Many small businesses make the mistake of not deducting rent as a business expense when filing their taxes. But it’s absolutely possible to take this deduction and, what’s more, you definitely should! Here’s what you need to know about including business rental as a tax write-off.

If you work from home, you can claim a deduction for your home office space

A lot of us are working remotely these days, and if you’re a freelancer or small business owner who works from home, good news: you can claim part of your rent as a business expense.

There are a few rules, though. You can only claim the part of your home that you use for actual work (no, your kitchen doesn’t count). Let’s say, for example, that you rent a 2000 square foot home, but spend most of the work day in your 100 square foot home office. 

In that case, you’d divide the square footage of your workspace (100) by the square footage of your home (2000), then multiply that number by your monthly rent. The final number is how much you can deduct each month. For the annual deduction, simply multiply that monthly number by the number of months you spent working from home. 

So, in the example above, if you worked from home all year and paid $1000 a month in rent, you’d end up with a $600 deduction. Not bad!

If you rent an office or storefront, you can probably claim a 100% deduction 

Renting an office space for your self-employed business can add up, so you’ll be happy to hear that in most cases, you should be able to deduct 100% of office rent from your taxes. In other words, if you pay $1500 a month for your rented office space, and you conduct most of your business there, you’ll be able to deduct $18,000 from your taxes owed at the end of the year. 

There is one caveat though: you can’t count a home office AND a rented business office for the same period of time. If you used one for half of the year, and the other for the other half, you can count both, but not for the full year.

A storefront functions much like a rented office; because it’s a necessary part of your daily operations and you’re likely using 100% of it for your business, you can deduct 100% in most cases.

What about properties you own?

Unfortunately, you can only take this deduction for properties you rent. You can, however, deduct renovations or improvements made to an office that you own.

What about other kinds of rentals?

Any expense that’s necessary to business operations is generally tax deductible. That means that if you rent machinery, equipment, vehicles, or other business items, you should be able to deduct them.

There you have it: now you have no excuse not to take full advantage of these great savings when filing your taxes!