Probably one of the most common accounting question is, “What expenditures are considered to be business-related tax deductions?” Generally speaking, tax laws allow you to deduct “ordinary and necessary” business expenses. As with most laws, this can get a bit grey and complex. An expense is considered to be ordinary if it’s common and accepted in your trade or business and a necessary expenses is one that is helpful and appropriate for your business. Remember that in order to be considered a necessary expenses it does not have be indispensable. Here are a few common business-related tax deductions:
- Home business use – I’m going to go out on a limb and say that this year might end up having the most people ever taking this deduction. The current COVID-19 pandemic certainly forced many businesses to turn a portion of their homes into a temporary office or other work-related use. Check out a past blog discussing this in further detail.
- Car business use – Many business owners have one vehicle for both business and personal use. If this is you, then you can deduct a portion of the expenses by dividing your expenses based on actual mileage.
- Advertising and marketing – Any monies spent on websites, business cards, social media, promotional materials.
- Dues and subscriptions – Fees for software, trade organizations, etcetera.
- Labor expenses – for both employees and independent contractors.
- Professional development/continuing education – Classes and training that are both required or just needed to develop skills related to your business.
- Professional fess – Accounting and legal fees are among those that fall under this category.
- Meals – A portion may be deducted IF they were for a business purpose such as taking a client out to dinner, lunch, and etcetera.
The above is the short list of business-related tax deductions, there are many more deductions that your business may not be taking. Working with a professional accounting professional from Potts and Company will help you maximize your business deductions.