What business expenses are generally tax deductible?
Do you run an independent business or as a freelancer? The majority of business expenses you make are usually tax deductible. That is, these can be subtracted from the total of your income when determining what taxes you need to pay. Knowing which expenses are commonly tax deductible for a business can help you save money and reduce your tax liability.
Tax-deductible business expenses are those legitimate costs incurred in order to operate and manage a business. Deductible expenses need to be ordinary and necessary, and must be directly related to the business. This means that you can't claim deductions for any activities that are not related to your specific business operations. In all cases, it's best to consult with a tax expert to make sure you understand the rules.
Common examples of expenses that are usually tax deductible for a business of any size and form include, but are not limited to, the following:
- Accounting and legal fees
- Advertising and marketing
- Business startup costs
- Commissions
- Computer software and hardware
- Depreciation or amortization
- Employee salaries and benefits
- Insurance premiums
- Interest payments
- Maintenance and repair
- Rent for business property
- Travel expenses
You can also deduct the cost of goods you resell, as long as the expense can be separated from your other business expenses. It’s important to plan in advance and save all the receipts or invoices for the costs of the products you purchased for reselling. That way, you can clearly prove the relation between the expenses and the products you sold.
Ultimately, the expenses that are eligible for deduction can vary depending on the type of business you operate. To make sure you’re taking full advantage of tax deductions, it's important to consult with your tax advisor or accountant.Tax deductiblebusiness expenses can be a great way to reduce your tax liability for the year.