BUSINESS OWNERS PAY CLOSE ATTENTION TO THE FOLLOWING KEY TWENTY-SEVEN (27) WORDS DESCRIBING WHAT YOU CAN DEDUCT FOR YOUR BUSINESS AND EMPLOYEE BUSINESS EXPENSES:
The 27 words are found at the start of the Internal Revenue Code Section 162. Trade or business expenses.
(2) In general
“There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business…..”
Note: The key words are: “Ordinary and Necessary”
An ordinary expense is one that is common and accepted in the taxpayer’s field of business, trade, or profession.
A necessary expense is one that is helpful and appropriate to the taxpayer’s business.
However expenses are not deductible to the extent they are lavish or extravagant.
Remember this: Everything you do, everywhere you go, and everyone you meet can be related to your business.
