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