Are Your Business Expenses Tax Deductible

Are Your Business Expenses Tax Deductible? Here's What the IRS Looks For

How do you know if a business expense is tax deductible? The tax code says you can write off “ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.” An ordinary expense is common or customary in your industry. And a necessary expense is one that’s helpful or appropriate in the circumstances. What’s critical is that an expense meets both criteria and is substantiated. The IRS has challenged and courts have denied deductions for various reasons, including because they lack a clear business purpose and because records failed to show a taxpayer was operating a business. Contact us for guidance on substantiating business deductions.