Do you know what types of expenses are deductible from your business taxes? A lot of factors can play into this, including what industry your business is in and whether you are a startup or not. The most common expenses that are deductible are any that are “ordinary and necessary.” Let’s dive into the different types of deductible expenses.
For the most part, startup businesses have many expenses to get started. This can include things such as business supplies, office rent, advertising, and marketing. Make sure you keep receipts of everything that you bought. All startup expenses are deductible on your income taxes.
Cost of goods sold are expenses that are necessary to bring the goods or services to it’s finished state. Examples can be like paint for painters or labor costs for general contractors. Permit fees for electricians are included. These are under the category of necessary expenses.
If you use your home or car for business purposes, then you can deduct a certain amount from these expenses. With your home, it can include rent/mortgage, internet and utilities. If you use your personal vehicle only for business, then all expenses can be deducted. But if you use it for business and personal, then you must divide the expenses based on actual mileage. Most CPAs will have you either deduct business mileage or actual expenses such as fuel, maintenance, and registration fees.
The amount that you can deduct from each category depends on different factors. It’s best to work with a CPA and a bookkeeper to make sure you are making the most of the expense you have. This can help to lower your tax bill and help you out come tax time.
