What expense category does storage come under?

Whether you're storing physical goods or digital data, knowing how to categorize storage costs is important for your business finances. Let's break down where storage expenses fit and how to account for them properly.

Classifying storage expenses

Figuring out where storage expenses fit in your books depends on how they support your business.

• Operating expenses: If storage is essential for your daily operations—like housing inventory or equipment—it falls under operating expenses.
• Cost of goods sold (COGS): When storage costs are directly tied to storing inventory before it's sold, they can be included in COGS.
• Rent expenses: If you're leasing storage space separate from your main business location, these costs are considered rent expenses.
• Capital expenditures: Purchasing a storage facility or making significant improvements to one classifies as a capital expenditure.
• Other expenses: Miscellaneous storage costs that don't fit into the above categories.

Examples of storage expenses

Storage expenses can come in many forms, depending on your business needs. Here are some common types you might deal with:

• Warehouse lease payments: Monthly fees for renting a warehouse to store products.
• Self-storage unit costs: Expenses for additional space to keep equipment or documents.
• Cloud storage subscriptions: Fees for digital storage services like Google Drive or AWS.
• Maintenance and utilities: Costs for upkeep and utilities of owned storage facilities.
• Insurance premiums: Payments to insure stored items against theft or damage.

Tax implications of storage expenses

How you categorize storage costs can directly affect your tax deductions and financial reporting. To avoid issues and maximize benefits, here are key points to consider:

• Deductible expenses: Many storage costs, like rent and maintenance, are tax-deductible business expenses.
• Depreciation: If you own a storage facility, you may be able to depreciate the property over time.
• COGS adjustments: Including storage costs in COGS affects your gross profit and taxable income.

Remember to maintain detailed records of all storage expenses to support your deductions. Always consult with a tax professional to ensure you're maximizing deductions and complying with tax regulations.

Let Ramp automate your expense process

Managing and categorizing storage expenses doesn't have to be a chore. Ramp automates expense tracking, making it easy to monitor costs like storage fees. With real-time insights and automatic categorization, you can streamline your finances and focus on growing your business.