I have included the link to the IRS Small-businesses-self-employed site for you pleasure in reading. For a shorter version keep reading this post that will help summary some of the items allowed or not allowed for business deductions should you get audited. I know I said the bad word and for years I never had to deal with “those people” but then I did. It took tons of time looking into backup for deductions. Most were accepted but some we had to fight for and some it was just worth letting them pass to get rid of the man. The nice thing is if you if you know ahead of time what is or is not allowed it makes it easy to fight for or against.
If this is too much for you contact me and I can help you in the coming year to make sure that your expenses are covered in the new 2018 year. firstname.lastname@example.org
What Can I Deduct?
To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business.
Cost of Goods Sold
If your business manufactures products or purchases them for resale, you generally must value inventory at the beginning and end of each tax year to determine your cost of goods sold. Some of your expenses may be included in figuring the cost of goods sold. The cost of goods sold is deducted from your gross receipts to figure your gross profit for the year. If you include an expense in the cost of goods sold, you cannot deduct it again as a business expense.
The following are types of expenses that go into figuring the cost of goods sold.
The cost of products or raw materials, including freight
Direct labor costs (including contributions to pensions or annuity plans) for workers who produce the products
Indirect costs include rent, interest, taxes, storage, purchasing, processing, repackaging, handling, and administrative costs.
You must capitalize, rather than deduct, some costs. These costs are a part of your investment in your business and are called capital expenses. Capital expenses are considered assets in your business. In general, there are three types of costs you capitalize.
Business start-up costs (See the note below)
ImprovementsPersonal versus Business Expenses
Generally, you cannot deduct personal, living, or family expenses. However, if you have an expense for something that is used partly for business and partly for personal purposes, divide the total cost between the business and personal parts. You can deduct the business part.
Business Use of Your Home
If you use part of your home for business, you may be able to deduct expenses for the business use of your home. These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation.
Business Use of Your Car
If you use your car in your business, you can deduct car expenses. If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage.
Other Types of Business Expenses
Employees’ Pay – You can generally deduct the pay you give your employees for the services they perform for your business.
Retirement Plans – Retirement plans are savings plans that offer you tax advantages to set aside money for your own, and your employees’ retirement.
Rent Expense – Rent is any amount you pay for the use of property you do not own. In general, you can deduct rent as an expense only if the rent is for property you use in your trade or business. If you have or will receive equity in or title to the property, the rent is not deductible.
Interest – Business interest expense is an amount charged for the use of money you borrowed for business activities.
Taxes – You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses.
Insurance – Generally, you can deduct the ordinary and necessary cost of insurance as a business expense, if it is for your trade, business, or profession.
This list is not all inclusive of the types of business expenses that you can deduct. For additional information, refer to Publication 535, Business Expenses.