What Counts as a Deductible Expense (And What Doesn’t)
Start with the IRS lens
A business expense is deductible if it’s both ordinary (common in your industry) and necessary (helpful and appropriate for your business).
Common deductible categories
Software & subscriptions (accounting, CRM, design tools)
Supplies & small equipment under your capitalization threshold
Contract labor (with a W-9 on file)
Business travel (transportation, lodging) and 50% of business meals with a clear business purpose
Home office (exclusive & regular use) and the business-use % of internet/phone
Vehicle costs (mileage or actual—pick one method for the year)
Often not deductible (or limited)
Personal clothing usable outside of work
Commuting from home to a regular workplace
Fines and penalties
Client gifts above the small per-recipient limit
Entertainment (most entertainment remains non-deductible)
Tighten up your records
Capture: date, amount, vendor, business purpose, who (for meals). Snap the receipt into your accounting app or cloud folder the day it happens.
Quick decision filter
Ask:
Is it ordinary in my industry?
Is it necessary for this business?
Would I feel comfortable explaining the business purpose in an audit?
When in doubt…
Ask me. A 15-minute gut-check can save hours later—and we can refine your Chart of Accounts so expenses land in the right buckets automatically.
Need help? Email sara@dunhambookkeepingservices.com or book time at calendly.com/sara-dunhambookkeepingservices.
