Now you have your business up and running you may have questions as to what deductible business expenses are. First, please do not rely on the “my buddy told me I can write off my house, boat and car” form of professional advice.
The IRS, Score, Small Business Development Centers associated with Universities and Colleges, and sites like this, have free resources where more specialized assistance can be had from qualified professionals.
Let us look at what is on the Schedule C Profit and Loss from Business and then from the list of S Corporation items. These are not complete as your specific business may have additionally required and necessary expenses. Please never use Miscellaneous or Other as an expense as the IRS will have cause to inquire further especially if the amounts are large.
- Advertising: includes but is not limited to newsletters, website, business cards, logo creation, web click ad charges
- Automotive/truck Expenses: milage at cents per mile unless specific use vehicle owned by business then actual expenses can be claimed. Note: HUGE expense for audit to see if all records have been kept including but not limited to mileage logs, repair receipts, etc.
- Parking Fees and Tolls
- Bad Debts: Only if you are an accrual taxpayer that invoices clients/customers and you have tried all means to collect
- Independent contractors: individuals or businesses. 1099-NEC is required for anyone other than a corporation that receives more than $600 in a calendar year.
- Insurances: includes general liability, building, and equipment, other insurance NOT health, worker’s compensation
- Interest: credit card and loan interest, merchant fees
- Legal and Professional fees paid
- Office supplies: do not include items such as computers, printers, or office furniture. Note: If costs are more than $350 then they must be listed as depreciable assets.
- Rent: broken down into equipment, storage, office space
- Repairs and Maintenance, not auto: this is for businesses that have a separate site, not in the home and can include any equipment repairs
- Supplies: can be a catch-all, can also be listed under Material and Supplies as Cost of Goods Sold
- Taxes and Licenses: includes business property taxes imposed by the city or county on business assets, not vehicles. Licenses that are required for your business, permits for construction companies or other building trades. Payroll taxes that are paid by the employer (employers’ portion of Social Security, Medicare, State unemployment, and Federal Unemployment.
- Wages and Salaries Paid: comes from W2s and matches to W3 filed with IRS
- Pension and Profit-Sharing Plans for Employees Employer portion only
- Bank Charges
- Dues and Subscriptions: Can include annual subscriptions for software and journals
- Gifts: Internal Revenue Code limits $25 per CLIENT (this includes husband and wife or family), or employee
- Internet: this is for businesses that have a separate site, not in the home
- Janitorial and Cleaning: Again, this is for businesses that have a separate site, not in the home
- Meetings: Conference fees, seminars, unit meeting fees
- Payroll processing fees: an outside company you pay for the service of running your payroll
- Postage and shipping: can also be under the cost of goods sold
- Security Service
- Software purchased outright: if a proprietary software costs more than $250 it must be depreciated/Amortized
- Telephone and Fax: not in the home
- Tools and equipment under $350: Larger tools and equipment must be depreciated
- Uniforms: Logoed, rented uniforms for service personnel (such as jumpsuits for mechanics)
- Utilities: This is for businesses that have a separate site, not in the home