Are your business expenses ordinary and necessary? If so, they may be deductible.
You can deduct business expenses on your income tax return. These are the current operating cost of running your business. To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business.
For example, the purchase of a television for use in a sports bar is both ordinary and necessary. On the other hand, the purchase of a television for use in a retail store may not qualify as it is neither ordinary nor necessary.
If you use your car or truck in your business, you can deduct the cost of operating and maintain it. You generally can deduct either your actual expense or the standard mileage rate – 56.5 cents per mile in 2013 – for business miles driven.
Actual Expenses are the cost of the following:
- Garage rent
- Lease payments
- Maintenance of the vehicle
- Parking fees
If you use the vehicle for both business and personal purposes, you must divide the expenses between business and personal use. You can divide the expense based on the miles driven for each purpose. A word of caution: there are specific requirements for maintaining documentation for business verses personal use of your vehicle.
The IRS also has a full explanation of business expenses.