FAQ: What Counts as a Legitimate Business Deduction?
- Miranda Kishel
- Jul 25
- 2 min read
What Counts as a Legitimate Business Deduction?
A legitimate business deduction is any ordinary and necessary expense that helps you operate your business. According to the IRS, an expense must be both ordinary (common in your industry) and necessary (helpful and appropriate for your business) to qualify.
For example:
Office supplies and software
Advertising and marketing costs
Professional services (legal, accounting, consulting)
Business-related travel, meals, and mileage
Employee wages, benefits, and payroll taxes
If it directly supports the generation of income or the functioning of your business, it’s likely deductible under current business deduction rules.
Why This Question Matters
Many small business owners miss out on legal deductions simply because they’re unsure what's allowed. Others get overly aggressive and risk audits by writing off personal expenses as business costs. Knowing where the line is can make a major difference in your tax bill and audit risk.
Related Questions Business Owners Often Ask
Q: Can I deduct home office expenses? Yes, but only if you use the space exclusively and regularly for business. You can choose the simplified or actual expense method.
Q: Are meals and entertainment deductible? Business meals are 50% deductible if they’re with a client or for a legitimate business purpose. Entertainment is generally not deductible.
Q: What about clothing or personal items? Only specialized uniforms or protective gear qualify. Regular clothing, even if worn at work, is considered personal.
Q: Can I deduct my car or mileage? If used for business, yes. You can use the standard mileage rate or actual expenses method—just keep detailed logs.
Tips to Maximize Legitimate Business Deductions
Separate personal and business finances with a dedicated business bank account and credit card.
Track everything using apps or accounting software. Keep receipts and categorize expenses.
Document the business purpose for items like meals, travel, or subscriptions.
Hire a tax advisor to review your deductions and catch anything you might miss—or shouldn’t be claiming.
Use year-round tax planning to spot new deductions and avoid surprises.
For a deeper review of what you can and can’t deduct—and how to structure your finances for optimal tax savings—check out our tax advising services. We’ll help you find opportunities, stay compliant, and keep more of what you earn.
