| When going through the great task of doing taxes for | | | | deducted if it is an ordinary and necessary expense of |
| a business, you can easily get trained to a tax | | | | the business. How is that for being vague? Regardless, |
| philosophy. Specifically, you will always start asking if | | | | you can see there is definitely some wiggle room in |
| something is deductible. | | | | the phrase. Still, the IRS defines the statement |
| The IRS is an evil, thieving devil hell bent on stealing | | | | differently than most people would. |
| every last penny you've made during the year. As the | | | | In the view of the IRS, an "ordinary" expense is one |
| prince in shining armor, your primary weapon to beat | | | | that is found with most business in your industry. It is |
| back the beast is the tax deduction. Hah! And you | | | | not expenses found in business as a whole, just your |
| thought tax was a boring subject. Okay, it is, but at | | | | niche. As a result, a bakery probably cannot delete |
| least I tried. | | | | international travel flight costs whereas a travel agent |
| So, is something deductible or isn't it? As you probably | | | | probably can. |
| know by now, the answer is "it depends", a common | | | | A "necessary" expense is one that is...well, necessary |
| refrain when dealing with taxes. That being said, you | | | | to maintain or grow your business. Attending a |
| can go a long way to figuring out the answer by | | | | conference on the latest advancements in your |
| understanding what a business tax deduction is in the | | | | industry is a necessary expense. Attending a club with |
| eyes of the beast known as the Internal Revenue | | | | scantily clad women while at the conference is |
| Service. | | | | generally not. Exceptions, of course, are probably |
| Let's start with the basics. A tax deduction is simply an | | | | made for players of professional sports, but there you |
| amount you can deduct from your total business | | | | are. |
| revenues. The idea is to claim as many legal | | | | On top of these two requirements, we have a catch |
| deductions as possible. Why? Well, the more you | | | | all the IRS can use to smack you around if it thinks you |
| deduct, the lower your ultimate net profit will be. The | | | | are going too far with the deductions. What is it? The |
| amount you end up paying the IRS is based on your | | | | lavish rule. A deduction that is otherwise ordinary and |
| net profit. Given this fact, you should be very | | | | necessary can be capped or voided if the deduction |
| interested in deductions. | | | | amount is too lavish. Basically, this means you are |
| Business tax deductions are a mysterious part of the | | | | deducting something excessive compared to your |
| tax code. To the surprise of many, they are not | | | | business. The IRS will not bat an eye at Microsoft |
| actually written into the code for the most part. This is | | | | claiming a ten million dollar deduction for marketing. It |
| the primary reason why any tax advice you receive is | | | | will, however, blink a few times if John's Pumpkin Pie |
| hedged with a lot of CYA comments. So, if it isn't in | | | | Patch tries to claim the same deduction. |
| the code, how do you know something can be | | | | Figuring out tax deductions for your small business is |
| deducted? It all has to do with a very vague section of | | | | not that taxing, pun intended. There are specific rules, |
| the code. | | | | but you should start with the question of whether the |
| In the view of the IRS, a business expense may be | | | | expense is ordinary and necessary. |