Running a business can be a costly endeavor that comes with plenty of rewards if you play your cards right. As a business owner, there are a number of ongoing and one-off expenses to budget for. Between rent, utilities, inventory, and payroll, your list of outbound costs can quickly add up month over month. It’s critical to understand the distinction between office supplies and office expenses since these costs are treated differently on your business tax return and have a varied impact on your business’ taxes. What expenses are tax write-offs, and can you write off office furniture?
Office Supplies
Office supplies are the standard office materials that staff utilize, such as pens, staplers, paper clips, USB flash drives, and printer ink cartridges. Additionally, office supplies include the following:
- Invoices and sales receipts
- Janitorial materials
- Bathroom materials
- Filing cabinets and storage lockers
- Plates, paper towels, and plastic utensils
- Beverages for the break room of employees
Postage is also included in the IRS’s definition of office supplies. However, substantial sums of postage used to ship items are categorized differently.
Office Expenses
Office expenses are the additional costs associated with maintaining an office. Because these charges are utilized to operate the office, they are sometimes referred to as “office operating expenses.”
Expenses associated with office operations include the following:
- Website services and cloud services
- Internet hosting and website maintenance fees, domain names, and subscription fees.
- Software, including web-based solutions such as QuickBooks
- Computers, laptops, iPads, and tablets
- Office Furniture
- Telephones and telephone systems for offices
- Employees’ cell phone expenses
Certain higher-cost office costs convert to business equipment, which is classified as an asset and depreciated.
Office Expenses: Deducting vs. Depreciating
Previously, all company assets (things that were utilized for more than a year) costing more than $500 were required to be depreciated. Depreciation is a method of paying back the cost of a commercial asset over its useful life, and you deduct a portion of the expense each year.
Depreciation on office equipment can be tricky to calculate, but luckily the IRS has introduced a new, more straightforward approach for classifying low-cost assets as costs rather than depreciating them. Beginning in 2016, you may deduct company assets (including office assets) that cost less than $2,500. This category includes software and software suites and laptops, tablets, smartphones, and other small electronic devices. The amount you may deduct includes the cost of purchasing and installing the item.
To deduct the cost of this item, the item must also be classified as an expense in your accounting system.
If you spend more than $2,500 on office supplies, costs, or equipment, these items become depreciable assets, and you must depreciate them.
What Property Can Be Depreciated
Most forms of physical property (excluding land) are depreciable, including buildings, machinery, automobiles, furniture, and equipment. Some intangible property, such as patents, copyrights, and computer software, may be depreciated.
The property must fulfill all of the following characteristics to be depreciable.
- It must be your personal property.
- It must be utilized in connection with your company or revenue-generating activity.
- Its useful life must be quantifiable.
- It should be anticipated to last longer than a year.
Can You Write Off Office Furniture?
A desk, a file cabinet, and a printer, among other equipment and office furniture, are very likely utilized at your workplace. The tax code provides many methods for deducting your expenses:
- Expensing under section 179 for the first year
- Depreciation bonus
- Depreciation on a regular basis
- De minimis safe harbor
The following are common depreciation timeframes:
- Computers, office equipment, automobiles, and appliances: 5 Years
- Office furniture: 7 Years
- Residential rental properties: 27.5 Years
- Commercial and non-residential real estate: 39 years
How To Write Off Office Furniture
You can lessen your tax burden with depreciation. Learn about how to calculate depreciation expenses for your business below.
- The deduction might be depreciated over time, or you could take a section 179 deduction and deduct all or part of the cost of the furniture in the year it is purchased.
- Record the deduction amount on IRS form 4562 and attach it to your 1040 tax return.
- Do not just record this deduction on your business’s form C for profit and loss.
- The IRS document 946 details how to depreciate office furniture using the MACRS Depreciation model.
Update Your Office Furniture!
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