The post Understanding Guaranteed Payments: Impact On Business And Personal Taxes first appeared on Reinspired Books, LLC.

The end of the year is approaching. What does this mean for business owners? It’s time to start getting those books ready for tax time! As a business owner, do you know the types of expenses you can deduct for your company?

Every industry is different. Every business in each industry is different. What one company can deduct for the year does not mean it’s deductible for a different company. All qualified expenses have one thing in common. According to the IRS, all expenses must be incurred in the pursuit of profits and not for personal reasons. Deductible expenses must be ordinary and necessary, meaning it’s appropriate for the business under normal circumstances.

Here’s a brief list of qualified business expenses:

• Advertising
• Car & Truck Expenses
• Depreciation
• Employee compensation and benefits
• Insurance
• Interest
• Legal Fees
• Office Expenses
• Rent
• Repairs & Maintenance
• Supplies
• Travel
• Utilities

All deductions must be reasonable amounts and be a for-profit activity to qualify.

Non-qualified expenses

Just as are there are allowable expenses, the IRS has guidelines on deductions that are not allowed. These expenses include penalties, fines, and illegal purchases and activities. Businesses selling cannabis, a schedule 1 drug, can only offset their gross income with the cost of the goods sold.

Expenditures not fully deductible during the tax year incurred are instead generally capitalized if the expense has a useful life of over one year.

Here’s a brief list of examples of capitalized expenditures:

• Buildings
• Machinery & Equipment (over specified threshold)
• Similar properties such as trucks and cars
• Leasehold improvements (Direct & Indirect costs)
• Furniture & Fixtures

The post Business Deductions first appeared on Reinspired Books, LLC.