It may be time to reimagine your New York City business model from working in an NYC brick and mortar office to working out of your home. There are a few significant ways to save money with such a transition.
SAVE MONEY ON BUSINESS EXPENSES WORKING REMOTELY FROM HOME
There are several expenses that are eliminated or reduced when you opt-out of having an office located in New York City:
- Rent & facility expenses – Eliminating your NYC office rent expense is a huge savings. Even commercial renters must sometimes pay insurance fees for the office space, hire cleaning people, contract trash disposal, landscaping or snow removal and bear other fees related to maintaining the office.
- New York City business taxes – Business taxes are a huge expense in NYC, so business owners who live outside the City can save a substantial amount by moving their office to their home. If you need to meet with clients in a more business-like setting, there are lots of options today for renting a meeting room or office space for daily or hourly rates when needed.
- Electronics and communications – No more phone systems and other IT or office equipment needed for multiple people to use. Paying only for what you alone need at home is far and away a lesser expense. If you want to screen calls through a receptionist, many companies hire call reception services that will answer with your business name and forward calls to you, your voice mail, or even other staff. This saves you the expense of a full-time receptionist and paying for the office space to accommodate that person.
- Wardrobe expense – You may not need to update your work wardrobe as often.
- Commuting – Reduce vehicle wear and tear, maintenance, cost of gasoline, parking fees and higher mileage insurance coverage cost. For train and bus commuters, the costs of fare and seasonal parking to the station are eliminated or reduced.
- Food and miscellaneous – Food and beverage costs might be reduced when you can eat at home and make your own coffee. Dining out or having lunch delivered is another costly expense in NYC.
WORK FROM HOME TAX DEDUCTIONS & BUSINESS EXPENSES
All your normal business expenses can still be used to reduce the taxable income for your NYC business, plus there are a few additional tax deductions available when you work from your residence.
- Monthly expenses – You can deduct a portion of home expenses dedicated to business use. Take a percentage of the monthly expenses for rent, utilities, mortgage interest, home insurance and property taxes, or use the less complicated home office deduction based on the square footage of your home office.
- Office (hard) expenses – The cost of necessary office supplies, business furniture, equipment and electronics in your home may be used to decrease your taxable business income if used for business use.
- Office (soft) expenses – Software, training or education used solely for the business.
- Services – Hiring professionals, such as IT, attorneys or financial services.
- Marketing – Advertising, fees for websites, hosting, social media, tradeshows, events, small client or vendor gifts.
- Travel – Travel to meet with business associates or other business-related activities all become travel expenses. If you drive your own car you may be able to claim your mileage for these activities as a business expense at the current federal mileage rate. You may also include tolls, parking, subway fare, plane flights and rental car expenses. Proper documentation as to the cost and purpose of your travel, of course, is vitally important.
- Meals and entertainment – A portion of the cost of short meetings over a meal or coffee and business-related entertainment can be counted. Stay modest with this to avoid being flagged as “extravagant.”
- Health insurance – If you can claim a profit for the reporting year, are self-employed and you and your covered family members are not eligible for other employer insurance, this may provide a significant tax deduction.
TAX IMPLICATIONS FOR REMOTE WORKERS
There are exceptions and additional deductions not mentioned here, so call Spear CPAs to discuss your specific circumstances related to tax planning for remote workers. Our goal is always to help you pay the least amount of tax legally possible. We offer several service packages to choose from based on your business needs.