Marketing encompasses the promotion, sales, and distribution of products and services. According to the IRS, tax deductible marketing expenses include various types of traditional advertising (both traditional and online/interactive) as well as meals and entertainment for the purpose of promoting your business to clients.
From television ads to magazine spreads, direct mail postcards to email marketing, customer service call centers to internet advertising, and promotional events and press releases, marketing expenses vary greatly according to industry and can add up quickly, while their effectiveness is often difficult to measure. Because of the potential reward and cost, is important for every business owner to determine the specific marketing expenses necessary to promote her business.
However, there are a few marketing expenses that are absolutely necessary for the success of any business and must be considered when putting together a marketing budget for a big business or a mom and pop store.
Your website is your digital business card, product catalog, customer service representative, sales person, and information center all rolled up in one. Specific website expenses involve the site design, hosting, security, and maintenance, as well as the costs for any e-commerce and email functions necessary for your business. Hire an experienced design firm to custom design your site if your budget allows. Or, if you are trying to keep your web expenses to a minimum, simply consult a web hosting service who can provide you with everything you need-design, maintenance, security, email, and e-commerce functions-to develop a professional and cost effective internet presence.
Business cards may seem a bit "old school" in this digital age, but that doesn’t diminish their usefulness as a marketing tool. Although they are inexpensive, make sure to budget the cost of business cards for everyone in your business- from the receptionist to the salespeople and the executives. Whether you are a rock star, graphic designer, chiropractor, or run a car repair shop, a business card is still the simplest way to remind someone who you are and how to find you.
Printing and Postage
This expense is extremely variable depending on the size of your business and industry. And while the digital age is diminishing the importance of this expense, there is still no way to eliminate it entirely. Determine what is necessary to promote your business-postcards, brochures, catalogs, or simple letterhead and invoices-and over estimate this cost in your budget. Not only does the cost of paper and ink fluctuate, but the cost of postage can change dramatically depending on what you are sending and where it is going.
Meals and Entertainment
Any time you treat a current or potential client to lunch or dinner as a way to promote your business relationship, it is considered a tax deductible marketing expense by the Internal Revenue Service. Entertaining customers as a way to promote your business is also tax deductible so make sure you plan to include this expense in your budget as well. In general, only a portion of these expenses can be deducted from your taxes, so consult your accountant or the IRS website to determine the amount allowable by law.
Staff or Contract Labor
If your business is small you may not have a current need for permanent marketing, promotions, or sales staff. But success brings opportunity and expense, and often a need for an extra set of hands. Keep in mind that additional staffing costs can be considered marketing expenses if they are deemed necessary to promote your business.