Understanding what qualifies as a deductible expense is vital for small business owners. Deductible expenses reduce your taxable income, which ultimately decreases the amount of tax owed. In general, expenses that are “wholly and exclusively” incurred for business purposes are deductible. These might include office supplies, rent, utilities, and travel expenses directly tied to client meetings or business operations.
Some expenses, like meals and entertainment, can be tricky. While meals with clients might be partially deductible, personal expenses are not. Similarly, the cost of uniforms or protective clothing is typically deductible, while everyday clothing is not. Mershaw Accounting can help you distinguish between these expenses and ensure you make the most of your deductions.
It’s important to keep detailed records, especially for mixed-use expenses like a home office. For example, if you use a portion of your home as an office, a percentage of household expenses, like electricity or internet, may be deductible. Our team at Mershaw Accounting can help you calculate this accurately to ensure compliance and maximum tax relief.
By tracking deductible expenses throughout the year, you can better manage cash flow and avoid unexpected tax bills. If you need assistance with expense tracking or want to learn more about what you can claim, Mershaw Accounting is here to support your financial goals with customized advice and support.
Disclaimer: This article is for general informational purposes. Mershaw Accounting takes no responsibility unless formally engaged.