Deductible Business Expenses

Business expenses are the cost of carrying on a trade or business and usually deductible if the business operates to make a profit.

What Can I Deduct?

To be deductible, a business expense must be both ordinary and necessary.

Cost of Goods Sold

If your business manufactures products or purchases them for resale, you generally must value inventory at the beginning and end of each tax year to determine your cost of goods sold unless you are a small business taxpayer.

Capital Expenses

You must capitalize, rather than deduct, some costs.

Personal versus Business Expenses

Generally, you cannot deduct personal, living, or family expenses. However, if you have an expense for something that is used partly for business and partly for personal purposes, divide the total cost between the business and personal parts. You can deduct the business part.

Business Use of Your Home

If you use part of your home for business, you may be able to deduct expenses for the business use of your home.

Business Use of Your Car

If you use your car in your business, you can deduct car expenses. If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage.

Other Types of Business Expenses

  • Employees’ Pay
  • Retirement Plans
  • Rent Expense
  • Interest
  • Taxes
  • Insurance

The above list is not all inclusive of the types of business expenses that you can deduct. For additional information, refer to Publication 535, Business Expenses.

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One comment on “Deductible Business Expenses

  1. Pingback: Its’ time to start organizing your tax deductible expenses | C Fitts Tax Solutions

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