All companies and business owners are looking for ways to save money within their business. For small business owners who work from home, it’s important to know how to write off your home office in order to save on your taxes. In some cases, it may be necessary to make some upgrades or updates to your home office, whether it’s establishing a dedicated workspace in your home or upgrading your work equipment. If you need further small business advice, connect with Red Beach Advisors to take your venture to the next level.
Home office deductions
Many small business owners face difficulties when it comes to taxes: not only do you have to ensure you’re following the appropriate tax code in your state, but you also have to stay on top of recording all earnings and expenses. It’s a great idea to hire an accountant to help with recording profit and loss so you can ensure you’re paying the right amount in taxes.
One great way to save money on taxes is by deducting home office expenses. However, there are some specific rules around what’s considered a home office, so look over the guidelines and be sure that your home office qualifies.
The IRS requires that home offices be for “regular and exclusive use,” which means you must regularly use that part of your home exclusively for business. For example, if you do your work from your kitchen table, that is not considered a home office. However, an extra room that is converted into an office space is viable for a deduction.
Another requirement is that your office must be the principal place of your business. Small businesses are permitted to conduct business at locations outside the home, but if you use your home office substantially and regularly, you could qualify for the deduction.
Along with home office deductions, small businesses can also qualify for business equipment deductions. Office supplies, furniture, software, and electronics are all eligible for deductions, but it’s important to know what qualifies.
Section 179 of the IRS tax code allows for small businesses to deduct the purchase price of qualifying equipment or software financed or purchased during any given tax year. Keep in mind that you can also write off technology such as a new laptop, and you can often get great deals online.
Another great item for your home office would be a pair of headphones or a headset. Working from home can create plenty of distractions, so having a dedicated pair of headphones will help you stay focused on any virtual meetings you may have with clients or customers.
Improving your business operations
Many small businesses would benefit from improving operations, whether it’s enhancing customer experiences or keeping pace with the competition. It’s important to stay on top of the newest tools and technologies available in your industry to evolve with cultural changes and remain relevant.
New software can also be written off for business expenses as part of Section 179, so be sure to keep track of any new programs you buy to help streamline operations and improve your business.
Running a business out of your home certainly has many perks, but navigating tax write-offs and business expenses can be challenging. Be sure to work with an accountant so you can ensure that you’re keeping records of your expenses for tax purposes. If your home office needs some adjustments to qualify for the home office deduction, do what you can to upgrade it and save money at the end of the tax year.
Do you need small business advice? Contact Red Beach Advisors for personalized consulting! Call (424) 247-6143.