![]() ![]() Not capitalizable – Certain items such as a building or equipment that is used in the business activity may need to be capitalized.(We will discuss paid or incurred in more detail later.) Paid or incurred during the year – Since taxes are calculated on a yearly basis, the expenses must have been paid for, or the obligation to pay for them occurred in the year deducted.If these expenses are commonly used and accepted as being used in the type of business activity, then they are said to be necessary. Ordinary and necessary – The expenses that are helpful in furthering the business and appropriate for the type of business being conducted will generally be considered ordinary.So, what do you mean by which business expenses, you may ask? Well, are we referring to “employee business expenses” or “trade or business expenses.” For this question, we will focus on the expenses of a qualified trade or business.įor a trade or business, a taxpayer is generally allowed to deduct business expenses that meet the following conditions: Understanding which business expenses are referenced can mean all the difference to the right answer. The answer is not simple because the question is not simple in terms of what the tax code allows. Instead, the answer is likely to be “Yes, No, Maybe So,or Not Now.” ![]() ![]() As with any other tax question, the answer is generally not going to be as easy as “Yes” or “No” when it comes to the deductibility of business expenses. ![]()
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