due to a provision in the Working Families Tax Cut Act (also known as the One Big Beautiful Bill).
The bottom line
Utility costs aren’t deductible for most homeowners — they can only be deducted in specific situations, such as for home office use, rental properties, or renewable energy upgrades. By understanding when these deductions apply, you can reduce your tax burden and maximize your tax savings. Just remember to keep accurate records and follow IRS guidelines to ensure you’re eligible for these tax breaks.
This article is for informational purposes only and not legal or financial advice.
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