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What can I write off as a business expense?

SOLVED•by TurboTax•11695•Updated 1 week ago

If you’re self-employed or own a small business, you can deduct eligible business expenses to pay fewer taxes. These expenses must be common for your type of business and also necessary for your operations.

  • Advertising and promotion
  • Phone and internet
  • Business meals (generally, 50% of qualifying food and beverage costs can be deducted)
  • Insurance premiums, including liability coverage, workers' compensation, and business-interruption insurance
  • Health insurance premiums
  • Independent contractor payments
  • Shipping and postage
  • Equipment rental
  • Employee salaries and benefits
  • Taxes and licenses, including payroll taxes, personal property taxes, real estate taxes paid on business property, sales tax, and business licenses
  • Business travel expenses, including travel to and from your destination (not including travel to and from your regular place of work), parking and toll fees, taxi costs, and accommodation
  • Software subscriptions
  • Depreciation 
  • Supplies, utilities, and repairs
  • Rent paid on business property
  • Car and truck expenses
  • Interest on business debt
  • Mortgage interest
  • Bad debts
  • Bank fees/credit card convenience fees
  • Startup costs
  • Moving expenses
  • Membership dues for boards of trade, business leagues, chambers of commerce, civic or public service organizations, professional organizations, real estate boards, and trade associations

You may be able to deduct mortgage interest, real estate taxes, insurance, utilities, maintenance, repairs, and depreciation expenses for the part of your home that’s used for business purposes. To qualify, the business part of your home must be:

  • Used regularly and exclusively for the business, and
  • Your primary place of business

Rather than calculating your actual expenses, you may choose the simplified option of determining the deduction for business use of your home. The standard deduction is $5 per square foot of home used for business, up to a maximum of 300 square feet.

If you have a car designated entirely for business use, you can deduct its full operating cost. If your personal vehicle is used in part for business purposes, however, you’ll need to divide your expenses to deduct only the business usage costs.

There are two options for calculating the business use of your vehicle:

  • Standard mileage rate
  • Actual expense method (eligible expenses include depreciation, lease payments, registration fees, licenses, gas, insurance, repairs, oil, and tires)

Note: Other car expenses for parking fees and tolls attributable to business use are separately deductible, whether you use the standard mileage rate or actual expenses.

It’s important to track your mileage. If you’re audited, you may need to show a log of the miles you drove.

For any expenses split between personal and business use, be sure to deduct only the business portion from the total cost. Always keep records of your expenses in case the IRS asks to see documentation.

Note: If you use an expense to figure out the cost of goods sold, you can't also deduct that expense. Also, certain costs that are part of an investment in your business must be capitalized, rather than deducted. For more information, visit the IRS page on deducting business expenses. 

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