Business expenses you can deduct - and the receipts that prove them
Ordinary and necessary. That is the test the IRS applies to business expenses: is it common in your line of work, and is it helpful for running the business? Most real costs pass. The problem is rarely whether something is deductible - it is whether you can prove it.
Costs most small businesses deduct
- Formation and state fees, registered agent service and annual report fees.
- Software and subscriptions you use for the business.
- Equipment and tools. Larger purchases may be written off at once or over several years; ask your accountant which suits you.
- Advertising, your website, hosting and your domain.
- Professional fees: accounting, legal, bookkeeping.
- Business insurance.
- Supplies and materials.
- A share of your phone and internet when you also use them personally.
The ones that need more care
**Vehicles.** You can use a standard mileage rate or actual costs, but either way you need a record of business trips: date, where, why, and miles.
**Home office.** If part of your home is used regularly and only for the business, a home office deduction may apply. "Only" is the word that trips people up - the dining table you also eat at does not count.
**Meals.** Business meals are generally only partly deductible, and you should note who you met and what it was about.
**Travel.** Business travel is deductible; a holiday with one meeting attached usually is not.
What a receipt needs to show
Who you paid, how much, the date, and what it was for. Card statements show the first three but not the last, which is why a photo of the receipt or a one-line note matters.
Records without the shoebox
Keep one bank account and one card for the business. Every expense on them is already dated and amounted. Snap receipts as you go and note the purpose in a word or two. At month end, reconcile: every line on the statement should have a matching record.
Mixing is the real risk
Paying business costs from a personal account, or personal costs from the business, muddies both your deductions and the protection an LLC gives you. Keeping them apart is the single habit that makes tax time - and any question from the IRS - short and boring.