Interior Design Business Expenses You Can Deduct

For tax purposes, a business expense is defined as a cost that is both ordinary and necessary for carrying on your trade or profession. An ordinary expense is one that is common and accepted in the interior design industry, while a necessary expense is one that is helpful and appropriate for your business. Understanding which of your expenditures qualify as deductible business expenses is an important part of managing your firm’s finances and tax obligations.

Deductible Operating Expenses for Your Firm

Office and Studio Costs

If you rent a commercial studio or office, the monthly rent payments are fully deductible. This deduction applies only to properties in which you do not hold any equity or title. Beyond rent, the recurring utility costs required to run your studio, such as electricity, water, and internet service, are also deductible. Business insurance, including general liability or property insurance for your office space, can be deducted in the year it is paid.

Home Office Deduction

For designers who operate their business from home, a portion of household expenses can be deducted, provided the space is used regularly and exclusively for the business. The IRS provides two methods for this deduction: the simplified method and the actual cost method. The simplified option allows a standard deduction of $5 per square foot of office space, up to a maximum of 300 square feet, for a total deduction of up to $1,500.

The actual expense method involves calculating the percentage of your home used for business and applying that percentage to your total home expenses. These can include:

• Mortgage interest
• Insurance
• Utilities
• Repairs
• Depreciation

For example, if your home office occupies 15% of your home’s total square footage, you can deduct 15% of your eligible home costs. This method may yield a larger deduction for those with high housing costs.

Software and Subscriptions

Monthly or annual fees for software and digital subscriptions are deductible. This includes:

• Computer-aided design (CAD) software like AutoCAD or SketchUp
• Project management platforms such as Ivy or Asana
• Accounting software like QuickBooks
• Subscriptions to trade publications and design magazines

Marketing and Advertising

Costs to promote your firm and attract clients are deductible. This includes:

• Developing and hosting a business website
• Fees paid to professional photographers for your portfolio
• Online and social media ad campaigns
• Printed materials like business cards and brochures
• Sponsorships of industry-related events

Professional Development and Fees

Costs associated with maintaining and improving your professional skills are deductible. This includes tuition for continuing education courses and workshops that are relevant to your work. Annual dues paid to professional organizations, such as the American Society of Interior Designers (ASID), and fees for services from an accountant or a lawyer are also deductible.

Business Travel and Vehicle Use

The costs of business-related travel are deductible, such as trips to attend trade shows, visit supplier showrooms, or meet with out-of-town clients. Deductible travel expenses include airfare, lodging, and 50% of the cost of meals. For local travel using a personal vehicle, you can deduct expenses using one of two methods: the standard mileage rate or the actual expense method.

The standard mileage rate for 2025 is 70 cents per mile driven for business purposes. This method requires keeping a detailed log of business mileage, dates, and the purpose of each trip.

The actual expense method allows you to deduct a percentage of your total vehicle costs based on its business use. To use this method, you must track all vehicle-related costs and the total miles driven for both business and personal use. Deductible costs include:

• Gas and oil
• Repairs
• Insurance
• Registration fees
• Depreciation

If you use the actual expense method in the first year a vehicle is in service, you cannot switch to the standard mileage method for that vehicle in later years.

Capital Expenditures and Depreciation

Capital expenditures are costs for purchasing significant assets that will be used in your business for more than one year. For an interior design firm, these assets might include:

• High-end computers with powerful graphics capabilities
• Professional-grade digital cameras for portfolio photography
• Office furniture for your studio
• A vehicle purchased specifically for company use

These items are not fully deducted in the year of purchase but are instead capitalized. The cost of a capital asset is recovered over time through a process called depreciation.

Depreciation is an annual tax deduction that accounts for the asset’s wear and tear or obsolescence over its useful life. This allows you to gradually deduct the cost of the asset from your business income. For example, office furniture and equipment are depreciated over seven years, while a computer is depreciated over five years.

The De Minimis Safe Harbor election permits you to immediately expense low-cost assets. Under this rule, you can deduct the full cost of any item that is $2,500 or less per invoice in the year of purchase, rather than capitalizing and depreciating it. This simplifies bookkeeping for smaller purchases.

For more expensive qualifying property, Section 179 expensing allows a business to deduct the full purchase price of new or used equipment and off-the-shelf software in the current tax year, up to a limit of $1,250,000 for 2025. This can provide a substantial tax deduction in the year a significant asset is placed in service, rather than spreading the deduction over several years.

Managing Client and Project-Specific Costs

Certain costs in an interior design business are tied directly to specific client projects. These direct project expenses, such as the cost of creating material sample boards or presentation materials for a particular client, are deductible as ordinary business expenses. Travel costs for a specific client meeting or a site visit are also handled as standard business travel expenses.

When you purchase furniture, fixtures, lighting, or materials and then resell them to your client, the initial cost of these items is not treated as a typical operating expense. Instead, it is classified as a Cost of Goods Sold (COGS). COGS is a direct cost tied to the revenue you generate from selling merchandise.

The calculation for COGS is the amount you paid for the goods that you sold. For example, if you purchase a sofa from a trade vendor for $2,000 and resell it to your client for $3,000, the $2,000 is your Cost of Goods Sold. This amount is subtracted directly from your sales revenue to determine your gross profit on the sale.

Some expenses may be directly passed through to the client for reimbursement without any markup. For instance, you might pay for a specific delivery fee on behalf of a client, and the client reimburses you for the exact amount. In these cases, the reimbursed amount is not recorded as business income, and the initial expense is not claimed as a deduction.

Documenting and Claiming Your Deductions

Recordkeeping

To substantiate the deductions you claim, you must maintain organized records. This involves keeping digital or physical copies of all supporting documents, such as receipts, paid bills, and invoices for every expense. Bank and credit card statements are also important as they provide proof of payment. For assets you depreciate, you must keep records that show when and how you acquired the asset and its purchase price. You should keep tax-related records for at least three years from the date you file your return.

Reporting on Your Tax Return

For sole proprietors and single-member LLCs, business income and expenses are reported to the IRS on Form 1040, Schedule C, “Profit or Loss from Business.” Part II of Schedule C is dedicated to expenses, with specific lines for common categories like advertising, car and truck expenses, and office expenses. Costs for professional development and association dues are included under “Legal and professional services.”

Travel expenses are reported on line 24a, while the deductible portion of business meals is on line 24b. If you are claiming the home office deduction, you will first complete Form 8829, “Expenses for Business Use of Your Home,” and then enter the total deduction on line 30 of Schedule C.

The Cost of Goods Sold is calculated in Part III of Schedule C and the final amount is entered on line 4 in Part I, where it is subtracted from your gross receipts. Depreciation, including any Section 179 deduction, is calculated on Form 4562, “Depreciation and Amortization,” and the total is then carried over to line 13 of Schedule C. Any deductible expenses that do not fit into the predefined categories can be listed in Part V, “Other Expenses.”