Discover more informative content by checking out the Keetria blog and podcast.
Planning updates to your home office? If you are doing so to support a small business, you could be in for potential tax savings. Tax planning and accounting services can help you make the most of these savings and also help you avoid issues with the IRS. It also helps to know upfront which expenses and updates can be deducted and which can’t. Check out this list of possible home office credits:
Some or All of Your Internet Costs
When it comes to self-employed tax credits, you can typically only write off things that you absolutely need to run your business. You may be surprised to learn that this includes either all or some of the fees you pay for your home internet connection. If your family utilizes the same connection for other tasks, like online learning, you can only deduct a percentage of the cost.
Many of Your Digital Security Expenses
Keeping your connection protected is a worthwhile endeavor, especially if you plan on storing personal information on devices or doing your taxes online (for instance). Without proper security measures in place — including antivirus software and a VPN — your information could end up in the hands of online criminals. Plus, you should be able to deduct any related expense.
Dedicated Home Office Space
If you’re creating a dedicated workspace at home, you could be eligible for the home office tax credit. This deduction can trip up many small business owners, but as long as you use your office exclusively for conducting business tasks, you should be okay.:
Keep in mind that employees who receive a W2 from their employers are not eligible for the home office deduction. Even if you work from home full time and have a dedicated home office, if you receive a W2, you cannot claim this deduction.
Direct Expenses Related to Your Business
Did you have your new home office carpeted? Or did you buy new office equipment and furniture? If your space qualifies for the home office deduction, you may also be able to write off these additional expenses. All of these costs should qualify as direct expenses for your small business. You just need to have receipts and documentation to prove as such.
Repairs Needed to Update Your Home Office
Other potential tax breaks you can take include those that offset the cost of needed repairs to your home workspace. Once again, taking these detailed deductions requires clear documentation and quite a bit of work. This is why so many small business owners may be better off taking a simplified home office tax credit to save themselves the time and hassle.
General Improvement/Repairs for Your Home
Okay, so you can’t claim most updates and home improvements on your business taxes. However, if these improvements add value to your home or are made to accommodate a family member with a disability, you can use related deductions to save on your personal returns or if you decide to sell your home in the future. For instance, if you finish an attic to create more bedroom space and free up a room for your home office, these expenses should qualify.
To make planning for these home improvement projects less overwhelming, websites like Angi provide a simple way to connect with the services you need. For example, if you’re looking for a handyman, you can find a top handyman near me and easily check whether they’re certified and how many ratings they’ve earned. You can also see which services offer deals and coupons, so that you’re not only lowering your tax bill, you’re also saving money on the costs of home repairs.
Business Owners Should Beware
There are quite a few ways that making home office or general home updates can save you money come tax time. As you may have noted though, we used a lot of terms like “may” and “could” throughout this guide. That’s because taking advantage of these money-saving deductions does require some professional savvy. If you are interested in maximizing your savings without triggering an audit, consider working with a professional tax preparation service.
Making improvements to your home office can increase your productivity. It may also help you save on your tax bill, depending on the sort of updates you make. Your best bet is to consult a professional accountant as you plan your project and certainly when you complete your taxes.
Keetria is an entrepreneur, wellness advocate, and brand strategy coach for creatives & entrepreneurs with 16 years of public relations expertise working with some of the world’s leading brands, startups, media personalities, and entertainers. If you would like to work together, don’t hesitate to reach out!