If you’re using the cash method of accounting, you cannot deduct that expense for 2019, but it can be deducted in 2020, when you pay the bill. The bill is for $1,750, and will be paid in January 2020.

So, for every dollar that you spend on ordinary and necessary business expenses, which we’ll explain next, you’ll be able to take a tax deduction in the same amount, reducing your tax burden considerably.Ī word of caution: You’ll have to factor in your accounting method when it comes time to deduct expenses.įor instance, in December of 2019, you receive a bill from Atlas Roofing for repairs completed earlier in the month. In fact, any expense that is considered ordinary and necessary for your business is likely a deductible expense. The IRS has defined business expenses as “the cost of carrying on a trade or business,” going on to say that these expenses are usually deductible if the business operates to make a profit.īut what counts as a business expense? A lot more than you may realize. Overview: What counts as a deductible business expense? In this article, we’ll explain what type of expenses are deductible as well as provide you with a list of the most commonly used business expense categories.

Some of the most common expense categories include utilities, travel, salaries and other wages, and rental expense, but there are many more that you should be aware of. Are you wondering what business expenses can be deducted from your taxable income? Here's a list of some of the most common small business expense categories.Įducating yourself about the common small business expense categories will make it much easier to determine what is and isn’t deductible at tax time.

Business software categories