There’s no denying the benefits of having a conventional office for your small business. This provides a designated space to work, meet with clients and conduct other important business. Plus, an office space outside the home offers privacy and limited distractions.
According to the U.S Bureau of Labor Statistics, more than 18.5 million people in the United States have a home-based business. If you identify with this group of entrepreneurs, you may welcome the opportunity to graduate to a conventional office space. There are, however, financial benefits of keeping the business inside your home.
A commercial space makes sense if you don’t have a dedicated space in your home for an office. Operating your business from the kitchen table or living room can be problematic, especially if you have a family. If you don’t have a spare bedroom, you may feel that a home office is out of the question. Yet, other areas of the home can be just as useful. In fact, some entrepreneurs convert their garages to office spaces.
Whether you have a one or two-car garage, the square footage is typically adequate to house a desk, chairs, shelves and other office equipment. And since garages have their own entrances, the space is practical for meeting with customers or clients.
Not sure whether your garage will make the perfect office space? Here are three financial benefits of using your garage as an office.
1. Avoid double expenses. Using your garage as an office space reduces your overhead costs. Commercial leases aren’t cheap. There’s rent for the actual space, plus utilities and insurance. Granted, the expense of running a conventional office is paid with company profits. But the more you pay in operating costs, the less you have to re-invest and save. Use your garage and you’ll avoid two rents/mortgages, as well as double utilities. This approach can build your business account and improve cash flow. There’s the initial expense of converting the garage into a suitable office. But unlike a commercial lease, this is a one-time expense.
2. Save on transportation costs. A significant drop in fuel prices isn’t likely. The more you drive, the more you’ll pay in transportation costs. However, a dedicated office space in your home can reduce how much you spend in this area. With no daily commute, you’ll spend less on fuel, plus reduce the wear and tear of your automobile. This results in fewer oil changes, and lengthens the life of your brakes and tires. And because you’re not driving your vehicle on an everyday basis, you might qualify for a low mileage auto insurance discount. This discount reduces your annual insurance premium, offering additional savings.
3. Tax benefits. Running your business from your garage has certain tax advantages. A dedicated office space in your home qualifies for a home office deduction. This write-off can reduce your taxable income and lower how much you owe in federal and state income taxes. Keeping your business inside your home opens the door to other deductions and credits as well. These include the depreciated value of your home for business use, energy-efficient upgrades and a percentage of your monthly utilities. You’ll need to itemize your tax return to take advantage of deductions and tax credits. To learn about eligible deductions, speak with your tax preparer.