Many businesses can save money with deductible business expenses, but understanding the legal terms related to this tax saving strategy can be confusing. Deductible business expenses are defined as costs incurred in the course of operating a business that can be used as a tax deduction for an income tax return.
What Are Deductible Business Expenses?
Deductible business expenses are costs which can be used to reduce taxable income and are generally associated with running a business. These types of expenses can be related to direct business costs such as hiring employees, purchasing necessary supplies or equipment, or even investing in research and development. Additionally, fees spent on advertising, legal fees, and accounting fees for preparing tax returns are also considered deductible business expenses.
What Is the Difference Between Deductible and Non-Deductible Business Expenses?
Not all expenses associated with running a business are deductible. Travel costs for vacations, meals, or non-business related activities are typically not allowed as a business tax deduction. In addition, personal expenses such as rent, car loan payments, or insurance premiums for cars or homes are also not considered deductible business expenses.
Examples of Deductible Business Expenses
Deductible business expenses can be incurred when starting, operating, or managing a business. Some common examples of deductible business expenses include:
- Employee salaries and wages
- Office supplies and equipment
- Advertising costs
- Professional fees (legal, accounting)
- Interest paid on loans
- Commissions and bonuses
- Utilities and internet access
Conclusion
Deductible business expenses can be a great way to save on taxes. Though understanding the legal definition of deductible business expenses can be confusing, managing business expenses can help businesses to reap the benefits of this type of tax saving strategy.