Many common business expenses are deductible if they are ordinary and necessary for the operation of the business, but it's crucial to maintain proper documentation to substantiate these deductions.
Detailed Answer
Business write-offs, also known as deductions, are expenses that are both ordinary (common and accepted in your trade or business) and necessary (helpful and appropriate for your business). Common deductions include office supplies, business travel, and advertising costs. However, personal expenses, fines, and penalties are not deductible. For example, a business meal is deductible at 50% if it is directly related to or associated with the active conduct of your business. Home office expenses can be deducted if a portion of your home is used exclusively and regularly for business purposes. Vehicle expenses can be deducted using either the standard mileage rate or actual expenses method, but only the business-use portion is deductible.
Where to Put It on the Tax Form
Schedule C, Line 27a for most business expenses; specific lines for certain expenses like Line 9 for car and truck expenses.
Real World Example
A freelance graphic designer purchases a new computer for $2,000, which is used exclusively for business. This expense is deductible as a business asset, and the designer can claim depreciation over the useful life of the computer.
Audit Risk & Documentation Tips
Audit risk is moderate, as business expenses are commonly scrutinized. Keep detailed records such as receipts, invoices, and logs. For vehicle expenses, maintain a mileage log. For meals and entertainment, note the business purpose and attendees. For home office deductions, keep records of the space's exclusive use for business.
IRS Reference
IRS Pub 535, Business Expenses; IRS Pub 463, Travel, Entertainment, Gift, and Car Expenses; IRC §162.
Relevant Industries
FreelancersConsultantsSmall Business OwnersReal Estate AgentsContractors
Popular Related Pages
Related Questions
Disclaimer: This is for informational purposes only and should not be construed as tax or legal advice. Always consult your tax advisor.
Can I Write This Off?