Starting a business comes with many business expenses. Office expense is one of the many startup costs, but did you know that even if you only use coworking spaces as your office, those expenses are tax deductible? Yes, coworking space expense is tax deductible.
You can opt to have your own home office or sign up for a coworking space. We will give you the pros and cons of coworking spaces and how to help you maximize your tax deductions.
Tax Deductions for Freelancers and Startups
Work culture has shifted since the COVID pandemic. More people are working from home, and many are also entering self-employment. However, many need to learn they can work in coworking spaces.
Coworking spaces provide easy access to traditional working facilities without the overhead. Although the cost of coworking spaces is significantly lower than that of maintaining a long-term leased office space, freelancers and entrepreneurs can still deduct taxes for coworking fees.
Even if you are not a self-employed worker, in some cases, rent coworking space for your work-from-home job and list the expense for a tax deduction.
Pros of Coworking Space
Saving money on office expenses is one of many benefits of coworking spaces. You can access office amenities like printers, internet, and office support. If you need a professional address, coworking agreements give you one as an added benefit.
Coworking spaces also come with a receptionist presence. Clients and customers that meet with you will be greeted by a receptionist and can wait in a professional lobby area for your arrival.
Cons of a Home Office
A home office can come with many limitations. There is a lack of privacy, and you may need more control over distractions such as kids, home visits, deliveries, etc. Also, working from home can make it hard to become productive, with the temptation to complete household chores being present.
Then there come the tax advantages you could receive from a home office vs. coworking spaces. Some tax jurisdictions only allow you to deduct home office expenses if the home office space is separate from your day-to-day living. In some cases, you can only deduct your home office based on the square footage of the office to a percentage of your rent or mortgage. Sometimes, this may be a lower deduction than deducting coworking rent payments.
In the U.S., the tax deduction allowance is limited to 300 square feet at around five dollars a square foot. This is known as the simplified option for deducting a home office. Renting a coworking space is straightforward. There is no measuring required when you file your business taxes.
Other Home Office Deductions
You can deduct the office supplies and equipment you purchased to run your business or do your job remotely, along with the coworking fee you pay. Tax deductible expenses are pens, paper, computers, and computer accessories such as headphones, keyboards, and tablets.
If you have a cellphone you use for business, you can deduct your phone bill or a percentage of the bill if you also use the cell phone for personal use. In some cases, business meals can be tax deductible. The meals have to be business related, so if you rent space to conduct business meetings, include some snacks and beverages and include them in your deductions.
Sign up for Coworking Space and Maximize Tax Deductions
If you are in Surrey and are looking for coworking space, we have two locations for you to consider. Our business centers have office equipment, receptionist, and mail service. Our fees are nominal, and you can use them as tax deductions. Reach out to us now to get started.
