What Business Expenses Are Truly Deductible?
Audio version available here (2 min. 20 sec.)
As we approach the upcoming tax season in 2025, many business owners have asked us what business expenses they can deduct to reduce their taxes. There’s no one clear answer, as there are dozens of deductible expenses you may be able to take advantage of. But there is a lot of misinformation out there if you try looking for deductions on your own, so let us give you the right guidance.
Before we get into all the possible business expenses you could deduct, we must point out that trying to deduct these expenses without substantiation is a bad idea. The IRS has a much higher budget now than it did several years ago. With their extra money, the IRS has launched audits against business owners at an unprecedented rate in recent months. If you get chosen for an audit and cannot prove your deductions with detailed receipts and financial statements, you are likely to fail the audit and be handed down a penalty. Documentation is key.
Now, business expenses that you are able to deduct with the right substantiation are:
Salaries and wages, such as compensation for your staff;
Business travel expenses, including meals and lodging;
Rent payments, such as your office rent;
Insurance premiums, including for fire, storm, theft, accident, or other similar losses;
Interest on business loans;
Taxes, including state and local taxes directly attributable to the business;
Depreciation of business property, including buildings, machinery, and equipment;
Repairs and maintenance, as long as they are routine and do not improve the property;
Advertising expenses;
Office expenses like supplies and postage;
Utilities for electricity, water, and gas used in the business;
Employee benefits, including health insurance, life insurance, and retirement plans;
Professional fees paid to accountants, lawyers, etc.;
Education expenses to maintain or improve required skills;
50% of the cost of business meals;
Home office expenses;
Bad debts closely related to the business when they become partly or totally worthless;
Amortization of certain business startup costs and other intangibles; charitable contributions;
Legal fees that are ordinary and necessary expenses to operating the business;
Employee achievement awards, with certain limitations;
Business gifts, up to $25 per recipient per year;
Subscriptions to professional journals and trade publications related to the business;
Software and online services used in the business;
Telephone and internet services used in the business.
While there are a lot of deductions you could implement on your next tax return, keep in mind that they each carry a set of rules and limitations you must follow. To be certain you are deducting these expenses correctly, work with a tax professional. With XQ CPA, it’s easy. Simply give us a call or schedule an intro meeting at the link below. We are here for you.
Expenses Checklist PDF available here.
Phone: 832-295-3353
Online Booking: https://xqcpa-bookme.acuityscheduling.com/schedule.php
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Want to pay less taxes? Read XQ CPA's official tax planning guidebook! How to Grow Your Wealth Through Tax Planning.
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