You must keep track of expenses if you’re planning to run a business. It’s also a good idea to have a clear understanding of the tax rules pertaining to your enterprise. To that end, the IRS has a publication devoted to helping businesses of all sizes understand what they can deduct and can’t. Whether you’re just starting out or you’ve been in the game for years, Publication 535 can help you make smarter business decisions.
IRS has a plethora of publications to help you navigate the maze that is the tax code. Among the many titles, Publication 535 serves as a solid primer on what’s what when it comes to business deductions. Among the topics covered are the basics of recordkeeping, what an expense is, and how you can capitalize on it. Using the information in this booklet, you’ll be on your way to financial prosperity and freedom.
What Publication 535 Covers?
While the IRS Publication 535 can’t provide an exhaustive list of possible deductions, it does offer a wealth of information on the most tax-efficient ways to run a small business. You may not be able to write off every expense, but the IRS will appreciate a thoughtfully compiled record of your expenditures.
Similarly, you’ll want to keep a close watch on your business finances to ensure your tax payments aren’t an unexpected surprise. With the influx of startups and new businesses popping up every day, the need for tax advice is at an all-time high. By keeping abreast of the latest in tax-related information, you’ll be a step ahead of the competition and on the right side of the tax trolls. As a result, you’ll be able to keep your hard-earned cash in your pocket.
What Qualifies as a Business Expense?
If you are running a business, you need to know what qualifies as a business expense. Having an understanding of these expenses can help you save money on your taxes. Business expenses can be defined as ordinary and necessary costs associated with running your business. They are tax deductible and help to lower your taxable income. In order to claim them, you need to keep accurate records.
There are several different types of business expenses, such as:
- Ordinary expenses: These expenses are common and usually deducted in the year they are purchased. You would normally buy things such as supplies, materials, and computers. Some examples of these expenses are telephones and office supplies.
- Necessary expenses are necessary to your business’s operation and must be useful. Examples of these expenses include insurance, travel, repairs, and business purchases.
- Capital expenses: These expenses are large and will increase the value of your business over time. Depreciation is the spreading of the deduction over the lifetime of the asset.
The difference between ordinary and necessary business expenses is whether or not the expense is essential to the operations of the business.