Deductible Business Expenses Guide

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1 Rent Any expense related to the use of real estate or any other kind of property that is not owned by your business, but is used in the operation of your business. These expenses are 100% deductible, if its 100% related to business use. Accounting, legal and other professional fees Business related fees paid to accountants, lawyers and business consultants are always deductible. However, some deductions must be spread over future years. If the expense is a one- time deal (e.g. you hire a CPA to prepare your payroll tax forms), then you can write of the expense in your current year. If, on the other hand, the expense is a long- term benefit (e.g. you pay a lawyer $600 to negotiate a 2 year contract with a vendor), then the expense must be deducted over the period of the expected benefit (using the example above, you will deduct 1/24, or $25, over the next 2 years).

2 Office Supplies You can deduct items like ink, pens, paper, printers, staples, file folders, highlighters etc. These items 100% deductible if they are used up the year they were bought. Entertainment and Meal Generally speaking, entertainment and meal expenses are 50% deductible. The entertainment must be: Both common and accepted in the field of your business. Helpful and appropriate. Directly associated or related to your business. The following expenses are 100% deductible: Transportation: if you go to an event with a client or customer. Employee parties: company parties for your employees. Charitable events: costs of putting on a charitable event.

3 Gifts to clients/customer $25 dollars per recipient, per year. Travel away from home Business travel expenses are deductible as long as they are ordinary and necessary. Transportation is 100% deductible, except for commuting from home to work. Lodging is 100% deductible. Meals are 50% deductible Laundry is 100% deductible. Charges for telephone, internet and anything else related to your business travel away from home is 100% deductible. When it comes to travel expenses, you have two choices of how to deduct your expenses:

4 1. Actual expense method: keep track of every cent you spend during your travels. Deduct the total amount at the end of your tax year. 2. Per diem method: using the IRS daily per diem schedule (please refer to IRS Publication 1542) you can simply deduct the daily allocated amount. Moving expenses You can deduct moving expenses if you meet the following rules: The relocated business site is at- least 50 miles farther from your old home than your old business site was, or If you are starting a new business, the new business site is more than 50 miles from your former home. For more information, please refer to IRS Publication 521 Health insurance Premiums for health insurance for your employees are 100% deductible as an ordinary business expense. There are certain rules for deducting health insurance premiums that owners pay themselves: Premiums can t be greater than the business s net profit.

5 Owners who are eligible to for coverage by a spouse s health plan cannot claim deduction. Health insurance premiums are not business expenses. Instead, owners claim 100% of these expenses as a personal itemized deduction on IRS Form 1040 Educational expenses Tuition, fees, books and supplies are all business deductions if they are related to an existing business. The education must be: To maintain or improve skills required in your present work or Required for your work by law or by your employer. Interest You can deduct interest charges paid for loans or credits for your business. This includes credit charges and ATM fees

6 Taxes Taxes paid by your business are deductible with some exceptions: Income taxes: federal income taxes are never tax deductible. Self- employment taxes: if your business is not incorporated, you can deduct 50% of your personal social security and Medicare taxes. Real estate taxes: regular state and local taxes on real estate used for business are deductible. If you are a home business, use IRS Form Sales tax: you can deduct state and local sales and use taxes on ordinary business expenses as part of the cost of the item. For example, if you bought a printer for $100 and the tax was $10, then you deduct $110 you don t deduct the tax separately. Advertising and promotion Business licenses and permits Marketing costs are fully deductible as long as there is a clear business connection. There are generally 100% deductible.

7 Repairs and improvements Business insurance You can fully deduct the cost of everyday repairs to business assets in the year the repair was made. You can deduct 100% of the premiums you pay for insurance. For more information on deductible business expenses, please refer to the following IRS Publications IRS Publication 463, Travel, Entertainment, Gift and Car Expenses. IRS Publication 535, Business Expenses IRS Publication 529, Miscellaneous Deductions IRS Publication 1542, Per Diem Rates IRS Publication 334, Tax Guide for Small Businesses