Tax Truths: Can I Deduct This?

Social media gives us access to an almost infinite variety of content which, for better or worse, includes tax advice. Some advice is legitimate and comes from professionals or people who have really done their research. However, much of it comes from well-meaning individuals who don’t realize what they’re saying is incorrect. 

Tax is hard to navigate because it’s often vague and filled with caveats. Our new blog series, Tax Truths, dives into questions we see that commonly receive misleading answers. We’ll kick things off with a popular one for business owners: “Can I deduct this?”. 

It’s a myth that you can deduct whatever you want when you own a business. Expenses must be both ordinary and necessary to your business for you to write them off but figuring out what qualifies can be a headache. There’s no all-inclusive list, and it varies between industries. 

The IRS defines ordinary as expenses that are “common and accepted” for a specific business. The IRS also states that necessary expenses don’t need to be essential as long as they’re “helpful and appropriate.” There are expenses generally deductible by any kind of business including rent for office space, payroll, advertising, and more. 

Other expenses will depend entirely on your industry. A professional musician, for example, could deduct the cost of a new instrument because it’s clear the purpose is to try and generate revenue. However, an instrument wouldn’t be deductible for most business owners. If you’re ever uncertain about an expense, consider whether you’d be able to justify it as legitimate for your business if your return ever came under IRS scrutiny. 

One final note is that personal expenses are never deductible by your business, that much is very clear. Mixed business and personal use expenses, like your cell phone bill, may be deductible based on the percentage of use for each purpose.