One main goal for many businesses is to ensure their expenses are less than their income to make a profit. Office expenses, which are separate from office supplies, are one type of expense that companies typically track. Learning about the different types of office expenses can help you create a more defined budget and help you file your taxes. In this article, we explain what office expenses are and how they differ from office supplies, then list eight types of expenses you may need to track.
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What are office expenses?
Office expenses, also sometimes called office operating expenses, refer to the cost of owning or renting an office. This includes things like:
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Cleaning services
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Office utilities
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Website hosting services
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Computers
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Landline or mobile phones
Employees typically can’t use items billed as office expenses for personal use. For example, a business may not allow employees to use the office printer to make copies of personal documents. This helps businesses keep track of expenses for tax purposes.
Importance of tracking office expenses
Tracking office expenses can be important for the following reasons:
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Understand tax liabilities: When you file taxes, you may be able to deduct certain office expenses. It’s vital to keep an accurate record of your expenses to submit with your taxes to ensure you get the correct deductions.
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Track the business’s profitability: Tracking office expenses can help you calculate the profitability of your business. To fully understand how much you earn in a year, it’s important to consider costs like furniture or vehicles.
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Calculate operating costs: Understanding how much you spend on operating costs, including office expenses, can help you evaluate your business budget and maintain clear accounting records.
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Assist with calculating special situations: If you work from home, you may find it useful to track your office expenses separately from your expenses. Doing so ensures you can file your taxes accurately.
Differences between office expenses and office supplies
While some may use the words interchangeably, office expenses and supplies are different. Here are a few main differences that can help you keep clear records:
Items
One of the main differences between office expenses and supplies is the item type. Office expenses are intangible or high-cost items, such as furniture or annual software subscription services. Office supplies are usually lower-cost items such as paper, writing utensils and break room supplies.
Depreciation
Office expenses typically cost more than supplies. When filing taxes, you may be able to write off the depreciation of office expenses, which you can’t do with office supplies. Depreciation refers to the standard decrease in the value of a product over time. For example, a computer decreases in value over time as an employee uses it. Additionally, when the computer manufacturer releases a new version, the older versions are worth less.
Deductions
The biggest difference between office expenses and supplies is how you list them when filing business taxes. Office expenses are long-term, whereas supplies are short-term and require replacement more often. This means that you can usually write off more on your taxes for office expenses versus supplies. Businesses usually spend more on office expenses, making the difference in tax liabilities important.
8 types of office expenses
There are a few important types of office expenses, including:
1. Salaries
Employee salaries and benefits are sometimes the largest expenses that businesses pay. This can include anything like salary, hourly wages, commission or retirement contributions. This also includes hiring and training costs.
2. Rent
Rent or mortgage payments for a workspace are also office expenses. These expenses could also include repairs or upgrades to the building. If you work or run a business from home, you may be able to deduct a portion of your rent or mortgage when filing taxes.
3. Utilities
Utilities, such as water, electricity and heat, are all common office expenses. You can also add phones, including landlines and cell phones, in your utilities. In addition to the cost of utilities, office expenses may also include phone repairs or insurance.
4. Office services
Any maintenance or cleaning services that businesses use are considered office expenses. Maintenance and cleaning could include:
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Repairing office equipment
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Checking HVAC units or other large equipment pieces
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Daily or weekly office cleaning
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Deep cleaning for carpet and upholstery
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Window cleaning
5. Computer or software programs
Desktops, laptops, programs and software are all considered office expenses. Any servers or cloud services, like online shared document storage, also fall into this category. If you use a computer or software for personal reasons at all, it’s important to keep a record of that usage so you can file your taxes correctly.
6. Insurance
Any insurance you have related to the office, like property, liability, health and vehicle, are expenses. If you have a home office, you may also be able to deduct a portion of your homeowner’s or renter’s insurance as an expense. Even if you are self-employed, you may be able to deduct the cost of self-funded insurance.
7. Furniture
Office furniture is a fixed asset that is usually costlier than normal office supplies. To qualify for tax deductions, furniture items are usually tangible and necessary items that last for a minimum of a year. Office furniture may include items like desks, meeting tables or office equipment.
8. Vehicles
Depending on the needs of your business and if you use the vehicle for personal reasons, you may be able to include it as a business expense. If you have office vehicles, you may also include other expenses like maintenance, upkeep or registration fees. You may also be able to include mileage that you drive for work purposes in your office expenses.
I hope you find this article helpful.
