It’s difficult to run a business, let alone a small business.  For most small businesses every dollar saved counts.  It’s important that a small business owner understands that there are expenses that they can write off at tax time (a write off simply being a deduction to your taxable income).

For something to be deductible, according to the IRS, it must be both ordinary and necessary to the business.  They define an ordinary expense as one that is common for the business, and a necessary expense as one that is both helpful and appropriate to the business.  However, there is some leniency when considering an expense to be necessary.

Necessary means that the expense was helpful to a business; the expense does not have to be considered indispensable to the business to be considered necessary.    These expenses should be documented with a receipt of payment. In the case of vehicle mileage, a documented travel log for all miles traveled while on business.

Business Expenses

There are many different types of business expenses, however, the following are the most common expenses that are linked to most any business.  To use your home as a place of business allows you—in most circumstances—to deduct expenses for the business use of it.  These expenses could include the home’s mortgage interest, home owner’s insurance, utilities, and depreciation.

Also, your car, whether it was purchased to be intended for business use or not, if it is being used for business, you can deduct certain expenses from your use of it.  If the car is used for both personal uses as well as business, then you will be able to deduct the mileage of the car while it was in use for business purposes.  Any other business expense such as insurance, retirement, rent or lease payments, interest accrued from the amounts you’ve borrowed on the business and the taxes on the business.

If you are a small business owner, consider hiring an accountant to advise you on your business expenses.  Also, remember to document every expense, because, when it comes time to pay your taxes, each deduction might mean more money in your pocket.

Practical Taxes

Practical Taxes is a full service accounting firm in Billings, Montana. We can help you get the most from your taxes, and make sure that you will get the maximum refund every year. But we don’t just do taxes! We can help with your bookkeeping, payroll, bank reconciliation, budgeting, and more. Give us a call at 406-894-2090 to learn more.