Business Expenses

Business expenses are the costs of carrying on a trade or business. These expenses are deductible if the activity is operated to make a profit. However, you do not need to actually make a profit as long as you have a profit motive.

To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary.

TIP: Request that your tax preparer shows clearly on his bill the amount paid for the preparation of business-related forms. That way, the amount deducted from business income for tax preparation fees is easily documented if that becomes necessary.