Common Business Deductions
Whether you are an established company with multiple offices or working out of your home, significant business deductions exist for your business. Following is a listing of deductions that are common to most businesses regardless of the specific service or products being supplied.
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Commong Business Deductions
- Office expenses
- Rent or lease payments
- Advertising
- Costs of goods sold
- Depreciation
- Insurance costs
- Utilities
- Wages of employees
- Employee benefits
- Retirement plans
- Payments to independent contractors [file form 1099]
- Accounting and professional services
- Communication expenses
- Commissions
- Travel expenses
- Vehicle expenses
- Business–related Meals and Entertainment
- Uncollected receivables
- Bank fees on bank accounts
- Interest payments
While the above list should provide you with a solid means for lowering your taxable revenues, certain expenses cannot be deducted. Following is a list of common expenses that do not help you bottom line from a tax perspective.
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Expenses That Cannot Be Deducted
- Personal expenses
- Life insurance in most cases
- Partnership organization expenses
- Hobby expenses
- Commuting to work and home expenses
- Gym dues
- Contributions to Roth IRA
- Examination fees for professionals
- Fines and penalties related to violations of the law
- Gifts to employees or business contacts exceeding $25
- Traffic tickets
- Parking tickets
- Political contributions
- Fees paid for lobbying
- Expenses paid for lobbying
- Tax penalties and fines
- Federal income tax
In Closing
Please keep in mind that the applicability of particular expenses to your business efforts is highly dependent upon exactly what you are doing. For instance, a business can deduct 100% of utilities for offices located in a commercial building. On the other hand, a business cannot deduct 100% of utilities if it is run out of the home, as a certain percentage of the utilities are applicable to personal use.