Clients send me all types of tax related questions. Recently I’ve been receiving questions about what’s deductible through a business.

The IRS says “To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.” This would include basically any expense necessary to operate your business from rent, to magazine subscriptions, to furnishings, even mileage driven for business purposes.

Items that can be deducted through your business but should be categorized differently include capital purchases such as leasehold improvements, equipment, computer hardware, etc. These would be capitalized and then expensed through depreciation. Additionally, if you sold inventory type items these would be categorized as inventory and then expensed when sold through Cost of Goods Sold.