When you run a business, you need to pay for a lot stuff. You might have to buy equipment, pay employees, and hire contractors to help you achieve your goals. And then there are all of those little expenses for small items you need to run your business, known as office expenses. So what types of small items are deductible, and how do you deduct the cost of office expenses on your tax return?
You will add office expenses to line 18 of Schedule C.
Let’s take a look at some items you might include on this line.
Bathroom costs. If you have a bathroom useable by your employees and contractors, then you can include the cost of hand soap, towels and toilet paper.
Coffee. Do you provide coffee for your clients? You can include the cost of coffee service.
Building maintenance. If you have a building, you probably have some maintenance — such as snow removal, window washing, lawn care and general cleaning — that needs to be done. You can include such maintenance costs, in addition to the cost of cleaning individual items like rugs and draperies.
Plants. I’ve never been in an office that doesn’t have plants. If you pay for the maintenance of either living or artificial plants, or for the care of a fish aquarium, you can include it. However, if you lease any of these items, and maintenance is included in the lease cost, then report the full expense on line 20b.
Telephone answering service. In the age of cell phones, I am not sure if these services even exist anymore, but if you have a telephone answering service you can include its cost on this line.
Note: This does not include the cost of voicemail service that’s a part of your telephone service. You will include this expense with your utilities costs on a separate line.
Decorative items. Have you purchased items to decorate your office, such as posters, candles and flower arrangements? You can include the cost of those items on this line. However, you can not include the cost of depreciable art — that goes on line 13. You have to capitalize this cost, and recognize the cost over a period of years (called depreciation). Additionally, if you lease the artwork for your office, the lease payments for the artwork go on line 20b, “Rent for other business property.”
Signage. Are you required to display signs in your office to meet local, state or federal regulations related to safety or licensing? You can include the costs of those signs.
Office-related expenses that don’t belong on line 18
There are a few other items that you might think are deductible and included on line 18. Let’s take a look at a few of these items, and where they would be deducted on your Schedule C.
Furnishings. You might have purchased furniture and fixtures to use in your business. These items are considered assets, and must be capitalized and depreciated over the course of their useful life (the IRS will tell you for how long). You report the deprecation on line 13, “Depreciation and Section 179 Expenses.”
Home office. Do you have a home office? Expenses related to it are reported on Form 8829, Expenses for Business Use of Your Home. See this post for a discussion of the expenses related to a home office.
Equipment leases. Do you lease any of your office equipment, such your computer or a copier? You report the lease payments on line 20a.
Utilities. You report utilities for your office — such as electricity, gas and telephone — on line 25.
Renovations. Did you do any significant renovations to your office? Like the cost of your office equipment and furniture and fixtures, these expenses need to be capitalized and recognized as expense through depreciation. You report this depreciation on line 13, “Depreciation and Section 179 Expenses.”
The above content should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.
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