Top 5 Tax Deductions AFH Owners Often Miss

Don’t Leave Money on the Table at Tax Time

(Especially If You Own the Home You Operate Your Adult Family Home In)

Running an Adult Family Home (AFH) means you wear many hats — caregiver, manager, cook, scheduler, and business owner. With so much to juggle, it’s easy to overlook valuable tax deductions that could save you thousands every year.

If you own the home where you operate your AFH, you’re not just responsible for resident care — you’re also running a licensed business. That means there are legitimate business expenses you can and should deduct. Unfortunately, many AFH owners miss these every tax season.

Here are the Top 5 Most Commonly Missed Deductions for AFH owners in Washington and Oregon — and how to make sure you claim them correctly.

1. Property Taxes and Mortgage Interest

If you own the AFH property, part of your property taxes and mortgage interest may be deductible as a business expense.Since your home is both a residence and a business, your accountant can allocate a percentage of these costs based on how much of your home is used for resident care versus personal living space.

💡 Example: If your AFH uses 80% of the home for resident care, you may be able to deduct 80% of the annual property tax and mortgage interest as business expenses.

This one deduction alone can make a significant difference — especially for AFH owners in higher-value housing markets like Vancouver and Portland.

2. Depreciation on the Building

Depreciation is one of the most overlooked tax benefits for AFH owners.If you own your property, you can depreciate the building’s business portion over time

— spreading the deduction across multiple years.

Depreciation helps offset the wear and tear of using your property for business purposes. It’s a powerful deduction that directly reduces taxable income, but many AFH owners skip it because they’re unsure how to calculate it.

🧮 Tip: Your AFH accountant can determine the depreciable portion based on the home’s value (excluding land) and how much of it is used for AFH operations.

3. Mileage for Business Travel

Did you know that every trip you make to:

• Buy groceries for residents,

• Pick up medical supplies, or

• Drive residents to appointments…counts as deductible mileage?

Many AFH owners overlook this because they use their personal car — but the IRS allows you to deduct business miles at the standard rate (currently around $0.67 per mile for 2025).

💡 Pro Tip: Keep a simple mileage log or use a mileage-tracking app. You’ll be surprised how quickly those short trips add up — and how much you can save at tax time.

4. Cell Phone and Internet Expenses

If you use your cell phone or internet to communicate with staff, residents’ families, or manage business operations (like payroll or billing), a portion of those costs are deductible.

Even if you use your personal phone, your accountant can allocate a reasonable percentage (often 50% or more) as a business expense.

This is one of those “small” deductions that can add up significantly across the year — especially when paired with other ongoing business utilities like software subscriptions and online services.

5. Home Maintenance and Supplies

Running an AFH means your home is your workplace. Repairs, cleaning supplies, safety upgrades, and household items related to care operations are deductible business expenses.

This can include:

• Home maintenance related to resident areas

• HVAC servicing, smoke detectors, and safety equipment

• Furniture, bedding, and appliances used for resident care

• Cleaning and sanitation supplies

🚨 Important: Keep receipts and categorize expenses properly — personal repairs or upgrades unrelated to the business aren’t deductible.

Bonus Tip: Work With an AFH-Specialized Accountant

AFH taxes are not like ordinary household taxes — your income often includes both tax-free Medicaid waiver payments (IRS Notice 2014-7) and taxable private-pay income. That mix makes bookkeeping and deduction tracking more complex than a typical small business.

A professional AFH accountant can help you:

• Allocate expenses between personal and business use

• Properly record property depreciation

• Separate Medicaid waiver and taxable income

• Prepare tax returns that meet state and IRS standards

Final Thoughts

You’ve worked hard to build a caring, compliant Adult Family Home — don’t leave money on the table at tax time.By tracking these commonly missed deductions and working with a professional who understands your industry, you can keep more of your income and strengthen your financial future.

📞 If you own or operate an AFH in Vancouver, WA or Portland, OR, let’s review your books together before the next filing deadline.

As a Certified Management Accountant (CMA) and IRS Enrolled Agent, I help Adult Family Home owners:

• Maximize deductions

• Stay compliant with IRS and state rules

• Create long-term tax strategies that support growth and retirement goals

👉 Schedule a consultation today email christina@acuitytaxgroup.com and let’s make sure you’re not missing valuable deductions this year.