Business expenses are deductible if they are ordinary and necessary for carrying on your trade or business. The IRS defines "ordinary" as common and accepted in your industry, and "necessary" as helpful and appropriate for your business, even if not indispensable. Deductible expenses must be directly related to your business operations and not for personal use.
Common Deductible Business Expenses
- Advertising: Marketing, promotions, website, online ads
- Car & Truck Expenses: Business use of a vehicle (mileage or actual costs)
- Commissions & Fees: Payments to agents or salespeople
- Contract Labor: Payments to independent contractors (Form 1099-NEC may apply)
- Depreciation & Section 179: Cost of business assets over time or immediate expensing
- Employee Benefits: Health insurance, fringe benefits (employees only)
- Insurance: Business liability, property, workers’ compensation
- Interest: Business loans, credit cards, mortgages (business portion)
- Legal & Professional Fees: Attorneys, accountants, consultants
- Office Expenses: Supplies, postage, small office items
- Rent or Lease: Office space, equipment, vehicles
- Repairs & Maintenance: Fixes that don’t improve or extend asset life
- Supplies: Items used and consumed during the year
- Taxes & Licenses: Business taxes, permits, regulatory fees
- Travel: Overnight business travel expenses
- Meals: Generally 50% of qualifying business meals
- Utilities: Electricity, internet, business phone
- Wages: Employee salaries (not owner pay)
- Other Expenses: Software, subscriptions, bank fees, education, etc.
Important Restrictions
- Entertainment Expenses: Not deductible on Schedule C. Meals must be separately stated from entertainment costs.
- Business Interest Limitation: If you are not a small business taxpayer, you may need to file Form 8990 to determine the limit on deductible business interest expenses.
- Local Telephone Service (Line 25): You can deduct additional costs beyond the base rate of your first home phone line if used for business. The base rate itself is not deductible.
Source:
Schedule C Instructions (2025)
Disclaimer: Always verify details with current IRS forms, instructions, and publications. For complex situations, consult a CPA or tax attorney.