What Business Expenses Can Be Deducted? – Employer Solutions Plus

Did I save my receipts? Can I deduct this? Will this be flagged? What if I get audited??

Do these questions sound familiar? They sure do to us! As business owners ourselves we completely understand the stress, the confusion and the pressure that tax season brings.

Using the guidance at IRS.gov, we have put together a basic guide for you to understand what you can and cannot deduct. Hopefully this helps reduce some of your stress as you prepare your tax paperwork for your accountant!

What qualifies as a business expense?

A business expense must be “ordinary and necessary.” Well that sure is confusing – what does that mean? If it is required to run your business – i.e. a cell phone, employee pay, insurance, office space – it counts.

What does not qualify as a business expense?

According to the IRS website, “The expenses used to figure out the cost of goods sold, capital expenses and personal expenses” do not count as business expenses. In general, you can’t deduct personal expenses. However, if you use something for both business and personal, you can divide the usage and deduct a percentage of the cost.

What if I use my home office or car for business purposes?

Here’s where it gets tricky, if you work out of your home you may be able to deduct things like mortgage interest, utilities, etc. For more specific information, review the Home Office Deduction guidelines provided at the IRS website. Car deductions are a bit more complex – you can find out mileage rates, and what is included and excluded here.

Hopefully our high level overview gives you a bit of clarity to navigate your way through tax season! Did you know that through our PEO partnerships and small business resources, Employer Solutions Plus can help find your business the perfect tax filing services? Professional help can assist you in streamlining your administrative functions and without having to memorize every single tax law you can focus more time on growing your business!