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What type of expenses are deductible for my business?

My answer is “ALL OF THEM, as long as they are necessary, ordinary, reasonable, documented, and legal; they may be deductible…”  And what does that mean? here:
  • Ordinary: means it is commonly accepted in the industry and seen often with other businesses in the same trade
  • Necessary: means the expense was required in order to generate the business income or it was incurred as a consequence of the income producing activities. But it does not need to be indispensable in order to be deductible
  • Reasonable: this is very subjective, but in essence it means it is not lavish or extravagant
  • Documented: means that the taxpayer has the burden of proof to prove the expense existed, that the amount reported is accurate, and it has a true business purpose (necessary)
  • Legal: the expenditure cannot break any laws, be considered a bribe, or made in connection to an illegal activity / or activity in which the business does not gave the legal capacity to perform

I recommend you look at my article on Top 10 Business Deductions often Misunderstood

Also, there is a 80+ list of expenses for multiple businesses

 

Good IRS Article for reference:
https://www.irs.gov/businesses/small-businesses-self-employed/deducting-business-expenses

 

-Hector Garcia, CPA
If you got tax questions, email me: hector@garciacpa.com

Hector Garcia

Hector Garcia

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