PrintTypically, all "ordinary and necessary" business expenses can be deducted from your business income when filing your business tax return. Such deductions may include business travel, office and/or computer equipment, attorney and accounting fees, delivery costs, utilities, and rent. These are items that are necessary to properly conduct your business. Mileage accrued for business-related travel can also be deducted at the current rate of $0.445 per mile.
Keep a careful record of your expenses, and have backup material on hand for documentation whenever possible. If you have incurred expenses that are both business and personal in nature, such as a trip that was for both business and personal reasons, you can deduct a portion of those expenses. Use discretion when determining what portion of the total expense was business-related. Make sure to document all such expenses.
The steady rise in home-based businesses has created some gray areas regarding business deductions. As is generally the case, you need to be able to justify each deduction in the event a tax auditor should question it. If you conduct business from a home-based office, for example, you can claim a deduction for the portion of your home that's being used for business purposes. Accordingly, you can also claim a percentage of your utilities, phone bill, and other related costs such as Internet service used for business purposes. Save your bills, and show the percentage you used as a business expense.
For all deductions you'll want to maintain a paper trail including receipts listing the date, name of the person or business receiving the payment, the total amount paid, and the category of business expense.
