Tax Write-offs: Home Office vs. Leased Office Space — Which is Better?

As a small business owner, you know that every penny matters at tax time. One of your most significant deductions is an office or retail space. This article is for entrepreneurs thinking of leaving the home office setting and moving their business to a more professional location, and wondering about the income tax implications. If you're wondering, "Which is better for income taxes, a home office or a leased office space?" we'll help you decide. 

We're not tax professionals at Broadway Suites. We provide high-end, shared office space solutions in Manhattan. This article is to help small business owners think about leased office space's tax advantages. If you need real income tax advice in New York, reach out to a CPA.

The Home Office Space Deduction

If you dedicate part of your home for business use, you can take a home office deduction, per the IRS.

• You don't need to own the home. It can be a rented apartment.

• The workspace must area must be dedicated to business only.

• Generally, the IRS will base your deduction on a percentage of your housing costs, considering the square footage of the space you're using. 

• In other words, if you dedicate a 100 square-foot bedroom of a 1,000 square-foot apartment (10% of the floor space), you'll be able to deduct 10% of your overall rents, utilities and so on. 

Remember, the IRS says you can take a home-office deduction as long as the home office is your primary place of business, and the space is dedicated only to work.

But that doesn't mean you don't have other places to do business! You can lease or rent office space and claim that expense as a cost of doing business.

The Deduction for Rented / Leased Office Space Will Probably be Bigger

100% of your expenses to rent or lease office space are tax-deductible. We can't do the math for you (we don't know how much you spend on rent / mortgage and utilities), but there's a good chance you'll achieve a bigger deduction by renting office space, compared to running your business out of your home. However, no law says you can't do both — run your business from home and rent office space.

Can I Get a Home Office Deduction and a Deduction for Office Space?

YES! As long as you're running the business primarily from home and leasing additional office space to meet the needs of your clients or equipment, you can claim both! For many entrepreneurs and small business owners, this is a strong point at income tax time. 

Ultimately, the choice to rent office space in New York is a decision only you can make. But if you've had a great year, and you're thinking about how to mitigate your small business income taxes, it might be time to expand. Remember, talk to a CPA if you need to know more. 

Then, visit Broadway Suites. We provide high-quality and affordable office space for rent in NYC. So let's talk!

Related Reading & Resources:

Bizfilings.com: Home Office vs. Leased Office Spaces — Reasons to Get Out of the House