Whether you’re looking to update the space you’ve been working in for years or you’re now just getting your small business off the ground and you need to establish a home office space, it’s important to understand the different types of office expenses that may be deducted from your taxes. From home improvements to office decor, here are three potential tax-deductible office updates and expenses in the sections below. Read on to learn all about them!
1. Home Improvements
Certain improvements or repairs to your home office may be tax-deductible if the space is used exclusively and regularly for your home-based business. If your office meets the requirements of the Internal Revenue Service (IRS), several of these tax-deductible office updates may include:
- Installation of built-in shelves or cabinets.
- Soundproofing the space for privacy and noise reduction.
- Adding new lighting to brighten the office space.
- Installation of a home security system to protect your office space.
- Installation of window treatments for client privacy.
- Painting your office walls a fresh new color.
Moreover, certain repairs to the office space may also be tax-deductible in some cases. If you need to replace a loose piece of flooring in your home office, for instance, you may be able to write it off as a business expense.
2. Supplies and Equipment
In addition to making improvements and repairs to your home office, you could update your workspace by purchasing new supplies and equipment for your small business. As a home-based business owner, you can typically write off any office furniture deemed necessary for your business, including printers, chairs, desks, tables, shelving units, and other electronics. You could even write off a new piece of artwork or decor, but keep in mind it’ll need to remain in the office or you could face an IRS audit.
3. Startup Costs
If your home-based business is still in its early stages, several other expenses may be written off as startup costs. As much as $5,000 in business startup costs can be deducted within the first year of operation — in addition to another $5,000 in business organizational costs. If you choose to structure your small business as a limited liability company (LLC), corporation, or partnership, you could deduct these organizational costs as startup expenses.
If you haven’t already formalized the structure of your new home-based business, now is the time to do it. Online formation services make the process as quick and easy as possible, and they’ll even help you to stay compliant with your local business laws throughout the year.
The Bottom Line
Many home-based business expenses are tax-deductible, but it’s important to hold onto your receipts and keep track of your expenses as best as possible. The experts at FreshBooks recommend opening a business credit card and business checking and savings accounts if you haven’t already done so as this will help you to keep track of your business expenses more easily. Additionally, it’s best to use file folders, envelopes, and binders to organize paper receipts, or you could use apps like QuickBooks to track expenses and store digital copies of your receipts.
If you have any questions or concerns about your business expenses or tax deductions, be sure to consult an accountant, bookkeeper, or another tax professional. Whether you’re in your first year of operation or your home office space could use an overhaul, a wide variety of tax deductions are available to home-based business owners — you just need to know how to claim them!