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Deductible Business Expenses

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Self-employed entrepreneurs incur many common business expenses that are fully deductible against their business income. Find out which business expenses are deductible, and which are partly deductible, for federal tax purposes.

Fully Deductible Business Expenses

Any expense which is ordinary and necessary for your trade or business is deductible under Section 162 of the Internal Revenue Code. Not all expenses, however, are fully deductible.

Here's the most common business expenses that are fully deductible against your business income:

  • Accounting fees
  • Advertising
  • Bank charges
  • Commissions and sales expenses
  • Consultation expenses
  • Continuing professional education
  • Contract labor
  • Credit and collection fees
  • Delivery charges
  • Dues and subscriptions
  • Employee benefit programs
  • Equipment rentals
  • Factory expenses
  • Insurance
  • Interest paid
  • Internet subscriptions, domain names, and hosting
  • Laundry
  • Legal fees
  • Licenses
  • Maintenance and repairs
  • Office expenses and supplies
  • Pension and profit-sharing plans
  • Postage
  • Print and copy
  • Professional development and training
  • Professional fees
  • Promotion
  • Rent
  • Salaries, wages, and other compensation
  • Security
  • Small tools and equipment
  • Software
  • Supplies
  • Taxes
  • Telephone
  • Trade discounts
  • Travel
  • Utilities
For more information, see Publication 535, Business Expenses.

Partial Deductible Business Expenses

Not all expenses are fully deductible. Some expenses are only partially deductible:
  • Gifts: are deductible up to $25 per person. Gift items that cost $4 or less are fully deductible.
  • Automobile and transportation expenses: must be split between personal use (non-deductible) and business use (deductible).
  • Home office: must be split between personal use (non-deductible) and business use (deductible).
  • Meals and entertainment: only 50% is deductible.
For more information on partially deductible expenses, see Publication 463, Travel, Entertainment, Gift, and Car Expenses.
For the home office deduction, see Publication 587, Business Use of Your Home.

Nondeductible Expenses

Some business expenses, even though they may be directly related to your trade or profession, are never tax-deductible:
  • Bribes and kickbacks
  • Contributions to political parties or candidates
  • Dues and membership fees for social clubs
  • Lobbying expenses
  • Penalties and fines
For more information, see chapter 11 of Publication 535.
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