A common question that we see searched online is whether or not office furniture is subject to sales tax. The answer is yes, unless you live in Alaska, Oregon, Montana, New Hampshire or Delaware, where there is no sales tax. Office furniture, like all other business expenses, is subject to 6.5% sales tax in Minnesota, and 5% in Wisconsin – where our two showrooms are located. Fortunately, like other business expenses office furniture is also 100% tax deductible.
How to Deduct Office Furniture
There are two options for deducting office furniture from your tax liability. The first is to deduct 100% of the total cost within the year it is purchased. This is most commonly used when a business does not have a significant amount of other deductions, or if they have a high tax liability for the year.
The second option is to depreciate the tax deduction over the life of the furniture. This is most commonly used when a business already has a significant amount of deductions, or if the tax liability is relatively low for the year. To calculate the annual deduction of office furniture – take the cost of each item and divide it by the useful life of the object (about 8 years, even though most furniture will extend well-beyond it’s usable life). Add up the results, and the end total is the amount to expense each year.
As far as which option to use, we recommend the one that saves your business the most money!