If you're an entrepreneur or a freelancer who works from home, you've probably come across the idea of writing off your coffee expenses for meeting your clients for coffee.
But did you know you may be able to write off the coffee for your home office as well?
It's true—not in all cases. In fact, not in most cases.
Especially with the way many of us who work from home have been conducting business over the past couple years. (Not in-person, so much!)
But, if you have a home office and meet a couple of strict IRS requirements, you could be missing out on a deduction.
Note: Damnit, I'm a coffee snob not a tax professional. Nothing in this article is given as tax advice. I'm just trying to steer you in the right direction for where you may be able to deduct—depending on your situation.
In other words, consult an accountant or a tax professional if you don't know what you're doing. Because if you get audited for writing off a $1,029 bag of Panama Geisha beans—don’t blame me. I don't offer an "audit protection" service—well I do, but it's an add-on that'll cost you 7/8ths of your total refund—12/8ths, if you're self-employed. (That's a TurboTax joke, folks.)
Ready? Let's get into some of the nitty, and hopefully not-so-gritty, on how to write off your home office coffee on your taxes.
How to Write off Coffee for Your Home Office
Here's the thing:
If you're the only one who uses your home office (i.e. no other staff uses it) and you don't use your office for holding client meetings, it's not deductible.
Now, on the other hand...
If your home office is set up to meet with clients, coffee can become "fair game."
Coffee (and coffee equipment) is a deductible business expense in a regular (non-home) office because it's used by your clients and/or your staff.
If you're holding meetings in your home office and providing coffee for clients, the IRS seems to be okay with you deducting it as an expense.
But you have to actually be physically meeting with clients for this.
Don't try to write off a Delonghi espresso maker in the corner of your office if you only meet with clients on Zoom, or you may end up “having some explaining to do." And I don't mean to Ricky Ricardo. I mean to Uncle Sam.
And he's much less forgiving than Desi Arnaz. Trust me, I used to watch a lot of Nick at Nite.
How to Not Write off Coffee for Your Home Office
So again, you can't simply write off coffee you drink by yourself at your desk.
While it would certainly be great and merciful of The Tax Man to recognize that coffee is essential to business, helps generate additional business, and is pretty much a utility like Internet access for entrepreneurs and freelancers—He doesn’t recognize that. Not at all.
Some Extra Tips:
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Keep track of your coffee expenses throughout the year. This means saving receipts for any coffee purchases, whether they’re paper receipts or emailed receipts from your online coffee purchases. Also, track how much you spend on filters and other supplies.
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Besides the formal limits on deduction amounts, there are some soft limits to think about when you’re deducting business expenses. What I mean is, depending on the nature and size of your business, you don't want to have excessive expenses. For example, you might raise some eyebrows by writing off $5,000 for coffee-related expenses if your eBay reselling business generated $6,000 in revenue.
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Just use common sense and don't try to do anything dishonest, and you'll be fine.
Coffee is a necessary part of doing business for a lot of freelancers and entrepreneurs who work from home, so hopefully this article has been helpful in showing you how some of you might be able to potentially save some money—or get a bigger refund—come tax time.
Again, I'm not a tax professional, so check with one (or an accountant) before you go writing off a year's worth of Zambian Peaberry, with "Jake said it was ok" in the description box.
And with that, I'm off to deduct another cup of coffee from my French Press.
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