Tuesday Tip: Know What Is Deductible

[Matthew Cervoni]

Hello BP! 

Don't forget to be tracking your tax deductions throughout the year. 

To be deductible, a business expense must be both ordinary and necessary. Ordinary meaning it is common and accepted in your industry, and necessary meaning it is helpful and appropriate. 

You also do not need a legal entity to claim business deductions. Even if you are operating as a sole proprietor you can deduct business expenses (you should still maintain a separate bank account and keep receipts).

Here are some common examples: 

Accounting & Legal Fees

Advertising & Marketing

Bank Fees

Contract Labor (don't forget to collect W-9s for 1099s due next January!)

Depreciation (2022 is the final year of 100% BONUS depreciation)

Insurance

Interest

Management Fees

Meals 

Mileage

Office Expense

Repairs & Maintenance

Salaries & Benefits

Software

Supplies

Taxes and licenses

Travel 

Utilities

We used to work with clients who would get their tax bill and then "try to find" extra business expenses. Those clients were certainly paying thousands of unnecessary taxes just from a lack of systems to track deductible expenses.