Everyone enjoys the ability to save money. One way business owners are able to maximize their savings is by breaking out their credit card expenses. Keep in mind that in order to deduct a business expense, the expense must be both ordinary and necessary. By definition, an ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade.
When you break out your credit card expenses, you are able to find deductions and partial deductions that may go unseen. Even though you cannot generally deduct personal, living, or family expenses, you may still be able to divide the total cost into business parts and personal parts, and then deduct the business portion. For example, if you borrow money and use 70% of it for business and then remaining 30% for a family vacation, you can deduct 70% of the interest as a business expense.
Deductions are hiding in many different places. The following list provides some of the most common deductions that could be missed:
- Auto expenses (i.e. fuel)
- Continuing Education
- Gifts for clients
- Meals and Entertainment
- Advertising
- Interest payments
- Internet and Phone
- Business Cards/Stationary
- Office Supplies
- Service Charges
- Dues and Subscriptions
- Rent and Utilities
For more accounting articles and helpful financial statement videos, check out our Financial Learning Center.
Resources
International Revenue Service – http://www.irs.gov/