Is Office Furniture Deductible?
Furnishing an office is a necessary, but expensive endeavour. Tax authorities (hopefully) understand that office furniture is a vital aspect of running a business, so they oftentimes allow business owners to deduct those expenses on their taxes.
Tax Deductible Office Furniture
One must first know how this expense is deducted and what classifies as a business expense in regards to your office furniture.
You must deduct only the amount you spend on furniture used as part of your business. Office furniture would be any furniture including chairs, desks, office printers and related electronics, shelving and picture frames which are used strictly in your office. The office furniture must be necessary for the operation of your business.
The benefit of deducting office furniture is that you receive a tax deduction which increases your net income after taxes. It also simultaneously lowers the amount of tax you pay in the year you take the deduction. You could add this savings to your retirement account, like an IRA. Doing so will add to the benefit of the original deduction by continuing to defer tax on the money you deposit into your retirement account, since many retirement accounts allow pre-tax or tax deductible contributions.
Do not deduct furniture which is unnecessary for your business or which is, in actuality, a personal expense. Personal office furniture expenses are not deductible. When you attempt to deduct these non-deductible expenses, you risk an IRS audit. The IRS will disallow your personal deductions resulting in an underpayment of the tax you owe. You’ll have to pay interest on this underpaid amount, along with a penalty.
The deduction would be either depreciated over many years or you may take a section 179 deduction to deduct all or a portion of your furniture in the year you purchase it. Use IRS form 4562 to record the deduction amount, and attach this to your 1040 tax return. Do not simply record this deduction under schedule C for profit and loss in your business. Depreciation of your office furniture is done using the MACRS Depreciation model outlined in IRS publication 946.
Office Equipment Which Can Be Deducted from Tax
“When business really gets going, you’ll find yourself buying or replacing things around the office without a second thought, often out of your own pocket. The definition for office equipment is incredibly loose, but can be summarised as any piece of equipment used in the business to meet business goals. Stationery and computers come to mind, but this definition can widen to include all kinds of furniture in the business, printers and their consumables like ink cartridges and paper, even maintenance and cleaning supplies. Here’s the catch: if the item in question is priced under R7000, it’s considered tax deductible. If it’s over R7000, however, it is considered a capital expense but the depreciation of the item is tax deductible.
The following items can be claimed as office furniture expenses:
- Coffee Table
If you have anything else that you’re wondering counts as office furniture, ask your accountant and they can determine if it qualifies.”
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