When most people start up a home business, the first thing they want to know is whether their business purchases can be taken as a tax deduction. Sure, it's easy to figure out that business supplies like paper, envelopes, and pens all count as a tax deduction, but what about the bigger things? Is your home office furniture tax deductible?
In most cases, it is!
However, before you start taking deductions on your taxes, you need to make sure that you have done all of your homework:
- First, you need to keep any and all records relating to your furniture. If you ever get audited, you will have to be able to prove how much everything cost. And, unfortunately, when it comes to the IRS you are guilty until proven innocent - meaning that it is up to you to prove that you were right to take a specific amount as a deduction, instead of the IRS proving that you were wrong.
- You need to make sure that any home office furniture that you take as a tax deduction is only used for business purposes. The IRS defines a home office as a space that is solely devoted to your business. So if, for example, you use your file cabinet to store business and personal documents, it's not going to count as a tax deduction. Or, if you buy a computer desk - and your kids also use it to do their homework - you can't legally take it as a home office tax deduction.
If you do not run a home-based business, you may be able to deduct your home office furniture.
How can that be?
It all goes back to how the IRS defines a home office. If, for example, you have a safe in your home that is solely used to store important business documents, it counts - and you can legally take it as a tax deduction.
So, how do you actually go about deducting your home office furniture?
The IRS gives you a choice - you can either deduct the full cost all at once, or you can deduct portions of the cost over 7 years in a process known as "depreciation". If you opt for depreciation, though, you will have to follow specific IRS guidelines as to how much you can deduct each year; it's not as easy as dividing the total cost by 7 and calling it a day!