List of IRS Business Expense Categories
- There are many official IRS expenses that businesses can deduct from their tax bills
- Business tax deductions make it easier to own and run a business
- Claiming your deductions takes careful paperwork management and bookkeeping
- We’ve identified at least 35 categories of deductions every business should know about
- SyncLedgers helps businesses organize the documentary proof of their expense deductions
One of the most important jobs an accountant can and should do for the businesses that employ them is to help identify IRS expenses that the company can deduct from their tax bill.
In general, the tax code in the United States is designed to encourage the formation and growth of businesses. Individual employees don’t get nearly as many benefits as the businesses themselves do. This is controversial because there are ways for corporations that earn billions of dollars in revenue to avoid paying almost any taxes at all.
It’s a political discussion worth having whether that’s a good thing or not. For the accountant, though, what matters more is compliance. Compliance with tax laws is essential to help businesses of all sizes continue to operate smoothly. That’s one of the reasons it’s so important to have accurate bookkeeping on your side. Keeping track of all the paperwork is a nightmare for either the lone accountant or the sole proprietor of a small business. Having an offsite and affordable bookkeeping team like what we provide at SyncLedgers can make things go a lot smoother.
Tracking IRS Expenses
One of the ways accountants and bookkeepers can work in harmony with their employers is by being aware of the deductions the business can and should claim. Whenever applicable, these deductions reduce the company’s tax burden and contribute greatly to its overall productivity. Not only do the deductions save money, but the money that the business spends on deductible purchases and activities can have long-term investment dividends.
The first step to tracking these possible deductions is to know what they are. After that, it’s a question of accurate categorization and recordkeeping.
You will want to refer to this IRS publication for more details on what the official IRS expenses that you can deduct are, and how to go about it. For the sake of convenience and clarity, we’ve also compiled a basic list here.
35 Business Expense Categories the IRS Says You Can Deduct
You’ll need to back up each of these expenses with documentary proof, so save all your receipts, invoices, and planning documents together!
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Wages for employees, including family members who are on the payroll.
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Education expenses for employees – If you pay for employee school books, tuition, and other educational materials, you can deduct it.
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Other benefits for employees – If your employee benefits include providing health plans and accident coverage, adoption services, dependent care assistance, life insurance, and cafeteria plans, those benefits are deductible.
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Lease and rent payments for both workspaces and vehicles are deductible when rented or leased, by not when you own them.
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Taxes you pay on leased business property – Not only the lease payments but taxes on property you lease are deductible, too.
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Interest the business pays on debts it incurs in the normal course of business
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Payroll tax – Social Security, Medicare, and unemployment tax payments
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Excise taxes on alcohol, tobacco, or fuel for your business
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Personal property taxes, referring to property the business owns that can be removed from the business without causing damage
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Insurance premiums for disasters, liability, bad debt, malpractice, worker’s comp, vehicles, and life insurance
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Health insurance for self-employed individuals and their dependents, including dental, medical, and some kinds of long-term care
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Up to $5,000 each of startup and operational costs. If there’s more, you can amortize it over 15 years.
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Bad debts you can’t collect from customers are deductible expenses
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Employee travel, entertainment, and meals for business purposes
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Marketing and advertising costs
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Business expenses for the use of a personal vehicle, distinct from personal use
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Charitable contributions, up to 50% of gross income, as long as you provide proper documentation
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Membership fees and club dues – Chamber of Commerce and other trade or professional associations
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Purchasing a franchise, or a trademark or trade name
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Interview expenses, including transportation and lodging for candidates, as well as 50% of meal expenses
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Legal and professional fees
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Fees for tax preparation services
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Permits and licenses
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Fines and penalties relating to late or incomplete contractual work
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Repairs to business facilities, though larger repairs that boost real estate value are subject to depreciation
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Subscriptions to trade journals and business-related magazines, not personal subscriptions
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Materials and supplies, including writing and printing materials, cleaning supplies, and manuals and books
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Utilities for heating and lighting the workspace
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Commercial telephone connections (does not apply to the first home line installed for a home office, but does to all subsequent lines)
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Depreciable assets like furniture, machinery, and equipment
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Payments to independent 1099 contractors
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Home office expenses as a percentage of the space your office occupies in the home
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$25 from every gift purchased for clients
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Continuing education costs
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Contributions to 401(k) plans
SyncLedgers Helps You Organize Your IRS Expenses
When you have to categorize all of these official IRS expenses to deduct as much as possible, it can involve wading through a lot of paperwork. One of the services we provide, though is specifically to help get all of these documents in order under proper categorization. We make it easy for the CPA of your choice to fill out and file the necessary return forms. Contact us today to get started!
