When considering purchasing a bed and breakfast, many aspiring innkeepers evaluate the lifestyle benefits first. Working at home, using innate talents like baking and decorating skills, and having the chance to live in a historic home, all play heavily into the decision to make the switch to the innkeeping way of life. Of course, equally important in choosing to become the owner of a B&B are the financial considerations. Yet when looking at these, prospective buyers often use a simple calculation, subtracting expenses from potential income.
But there’s another, often hidden benefit of owning an inn, and it comes in the form of business expenses that can deliver both tax and personal advantages.
Because so much of an innkeeper’s life is tied up with the inn itself, it is often difficult (if not nearly impossible) to break apart business expenses from personal expenses. The result is that you get to reduce your overall income by the cost of items not only necessary to the running of the inn but to your own comfort as well. And lower reported income means lower taxes.
While you should always consult an accountant before setting up shop as a new innkeeper, here are a few of the areas in which you might find yourself getting personal benefits from the business of innkeeping.
Most accountants will tell you that you should keep different receipts when you do your grocery shopping -- one for those items that will be used for the inn and one for personal groceries. While this is good advice, you will find that there are certain times that you can dip into the inn’s supplies for something you’d like to eat or drink -- like a cookie with your tea or some sugar for your coffee (and, of course, the tea and coffee itself). Leftovers provide another area to save money in this category as well.
Innkeeping is unique among businesses in that the house in which you live IS the business. Therefore, getting repairs done to the property is nearly always considered a business expense. If you live in a separate cottage on the property, this might not be the case, but by and large, the repairs to your home will be “covered” by the inn.
The same basic idea of using some of the inn’s food applies here. When you are in your kitchen, the paper towels and dish soap you use will likely have been purchased by the inn.
Do you put books out for the guests? Subscribe to satellite radio? Play CDs? Offer them DVDs to take to their rooms? Have a range of magazines or newspapers for them to read? Offer a puzzle or range of games? Provide expanded cable service throughout the inn? If so, then these expenses can all come under the inn’s umbrella -- even if you enjoy them on occasion too!
Landscaping and Gardening
Just like the house in which your B&B is based, it is likely that your yard will be one-and-the-same with the inn’s yard. Therefore, new plants, landscaping services, fountains and other garden decorations, fences, mulch, and much more would all count as a business expense. Of course, if you have your own private garden or yard, this wouldn’t be the case.
If you have a vehicle you use only for inn business, like grocery shopping or picking guests up from the airport or train station, you might be able to write it off as a business expense.
Again, because you live in the same house that functions as your business, you will benefit from the utilities that feed the main inn. If you happen to have utility meters on your own part of the house, then those obviously cannot be included as deductions, but all of your other heating, electric and phone costs can either be deducted outright or apportioned between your personal living space and the inn. However, because you’ll likely be spending most of your time in the inn, limiting the utilities you use in your own area of the house shouldn’t be difficult.
Items like a new computer, printer, hard drive and even services like cloud storage and WiFi are all write-offs when they’re going to be used for your business. Additionally, you’ll be able to claim ink, software, paper and other office supplies as business expenses.
You’re not expected to duplicate your appliances when you open a B&B, so the same microwave, Kitchen Aid, toaster, oven and dishwasher you’ll purchase and claim as a business expense, you can use personally.
Some innkeepers like to keep things formal, others like to dress in comfortable “at-home” clothes. In either case, the clothes you purchase for work might be eligible for deductions -- especially if they are custom-tailored pieces embroidered with your inn’s logo and/or name. Check with your accountant for guidance on this.
Just like the appliances in the kitchen, you’re completely allowed to use the inn’s washing and drying machines for your personal laundry. So you’ll not only get to save when you purchase them, but the water and detergent usage can likely be folded into the inn’s expenses as well.
Keep in mind, you should never “cheat” on your taxes. This is simply a general guide to deductions you might be able to take as an innkeeper that you might not have been aware of previously. Always double-check everything with a CPA, be meticulous about separating personal and business expenses when you can and, most importantly of all, keep your receipts!