What can be considered as a business expense is anything that would be necessary for the smooth running of a business. These are expenses incurred on behalf of the business. These include airfare, hotel rooms, meals and so on. Business expenses can be categorized into two sections namely direct and indirect expenses. Direct expenses consist of costs incurred in acquiring a definite commodity. Indirect expenses on the other hand include those costs that are related to demand creation.
Indirect expenses can be defined as costs that are related to growth and development. One great example is magazine costs. Magazines tend to be expensive and as such are non-deductible small business expenses. The cost of publishing a magazine is not deducted as a business expense but rather a marketing expense.
On the same note, other business expenses that are not deductible are office space expenses and utility expenses like electricity and telephone bills. Office space expenses include rent, utilities, computer, printer and so on. Other non-deductible business expenses include travel expenses for attending conferences, meetings and so on. It is important to remember that all these expenses must be documented as receipts must always be kept for tax purposes.
Vehicle expenses can also be considered as non-deductible expenses because these are associated with business travel. However, there are certain exceptions to the general rule. For instance, vehicle expenses paid for a vehicle used by the principal for official business purposes can be deductible provided that the principal is able to show that he or she actually used the vehicle.
Education expenses include those education related expenses required by the Internal Revenue Code. There are two exceptions to this general rule. If you are engaged in a business activity as an educational consultant, the educational expenses can be deductible only if your services directly benefit the education of others and if you treat them as a business expense for which you are eligible to be reimbursed. Second, education expenses that are indirectly related to the business activities can be deductible provided that the service is rendered by a person other than the principal.
A few exceptions to this general rule include the costs of copying, pages downloaded from the Internet and expenses made in connection with Internet access. Health-related business expenses such as hospitalization and medical care are deductible unless the health insurance has been excluded from the income tax return or the individual’s health insurance has been subsidized. Transportation costs incurred in getting to the place of business and travel time to and from the place of business are deductible. Personal services such as laundry, hair dressing and similar services are deductible when paid by the employee rather than by the employer.
A few exclusions apply to mileage rates and standard mileage rates. The term “standard mileage rate” refers to a single rate that is used to calculate the actual expenses incurred and does not include intercity and intrastate fares. A deductible and an actual expense can be claimed at the same time under the same tax shelter. Under certain conditions, however, it may be possible to deduct both the deductible and the actual expenses at the same time. Traveling expenses must be deducted from the employee’s gross income and cannot be claimed as a business expense if the travel is not a part of the employee’s job.
Oil changes are deductible business activities. They are depreciated in the normal course of business as determined by the IRS. The deductible oil changes are those required to ensure proper lubrication of the engine of the vehicle. The IRS has established a broad list of qualifying oil changes that may be deducted. Business owners should check with their accountant or tax preparer to determine which of these qualifying oil changes are applicable to their business.