What Can You Claim as a Business Expense?

pile of papers and calculator Tax time is the least anticipated time of the year for most Americans, but especially so for business owners. Not only do you have to do your own personal taxes, but you have to file for your business and determine which of your expenses are deductible. With the deadline to file looming in the near future, the tax management specialists at PADGETT BUSINESS SERVICES® are here to help you figure out the difference between expenses you can deduct and those that will likely trigger an audit.

In order for an expense to be business deductible, it must be ordinary and necessary. Ordinary simply refers to the item's significance to your trade; it must be commonly used by others in your business. A necessary expense is one that is deemed appropriate and helpful for your task. Here are a few questionable items that people commonly try to deduct, and the circumstances under which it is appropriate to do so:

Don't forget to file your taxes this year! If you are a business owner in need of professional tax help or if you have questions about filing this year, please contact PADGETT BUSINESS SERVICES®. To avoid a dreaded audit and to ensure you are taking advantage of all the possible deductions you may be entitled to, our seasoned tax specialists can provide the guidance you need in order to guarantee that everything is being filed correctly.

  • Vehicle Expenses: If your car is necessary in your line of work and if you only use it for business purposes, you can deduct it from your taxes. However, if you use your car for both business and personal use, you can only divide your expenses between business and personal usage - you can only claim the miles driven specifically for business. For more information on vehicle tax deductions, check out the IRS website.
  • Home Improvements: If you run your business out of a home office, you can receive a small tax deduction, but only if it is a "a portion of an owned, rented, or leased dwelling that is used exclusively for business purposes, a place to meet with patients, clients, customers in the normal course of business, a separate structure used in connection of trade or business, or space used on a regular basis for the storage of inventory or product samples used for your business." However, you likely won't be able to claim improvements made to the space unless they are deemed absolutely necessary. An example of this would be a home daycare center where improvements are needed to improve the overall levels of safety.
  • Meals: You can write off meals and entertainment in certain situations. If you are purchasing food for your client, you can deduct it. If you are having a business lunch and document it, you can count it as meals and entertainment and deduct it at 50 percent. If your employee works over ten hours in a day and you buy them dinner, you can claim that as well. However, you cannot write off you or your own family's dinner.
Do you have the support you need to manage your small business bookkeeping? Contact us to schedule an appointment to speak with a local small business advisor.