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Common Business Deductions
By: Richard A. Chapo, Esq.

Whether you are an established company with multiple offices or working out of your home, significant business deductions exist for your business. Following is a listing of deductions that are common to most businesses regardless of the specific service or products being supplied.

Deductible Expenses

Office expenses
Rent or lease payments
Advertising
Costs of goods sold
Depreciation
Insurance costs
Utilities
Wages of employees
Employee benefits
Retirement plans
Payments to independent contractors [file form 1099]
Accounting and professional services
Communication expenses
Commissions
Travel expenses
Vehicle expenses
Business-related Meals and Entertainment
Uncollected receivables
Bank fees on bank accounts
Interest payments

While the above list should provide you with a solid means for lowering your taxable revenues, certain expenses cannot be deducted. Following is a list of common expenses that do not help you bottom line from a tax perspective.

Expenses That Cannot Be Deducted

Personal expenses
Life insurance in most cases
Partnership organization expenses
Hobby expenses
Commuting to work and home expenses
Gym dues
Contributions to Roth IRA
Examination fees for professionals
Fines and penalties related to violations of the law
Gifts to employees or business contacts exceeding $25
Traffic tickets
Parking tickets
Political contributions
Fees paid for lobbying
Expenses paid for lobbying
Tax penalties and fines
Federal income tax

In Closing

Please keep in mind that the applicability of particular expenses to your business efforts is highly dependent upon exactly what you are doing. For instance, a business can deduct 100% of utilities for offices located in a commercial building. On the other hand, a business cannot deduct 100% of utilities if it is run out of the home, as a certain percentage of the utilities are applicable to personal use. No, the IRS will not accept an argument that you turn off all of the utilities once you stop working at home. The "candle light" argument simply will not pass muster!

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This article is intended to be a general commentary on tax issues. Each taxpayer's situation is unique and it is recommend that you speak with a tax professional regarding your particular situation. If you have additional questions, please contact us.