How to Write Off Business Expenses

Save a lot of money by writing off your business expenses properly.

There is a lot of confusion over business expense deductions. Questions on what qualifies as a business expense, what is deductible and how to deduct them when filing taxes are common questions. The IRS has published a manual, Publication 535, which explains what business expenses are eligible for tax deductions as well as the specifications for each expense category. The form called Schedule C is specifically for business tax deductions, though which Schedule C should be used is dependent upon your business' filing status as a sole proprietor, Limited Liability Corporation (LLC), corporation or other designation.

Things You'll Need

• IRS Publication 535
• All receipts of business expenses
• Schedule C of the appropriate IRS form
• Tax software (optional)

Instructions

1. Gather all the receipts saved for every business expense.

2. Sort the receipts according to the "Expenses" categories listed on the Schedule C.

3. Once sorted, total each category and enter the total into the assigned line on Schedule C. Then total all the "Expenses" category lines and enter it on the "Total expenses" line.

4. Complete the rest of the appropriate forms for your tax situation.

5. Mail in or e-file your taxes.

6. File and store a copy of your tax forms along with all your receipts for your records and in case of an audit.

Tips & Warnings

• Keep good records and only write-off business expenses that you have a receipt for as proof.

References

• Department of the Treasury, Internal Revenue Service: Publication 535
• Bloomberg BusinessWeek: Don't Write Off That Tax Write-Off
• Department of the Treasury, Internal Revenue Service: Schedule C (Form 1040) Profit or Loss from Business (Sole Proprietorship)

Resources

• H&R Block at Home
• Intuit's TurboTax