What to Know About the Tax Code When Purchasing New and Used Home Office Supplies
2020 marked a huge pivot for many businesses, shifting from the traditional office model to several employees being required to work remotely from home. The logistics of keeping employees socially-distanced at six feet apart forced many companies to do some heavy problem-solving, and the majority of them concluded that having everybody stay at home was the easiest and most convenient way to continue working. With video conferencing technology being at the standard that it is today, businesses were able to continue communicating amongst themselves and their customers without missing a beat.
The principal drawback of the work-from-home model was that employees were put in a position of having to turn their homes into fully functioning offices. In many cases, that meant using their own money to buy items such as desks, office chairs, and laptop computers. At face value, those could easily be considered business expenses that you would write off on your taxes. However, due to some recent changes in tax code dating back to 2018, things aren’t as simple as they once were when it comes to writing off new and used office furniture and supplies.
Who Qualifies for Home Office Deductions on Their Taxes?
With the changes brought to tax code via the Tax Cuts and Jobs Act, only people who are self-employed or freelancers can utilize home office tax deductions. If you are a full-time employee with a company, you unfortunately won’t be able to deduct anything that was purchased to set up your home office.
How Does the IRS Define “Home” For Home Office?
Per the IRS, a home can be any of the following:
- A house, apartment, condominium, mobile home, boat, or similar property
- Additional structures built on a property, such as an unattached garage, studio, barn, or greenhouse
- Would NOT include any part of the taxpayer’s property used exclusively as a hotel, motel, inn, etc.
To Claim the Deduction, What Home Criteria Must Be Met?
According to the IRS, the taxpayer must use part of their home for one of the following in order to qualify for deduction:
- It is used exclusively and regularly as the principal place of business for a trade or business
- It is used exclusively and regularly as a place to treat patients or serve clients and customers
- If it is a separate structure, then it is used exclusively and regularly as a place of business
- It is used on a regular basis for the storage of inventory or product samples
- It is used for the purposes of rental or as a daycare facility
What is Considered a Qualified Business or Home Office Expense by the IRS?
Once you have determined that you indeed qualify to write off business-related expenses, you can start going through receipts and identifying opportunities to take advantage of tax benefits. There are numerous business-related expenses that you can write off. Some are obvious. Some aren’t.
For instance, any common office item such as a computer, office chair, desk, or phone system would fall into the category of a qualified business expense that you can deduct on your taxes. You can even write off office improvement and repair expenses. Some examples would be giving the office a new paint job or installing new carpet. However, keep in mind that some big-ticket expenses may be subject to an asset-depreciation schedule.
Additionally, a percentage of your property related payments can go towards tax deduction. The rule of thumb on that is that if you use 25% of your home as an office, you can claim 25% of any tax-deductible expenses such as mortgage payments, insurance, and so forth.
However, do be careful when filing items for tax deduction as they relate to business expenses. If you try to push the envelope or incorrectly categorize a business expense, then you may trigger an audit. Speak with your CPA or other licensed tax professional if you are ever in doubt about whether or not your item is valid home office tax-deductible item.
Furnish Your Home Office Today at Santa Fe Office Interiors
Here at Santa Fe Office Interiors we have helped countless work-from-home employees furnish their home offices with the desks, chairs, and other office equipment that they need. Now that you know you can write off these items if you qualify under the tax code, you can purchase with confidence and fully build-out your home office to its full potential.
Santa Fe Office Interiors carries a wide array of both new and used office furniture designed to meet any budget. The best way to see how we can help realize your dream home office is by stopping by our storefront at 8106 Santa Fe Dr. in Overland Park, KS. Or, you can give us a call at 913-901-8800 to set up an appointment with one of our sales associates.