Can You Write Off Office Furniture for Your Business?

Businesses and self-employed individuals can deduct the cost of office furniture. This deduction helps reduce taxable income by accounting for the wear and tear of assets used in business operations. Understanding the specific rules and methods for deducting office furniture is important for maximizing tax benefits while remaining compliant with tax regulations.

Eligibility for Deducting Office Furniture

To qualify for a deduction, office furniture must be “ordinary and necessary” for the business and primarily used for business purposes. Examples of qualifying items include desks, chairs, filing cabinets, and shelving units. The furniture must also have a useful life of more than one year, distinguishing it from smaller, immediately expensed supplies.

Businesses, including sole proprietorships, partnerships, and corporations, are eligible to deduct these expenses. Self-employed individuals also qualify to claim deductions for office furniture used in their trade or business.

Understanding Deduction Methods

Several methods exist for deducting the cost of office furniture, each with distinct rules and benefits. The choice of method can significantly impact the timing and amount of the deduction. Businesses often combine these methods to achieve the most favorable tax outcome.

Section 179

Section 179 allows businesses to deduct the full purchase price of qualifying equipment, including office furniture, in the year it is placed in service. For tax years beginning in 2024, the maximum Section 179 expense deduction is $1,220,000. This deduction begins to phase out on a dollar-for-dollar basis when the cost of Section 179 property placed in service during the tax year exceeds $3,050,000. The intent of Section 179 is to incentivize small business investment by allowing immediate expensing of asset costs.

Bonus Depreciation

Bonus depreciation allows businesses to deduct a large percentage of the cost of new or used qualifying property in the year it is placed in service. For property placed in service in 2024, the bonus depreciation rate is 60%. This rate is part of a phasedown schedule, decreasing to 40% in 2025, 20% in 2026, and 0% starting in 2027. Unlike Section 179, bonus depreciation does not have a taxable income limitation, meaning it can be taken even if the business has a loss.

Modified Accelerated Cost Recovery System (MACRS)

The Modified Accelerated Cost Recovery System (MACRS) is the standard method for depreciating business property over its useful life if Section 179 or bonus depreciation are not fully utilized. Office furniture is assigned a seven-year recovery period under MACRS. This method spreads the deduction over several years, allowing for larger deductions in the earlier years of the asset’s life.

De Minimis Safe Harbor

For very low-cost items, the de minimis safe harbor election provides an immediate expensing option. This rule allows businesses to deduct the full cost of tangible property expenses below a specific threshold. The threshold is generally $2,500 per item or invoice, but it can increase to $5,000 per item or invoice for businesses with an applicable financial statement. To utilize this, a taxpayer must make an annual election and have a written accounting policy in place at the beginning of the tax year.

Special Scenarios for Deduction

Deducting office furniture can involve specific scenarios that require careful consideration of usage and location. The application of deduction methods changes when furniture serves dual purposes or is part of a home office. Understanding these nuances helps ensure accurate and compliant tax reporting.

Mixed-Use Property

When office furniture is used for both business and personal purposes, it is considered mixed-use property. Only the business-use percentage of the furniture’s cost can be deducted. For example, if a desk is used 70% for business and 30% for personal activities, only 70% of its cost is eligible for deduction. This allocation ensures that deductions are directly tied to the business activity, preventing overstating expenses.

Home Office

Office furniture deductions also connect with the home office deduction. Furniture used exclusively and regularly in a qualified home office is deductible. The deduction for home office furniture is separate from the deduction for the home office space itself, but both contribute to the overall expenses related to operating a business from home.

New vs. Used Furniture

Both new and used office furniture qualify for the same deduction methods, including Section 179 and bonus depreciation. This allows businesses to purchase pre-owned furniture and still benefit from immediate or accelerated write-offs.

Required Records

Maintaining records is important for substantiating office furniture deductions to tax authorities. Proper documentation ensures businesses can support expenses claimed on their tax returns if audited.

Key documents include purchase receipts or invoices for all office furniture acquisitions. These records should clearly show the date of purchase, the vendor, the item description, and the cost. Proof of payment, such as bank statements or credit card records, should also be retained. Documentation of the date the furniture was placed in service is necessary, as this date determines when the deduction can begin.

For mixed-use property, a log or other verifiable evidence should be maintained to substantiate the business-use percentage. This record could detail the hours of business use versus personal use. Such documentation provides clear evidence that the claimed deduction aligns with actual business activity, supporting the allocated portion of the expense.