Even before the pandemic, freelancing and work-from-home was growing in popularity. And now, with even traditional employees working remotely, this way of life has exploded in popularity. So, it’s no wonder that many of these workers are flocking to creative solutions such as coworking spaces… But many, new to the scene, are less familiar with how these options impact their tax returns.
We have some good news for you: Yes, the cost of using a coworking space is tax deductible! It counts as renting office space, and can include items such as:
- A regular membership fee, paid for coworking space
- Rental of meeting or conference rooms
- The cost of networking events
- Fees for printing and other “extras” provided by coworking spaces, if necessary and related to your work
As for the cost of food, here’s the rule to remember: If you’re just eating lunch (or grabbing coffee, or anything else) that meal is not tax-deductible. But if you’re conducting a business-related meeting or networking over lunch, save that receipt because that’s a tax-deductible expense.
Now, what about the cost of commuting, such as parking, toll fees, and gas? IRS rules are a bit trickier regarding these items. If you regularly commute to a particular location for work, those expenses are not deductible. But if you work primarily from home but commute to meetings irregularly, on an as-needed basis, the cost of travel can be deducted on your tax return. That’s an issue to discuss in more detail with your tax professional, so that you can make the decisions that best benefit your situation.
Deductions work by reducing your taxable income. Then, your actual taxes due are computed based on that amount. In some cases, claiming enough deductions can drop your taxable income into a lower tax bracket, which means that your actual percentage rate (that you pay toward income taxes) drops a few points. Always do your research and claim everything you can, because reducing taxable income translates into lower taxes or even a refund in the spring.
For more information on the tax benefits of working from home or renting coworking space, discuss this issue with your tax professional. If you’d like more information about our comfy, cozy work pods or roomy, high-tech conference rooms, and health/sanitation protocols, give us a call to schedule a tour of our facility.