Are Coworking Spaces Tax Beneficial?

Have you ever wondered if working out of a flexible space can help you save money? If not, then keep reading to find out!|

The tax deduction rate applied to coworking facilities services is 10% (Source: Rajput Jain & Associates- Chartered Accountants). The percentage number might seem less, but small things make a big difference, so let’s understand how a coworking space is tax-deductible and how it works.

How is working from a coworking space tax-deductible?

The cost of using a coworking space is tax-deductible if you use it for business purposes. According to the IRS (Indian Revenue Service), “The costs of doing business are deducted as business expenses.” For example: If you are an entrepreneur or a freelancer working out from a coworking space, the tax deduction is available for any expenses related to earning your business income. It means that if you have expenses related to generating your business revenue, you will be able to claim those expenditures against your business income when you file your taxes. 

In other words, if the coworking membership is taken solely for business purposes, such as the functioning of the business or meeting clients, or collaborating with fellow members, then it is eligible for a tax deduction. There are many ways by which joining a coworking space can help save money on taxes by reducing business expenses or making them easier to claim as deductions.

Is the home office tax deductible?

A home office tax deduction is available only to businesses that meet specific criteria. Such as- home office needs to be used regularly for business purposes only. You also need to keep detailed records of all work-related activities in your home office and need to track the use of equipment or supplies used solely for work purposes. Similarly, many other standards need to be taken into account and fulfilled. 

The home office tax deduction can be a trouble for individuals due to the criteria involved. Whereas, one can take advantage of tax benefits by renting an office at a coworking facility rather than setting up a shop at home.

What are the additional tax benefits you can enjoy by signing up for business space at a coworking space?

      1. Rental fee for the conference rooms and meeting rooms: You can claim a deduction for the rental expenses paid for holding meetings or conferences on the office premises. As the meetings are solely business-related.
      2. Cost of networking events: If you hold an event at which you make sales, then any costs associated with it may be deducted as business expenses. You can deduct anything from venue rental fees to food and drink costs at these events. The only requirement is that your event must be directly related to your business or career goals.
      3. Regular coworking membership fee: The membership at a coworking space is tax-deductible as it is the expense incurred for operating the business.

    Similarly, some other tax benefits you can claim, like- expenses for travel, business gifts, subscriptions, rent paid to an employee, etc.

    Therefore, a coworking space can be an easy alternative to a home office. And now, there are even tax benefits for using one as well. Renting out a space in a coworking environment can be highly beneficial. Not only does it help the business owner save on rent costs, but businesses also benefit from tax deductions under the cost incurred in sharing resources. The only tricky part is keeping track of how much time you spend there—a matter we will let you figure out for yourself!

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