It costs money to make money, and much of what business owners spend on their companies — their business expenses — can be deducted from their gross income to reduce their taxes. The list of deductible business expenses includes obvious ones like office rent, salaries and computers, but might also include water bills and window cleaning.
Read on to find information about deductions that can help your business save on taxes.
List of Business Expense Categories
The IRS says a business expense must be ordinary, necessary and directly related to running a company to be deductible. Most business expenses fall into specific categories. Schedule C, the IRS form which sole proprietors use to report their income, lists 20 broad business expense categories that include:
- Advertising
- Car and truck expenses
- Commissions and fees, contract labor
- Depletion
- Depreciation and section 179 expense deduction
- Employee benefit programs
- Insurance, interest
- Legal and professional services
- Office expense
- Pension and profit-sharing plans
- Rent or lease
- Repairs and maintenance
- Supplies
- Taxes and licenses
- Travel and meals
- Utilities
- Wages
Categorizing expenses is an important part of keeping good business records. The IRS wants business expenses accounted for and reported in the correct categories so it can determine if the deductions are legitimate. Categorizing expenses correctly will also mean a smaller bill from your accountant at tax time.
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