This publication analyzes common business expenses and explains what is deductible and what is not. The general rules for deducting business. The general rules for deducting business expenses are described in the initial chapter. The following chapters cover specific expenses and list other publications and forms you might need.
Business expenses are the costs of running a business and generating sales. Given that broad mandate, the IRS doesn't provide a master list of allowable deductions for small businesses and startups. Whenever an expense is “ordinary” and necessary to run a business in your industry, it's deductible. This makes it worth spending time organizing your expenses so that your company accepts all legitimate amortizations, creates an effective financial plan, pays the right amount in quarterly taxes and doesn't have to worry about an audit.
The intangible assets of Article 197 include a non-competition pact (or similar agreement) concluded in connection with the acquisition of an interest in a trade or business, or a substantial part of a trade or business. You can choose not to participate in this election if you affirmatively choose to capitalize the initial costs on your income tax return filed before the due date (including extensions) of the tax year in which the business or business activity begins. You can also deduct home repairs and maintenance done at your home, but only the part of your home that is used exclusively for business purposes. Fees charged by accountants and attorneys, which are ordinary and necessary expenses directly related to the operation of their business, are deductible as business expenses.
You cannot deduct any costs you have paid or incurred to completely renovate or build a public transportation facility or vehicle or to replace depreciable assets in the normal course of business. It can also amortize the cost of financing equipment, long-term supplies, or machinery used for your business. Sole proprietors, shareholders of a corporation, or shareholders of an S corporation can deduct charitable contributions made by their companies on Schedule A (Form 1040). You can claim a deduction for non-entertainment travel and meal expenses if you reimburse these expenses to their employees in accordance with a responsible plan.
Any rent payment made to occupy a warehouse for inventory or office space to conduct business is tax-deductible. You are not required to distribute these deductions between personal and business use, as required by the usual method. If you use the cash method of accounting, you generally deduct insurance premiums for the tax year in which you actually paid them, even if you contracted them in a previous year. We also provide links to major business topics, such as business expenditures, which provide a gateway to all related information on those issues themes.
In general, a reasonable payment is the amount a similar company would pay for the same or similar services. One of the most comprehensive guidelines on the requirements that must be met to cover eligible business expenses is IRS publication 535. If you capitalize on the costs of drilling and developing the geothermal wells you put into service during the tax year, you may be able to apply for a business energy credit. However, you usually can't recover other costs until you sell the business or close it in some other way.
