Question

I have a question about how to deduct business expenses. If I deduct business expenses on my tax return what information do I provide and where? How do I know what is considered an acceptable business expense?

Answer

If you’re self-employed you may deduct your business expenses on the same form you use to report your business income. Ex: Schedule C for a sole proprietor

If you’re an employee, you may have deductible unreimbursed business expenses. If so, use Form 2106 to report the expenses. Form 2106 results transfer to your Schedule A.

To know how to deduct business expenses from your tax return, you must understand what is considered a business expense. And it is important to not confuse personal expenses with your business expenses.

A business expense must be considered both necessary to the function of the business and ordinary to the business. To be considered an ordinary business expense it must qualify as something commonly accepted in your industry. A necessary business expense must be considered useful and relevant to your business industry.

To qualify as a business expense, the expense does not have to be considered essential to be viewed as necessary.

 

Related Topics

Related Resources

Home Office Safe Harbor Deduction

Do you qualify for the home office safe harbor deduction? Learn how this deduction could boost your refund and get tax answers at H&R Block.

If the IRS applied my last year’s refund to past tax debt, can I write off the debt offset on this year’s return?

Can you deduct past tax debt or associated penalties? Learn more about this important topic from the tax experts at H&R Block.

Deducting Property Taxes

Learn how to deduct real estate and personal property taxes with the tax experts at H&R Block.

If you are required to use your personal vehicle for work, can you claim gas on taxes or do you just use the standard mi

Can you claim gas and drive time on your taxes? Learn more from the tax experts at H&R Block.