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Business Deductions Checklist

Although most people do not like paying taxes, they are a fact of life and everyone has to pay their share. Luckily, there is a way to reduce the taxes that your business owes by deducting business expenses. This article provides a list of some of the most common business expenses that can be deducted. When reviewing this list, please keep in mind that this list is not complete. There are other business expenses that you may encounter, while your business deductions will depend mainly on the nature of your business.

As a general rule, if something is a true business expense, it is probably deductible. Below are some common business expenses that can be deducted:

  • Rent or home office
  • Employees' wages and other compensation
  • Utilities
  • Advertising
  • Auto expenses
  • Travel expenses
  • Entertainment, including dining (if related to the business)
  • Professional fees
  • Business licenses, permit fees, and membership dues
  • Business supplies and equipment
  • Accountant and attorney fees related to the business
  • Educational expenses (must be related to the business)
  • Repairs
  • Bad debts (deductible if the business sells goods as opposed to providing services)
  • Interest on business purchases
  • Moving expenses
  • Software
  • Charitable contributions
  • Business taxes
  • Financial institution fees
  • Parking fees and public transportation costs
  • Publications related to the business
  • Casualty and theft losses
  • Postage and shipping fees

Making Valid Business Deductions

While it's tempting to make as many business deductions as possible in order to minimize your tax obligations, making invalid deductions can lead to problems, especially with the Internal Revenue Service (IRS). The Internal Revenue Code does provide a general rule for business deductions. A business can deduct any expenses that are paid or incurred in any taxable year that were "ordinary and necessary" for your business. While this seems like a straightforward rule, it can sometimes be difficult to determine which expenses are ordinary and necessary. The business deductions checklist provided above provides some guidance, but it's important to stop and check carefully before you deduct.

There are a few things to watch out for when deciding what expenses to deduct. Personal expenses that may relate to your business are not necessarily valid business expenses. For example, while commuting to and from work is related to your business, the IRS defines it as a personal expense that can't be deducted as a business expense. Similarly, using a business credit card while you're on vacation is not a business expense. Finally, it's important to be mindful of employing or doing business with relatives. It's fine if your cousin prepares your tax returns because she is an accountant, but make sure you paid her for services that were actually rendered. The IRS is used to people trying to minimize their taxes, and for this reason, they know what to keep an eye out for.

Getting Legal Help

While some business deductions can be obvious, others may be a little more difficult to determine. It's beneficial to your business to make as many business deductions as possible, but to also make sure that they are valid. If you have questions or concerns about your business deductions – or any other aspects of starting and running a business – you can contact a local business organizations attorney for guidance.

You can visit FindLaw's Business Taxes section for more information and resources related to this topic.

Next Steps
Contact a qualified business attorney to help you
navigate your business's taxes.
(e.g., Chicago, IL or 60611)

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