Space can be a limited resource for small business owners, so storage units can be a valuable investment. In addition to giving you a place to store excess merchandise, records, or rarely used equipment, renting a storage unit may also lower your tax burden. However, before writing off the costs of your business tax returns, there are a few important things you should know.
When You Can Deduct Storage Costs
The IRS allows you to deduct the full costs of a storage unit, as long as they’re considered a necessary and ordinary expense. For instance, retailers commonly use them to store inventory, while offices often keep records or extra computers in storage units. If you’re not sure whether your deduction qualifies, consider talking to a professional before filing your business tax returns.
Units used to store products, equipment, or other items before launching a business can also be deducted as part of your startup costs. However, the IRS requires these costs to be spread over a cost of 180 months. If you’re claiming the full cost of storage expenses, they’re typically included in the rental category.
When Deducting Storage Costs May Be Complicated
A business storage unit can also be a convenient place to keep your private possessions, such as off-season clothing or sports equipment. While this doesn’t eliminate the deduction, it does complicate your tax calculations.
If your storage unit is for mixed-use, only the space used for business is deductible. To avoid potential tax issues, calculate the square footage allocated to business use, and multiply that number by the annual rent. This is the portion that can be deducted from your tax returns.
Taxes are among the most stressful and difficult aspects of running a business, which is why entrepreneurs throughout Quakertown, PA, rely on Dave's Bookkeeping and Tax Service, LLC. Their team maintains an up-to-the-minute knowledge of the latest updates to the code and will provide the detailed advice you need. To learn how they can help with your business tax returns and make an appointment, call their offices at (267) 212-6491.