Are you unsure what you can deduct as a business owner? Below is a list of common deductions. However, they are in no way an exhaustive list. The IRS allows you to deduct “ordinary and necessary” expenses for your business. So, if the deduction you’re contemplating isn’t on the list, that doesn’t mean it isn’t deductible.
The list of what you can’t deduct is shorter and includes things like clothing, personal meals, personal cars, country club dues, and other expenses that are personal in nature. Non-deductible expenses will be the topic of a future article. However, read below for the list of common deductions!
General Expenses
- Bank Fees
- If you’re paying a fee to the bank as part of your everyday operational business needs, you can write it off, whether that’s a monthly service fee, ATM withdrawal fee, or credit card renewal fee.
- Business Insurance
- All insurance premiums that protect your business from claims and any insurance for buildings and equipment used for your business can be written off as a business expense.
- Commissions and affiliate fees
- If you pay a commission to a non-employee or affiliate for business-related purposes, you can deduct all of those commissions.
- Employees and subcontractors
- All employees’ and subcontractors’ salaries are tax deductible.
- Payroll Taxes
- When you have employees, you have to pay payroll taxes. These taxes are a deductible expense.
- Employee Benefits
- If you provide health insurance or other employee benefits to employees, you can deduct this cost. This is subject to some limitations depending on the type of benefit.
- Gear and equipment
- Need to upgrade your equipment? Any upgraded gear or equipment counts towards your tax deductions.
- Legal and professional services
- Need a lawyer, financial advisor or a marketing professional? If so, you’re covered because you can deduct all costs associated with hiring a professional for your business.
- License and permits
- All business-related licenses, certifications, and regulatory fees that your business acquires are deductible. This may include business registration fees and any permits that your municipality may require to operate your business.
- Loan interest
- Did you need a loan to start or grow your business? The interest paid for the loan can be deducted. This also applies to credit cards and lines of credit that cover your business.
- Marketing and promotion
- Marketing and promotional expenses such as Websites, domain names, promotional merchandise and swag, or advertising are some of the expenses that you can write off.
- Materials and Supplies
- Any materials or supplies used while operating your business can be deducted.
- Mobile phone bill
- Do you use your personal cell phone for business use? Social media sites, responding to emails or messages and phone calls are a few examples of how you might be using your phone for work. If that is the case for you, a portion of your mobile phone bill may be deducted from your taxes.
- Office rent and lease
- If you operate your business out of your home or coworking space, you can deduct all of your office-related costs if you are not claiming your home-related expenses.
- Office supplies
- Any office supplies used in the general operation of your business may be deducted. Supplies may include pens, notepads, printer paper & ink, staples, etc.
- Payment processing fees
- Did a vendor or customer pay you with a credit card? Credit card payments come with a processing fee. You can claim those fees paid.
- Professional development
- Do you want to expand your knowledge in your field of business? If you enroll in classes, listen to audiobooks or attend seminars to do so, you can write them off on your taxes.
- Shipping and postage
- Whether you are shipping merchandise, mailing a letter or sending a thank you card, all shipping and postage expenses are deductible.
- Software and apps
- Any software or app that you use for your business may be written off as a business expense.
- Trade events and seminars
- Tickets purchased for conferences, webinars or seminars can be written off as a business expense.
Vehicle Expenses – NOTE: all of these require you to keep a mileage log.
- Depreciation
- If you own a car, you can write off it’s annual depreciation of the value from all business-related trips.
- Gas and fuel
- Gas and fuel costs used for business-related travel is tax deductible.
- Insurance
- You’ll need insurance for your vehicle, which you can write off.
- License and registration
- If you’ve done a safety inspection on your vehicle or have roadside assistance, you may write off a portion of those costs. You may also write off a portion of your vehicle registration fees.
- Loan interest
- Did you take out a loan to purchase your vehicle? If so, you can deduct a portion of the interest on that loan as a business expense.
- Parking fees
- Parking isn’t always free and can be expensive. Parking fees can be written off as a business expense if they were used for a business trip.
- Repairs and maintenance
- Cars require maintenance and sometimes unexpected repairs. A portion of those expenses are deductible if your vehicle is used for work.
- Tolls
- If you are traveling for work and you need to take toll roads, bridges or tunnels, remember to claim them as tax deductions.
- Mileage
- If you would rather not keep track of all these specific charges, you can also take the standard mileage deduction based on the number of business miles you drove. This rate is usually above $0.50 per mile and varies each year. Again, this requires a mileage log.
Business Meeting Expenses
- Business meals
- Getting lunch or having a coffee with a client to talk about business or secure a sale? You can deduct business meals when the meal has a business purpose.
- Meeting space rental
- Need to rent an office space for a meeting or conference? If so, you can deduct it.
- Transportation
- If you are driving, using rideshare or taking public transportation to meet someone, you can write off the expense if it was for work purposes.
Business travel expenses
- Accommodations
- Booking a hotel or Airbnb for a business-related trip is a tax deduction.
- Business travel
- If you travel for work and travel via plane, train or automobile, you can write off any expenses such as train tickets, airfare, and car rentals.
- Food and drinks
- Any meals consumed during your business trip can be deducted if the trip is primarily for business.
Disclaimer: Any accounting, business or tax advice contained in this communication is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion. It is not sufficient to avoid tax-related penalties. If desired, Arrow Advisors would be pleased to perform the requisite research and provide you with a detailed written analysis. Such an engagement may be the subject of a separate engagement letter that would define the scope and limits of the desired consultation services.