12 Small Business Expenses (And How to Make the Most of Yours)
Learn about the most common expenses that you can claim for your small business, and what you can and can't count as a tax deductible business expense.
Are you tired of paying business taxes? Ready to go rogue and never pay taxes again?
While the IRS might not take it well if you stop paying taxes (just ask Al Capone), there are ways to ensure you don't overpay on your taxes.
It starts with making sure you're tracking all your eligible expenses. So we made a list of the most common small businesses expenses you might not be tracking. Oh, and we'll also show you how to streamline reporting expenses.
Why tracking small business expenses matters
Most people don't get excited about tracking business expenses for taxes. We get it—organizing receipts and tracking expenses isn't as exciting as, say, skydiving in New Zealand.
But you know what is exciting? Saving money.
Tracking business expenses for taxes accurately can save you thousands. But if you want to throw away your hard-earned money, who are we to stop you?
Staying on top of expenses can also help your business:
• Reduce costs by seeing where your money is going
• Make tax season less painful
• Keep a closer eye on profitability
• Reduce employee frustration (nobody wants another spreadsheet!)
The good news is tracking expenses doesn't have to be a huge headache. Using an expense tracker tool like ClearSpend can streamline the process.
But first, what can you actually write off your small business taxes?
12 common small business expenses (and less obvious ones you might be missing out on)
Please note, we are not tax professionals, nor are we your tax professionals.
What we do know, however, is small businesses. We've spent the last few years getting to know who small business owners are and what they want. This list is the cumulation of all that research, but you'll want to check the laws specific to your state or situation before filing.
Now that all the legal stuff is out of the way, here are expenses your small business might be missing out on
1. Advertising and marketing
Advertising and marketing costs are generally tax-deductible. This includes obvious expenses, like the cost to run a radio ad, PPC ad costs, or the cost to put a billboard in Times Square, if that's your thing.
Other advertising and marketing costs might include:
• Paying to have a decal installed on your car to promote your business (driving costs won't be covered, however.)
• Building a new website and the costs to maintain it.
• Business cards
• Temporary signs
• Marketing platform costs, like MailChimp, Hootsuite, or LinkedIn Pro
• Digital marketing services, including SEO or developing a content marketing strategy
• Cost of email marketing, including development, writing, and testing
• Sales enablement software or consulting services
Essentially, any money you spend to promote or grow your business is considered advertising and these costs are deductible. There are a few restrictions, however. Inviting a client to a baseball game because you both just really love baseball is not a business expense, unfortunately.
2. Business insurance
Business insurance is the best way to cover your ass(ets), but the cost can add up. Luckily, most types of business insurance can earn you a sweet tax write off.
This includes insurance policies like:
• Commercial property insurance
• General liability insurance
• Cyber liability insurance
• Workers comp
• Commercial auto insurance
• Employment practices liability insurance
Most insurance policies taken out to protect your business or business assets are considered an expense and can be written off on your taxes. Personal liability or life insurance policies generally aren't tax deductible, but if you purchase coverage for your employees it might be — we'll cover that in the section on health insurance.
3. Banking fees & financial platforms
According to the IRS, business expenses must be both "ordinary and necessary." While that definitely leaves a lot open to interpretation, banking fees and interest usually fall into these categories.
So, what types of banking fees can you write off?
• Checking and savings account maintenance fees
• Overdraft fees — if they occurred in connection to a work purchase
• Merchant or payment processing fees
• Direct deposit fees from international clients
• Interest paid on a business loan
• Business expense tracking tools
• Accounting and invoicing software
TL:DR: Most banking fees incurred due to your business can be written off.
4. Contractor costs
If you hire someone to do something for your business, you can likely write off the costs come tax time. Contractor payments can add up quickly, so this is an expense you don't want to miss. Keep in mind, you'll likely have to send contractors a 1099.
This includes contractors like:
• Business coaches
• Cleaning your business location
• Construction in your business location
• Corporate strategy
• Creating content
• Cyber security or IT
• Design (including web design)
• Paid ads
• Security for your business
• Social media
• Tax preparation
Essentially, if you hire a person to do anything for your business, you can likely write off the costs.
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5. Depreciation of assets
Did you purchase expensive equipment for your business? There's good news and bad news.
The bad news is you generally can't write off the entire cost of a new piece of equipment for your business. (You can thank the Tax Cuts and Jobs Act of 2017 for this.)
However — you can write off the cost over time by claiming depreciation of the value over time. So there are still benefits to claiming purchases like computers, manufacturing equipment, and so forth on your taxes.
There are some nuances to this write off, so talk to a tax professional if you're unsure how it applies to you.
6. Health insurance & other benefits
Most benefits you offer employees are tax-deductible. This includes health insurance costs, retirement contributions, and group-term life insurance policies. You can also write off the cost to provide non-monetary fringe benefits such as a company car or gym memberships.
7. Office supplies
Tired of buying ink? The good news is the ink for your office can be written off, along with anything else you buy for business including binders, folders, notebooks, pens, printer paper, and shipping costs.
However, the office kegerator or Keurig might not make the cut.
8. Rent/mortgage for a physical location
The cost of commercial space for your business can be written off. That includes the cost to rent an office, store front, storage space, and any other locations used in the normal operation of your business. For ecommerce businesses, this might include a warehouse to store goods.
Pro tip: If you work from a home office, you may be able to write off a portion of those costs, too.
Pretty much any compensation provided to your employees can be written off on your taxes assuming they are "necessary and ordinary." This means paying a cashier at a clothing store $1.5 million might not pass muster.
However, reasonable salaries, wages, commissions, and bonuses are considered small business expenses.
10. Training and education
Costs for training and education are generally considered an expense if they are — you guessed it — necessary and ordinary. So the cost of a programmer learning a new coding language can be written off, but your puppy yoga teaching certification may not. (Unless you own a yoga studio!)
11. Travel expenses
Travel expenses are considered a business expense if you travel specifically for work. Deductible travel expenses include the cost of airfare, bus, or train tickets, taxi or ridesharing costs, baggage costs, lodging, meals, and other miscellaneous fees for things like parking, wifi, or computer rental.
Less common small business expenses related to travel include tips to the staff at your hotel, dry cleaning, and business call costs.
12. Vehicle mileage
If you drive for work, good news — you can write off the cost of driving your car using either the standard mileage rate (around .56 per mile) or you can determine the actual cost of operating your car for the portion of the time you use it for business. If the car is only for business, you may get a larger write-off by tracking actual expenses.
Note: parking fees and tolls are separate business expense deductions, according to the IRS.
Say goodbye to your expense report with ClearSpend
Tired of clunky expense reports and boxes of paper receipts? With ClearSpend, you can ditch the spreadsheets and the paper receipts. We make it easy to stay on top of expenses — and we'll even stop Toby from sales from spending $7 a day on mochaccinos.
Did we mention we'll also help eliminate financial waste? Yeah, we do that, too.
Tired of getting nickeled and dimed by companies like Expensify? We get it. That's why we made ClearSpend free.