Clients often ask for a cheat sheet for what expenses are deductible and which expenses are not. Each business is different, so some expenses could be deductible for one business and not for another. The general rule is that the expense is "ordinary" for your field of work and are "necessary" for you to engage in business. They should also be routine in nature.
A good question to ask yourself is "Would I spend this money if I I didn't have a business?" If this answer is no, then its most likely deductible. If the answer is yes then you might want to think twice if it's a business expense or not.
Examples of Deductible Expenses:
- Automobile Expenses if you use your vehicle for work: Gas, Maintenance, Insurance
- Bank Service Charges
- Business Cards & Stationary
- Business Liability/Malpractice Insurance
- Business Meals
- Continuing Education
- Equipment and Tools used for Business
- Health Insurance
- Interest Payments on Business Credit Cards
- Internet and Data Plan
- Licenses
- Office Supplies & Furniture
- Parking
- Postage
- Professional Association Dues
- Professional Publications
- Public Relations, Promotion, and Advertising
- Retirement Contributions (401k, SEP IRA, Defined Benefit Plan)
- Software and Subscriptions
- Telephone used for business
- Trade Shows, Conventions, and Seminars
- Uniforms and Scrubs
Examples of Non-deductible Expenses
- Business Suits/Clothes
- Cable TV (Unless it's for your office)
- Country Club Dues
- Disability Insurance
- Entertainment
- Gym Dues
- Life Insurance
- Personal Medical Expenses
- Personal Use of Automobile (or anything for that matter)
Expenses that Can Get Tricky
- Automobile: you have to use your automobile for business, and commuting to work doesn't count. It's hard to deduct your car if you work from home. It's better to keep track of your miles that you use your car for business, like driving to the post office or to your accountants office. You can use an app like MileIQ to track your business miles.
- Meals: Every lunch isn't a business expense. It's important that your meal has a business purpose, and you document who you were with and what you discussed.
- Home Office: You can't have a home office and a regular office. If you work from home, the space you use for your home office has to be used exclusively for work. That means you can't have a bed in the room where you work.
Please keep in mind that every business is different, and some of the expenses above might not apply to your business or might not be deductible for you. Please consult your accountant for more clarification and use this list as a good conversation starter.
