Business Expenses - What Can I Deduct?

I get this question all the time. The IRS doesn't provide a list of 'allowable deductions' for businesses. To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.

As you are reviewing your business expenses for 2011, ask yourself these two questions:

1. Would other business in my industry also have this type of expense?
2. Is this expense necessary for my business to operate?

If you can answer 'yes' to both questions, then it's probably a valid business deduction.