Tax Planning
Kenny Adams
Don't Overlook These 18 Business Expense Deductions
The tax code allows you to deduct all the ordinary and necessary expenses paid or incurred in the normal course of operating a business. But which expenses are ordinary and necessary? You may be surprised to learn that some business expenses you might consider to be unusual or out-of-the-ordinary are deductible if certain conditions are met. In fact, the list of deductible business expenses is quite extensive.Keeping that in mind, here is a brief checklist of 18 business expenses that are frequently overlooked at tax return time. For your convenience, these expenses have been arranged in alphabetical order.
- Alarm service for business items in your home office
- Bad business debts that are totally worthless
- Beverage and snack services
- Briefcases
- Business calls made from a home phone
- Business expenses charged on personal credit cards
- Car washes if the car is used for business purposes
- Entertaining clients at home
- Fees for business credit cards
- Holiday parties for your staff
- Internet service provider fees
- Luggage used exclusively for business travel
- Pagers and beeper services
- Passports for business use
- Service charges on business bank accounts
- Taxi fares while away on business
- Tips to hotel employees during business trips
- Works of art for the office.
Of course, there are other limitations which may restrict the deductions claimed on your return. For example, you generally may deduct only 50% of your qualified business entertainment and meal expenses incurred during the year. There are, however, certain exceptions to this rule, including recreational expenses where the entire workforce is invited, such as a company picnic or holiday party.
In addition, unreimbursed employee business expenses must be deducted as miscellaneous itemized expenses on your individual tax return. Your total miscellaneous expenses for the year are deductible only to the extent they exceed 2% of your adjusted gross income (AGI). For example, if your AGI for 2005 is $100,000 and you incur $2,500 of miscellaneous expenses, you may deduct only $500.
