Business expense overview (for tax Time)

Tracking business expenses is important because they ultimately become tax deductions which means saving money (and who doesn't want to save money!). But where's an entrepreneur to start? Here is a quick overview to get you on the right track.

Advertising. Includes any materials you use for marketing (e.g. bridal guide magazines, Facebook ads, and email services like Flodesk or Mail Chimp. Unbranded gifts, such as books, are not considered advertising (they are considered "other expenses" though!).

Contract Labor. Payments you make to independent contractors (e.g. freelancers you hired for additional project support: virtual assistant, second shooter, intern...). This is NOT the same as wages which are paid to employees which are deductible on the "Wages" line of Schedule C. Independent contractors are people you have "the right to control or direct only the result of the work," not when and how will be done (IRS.gov). 

Insurance. More specifically, business insurance such as general liability insurance or equipment insurance.

Legal & Professional Fees. Accountants, tax preparers, lawyers, bookkeepers... Yes, the fees to have someone take care of your bookkeeping is deductible on your taxes! That's a win-win!

Supplies. This includes any supplies that are used in your business: pens, printer ink, paper clips... any supply you use and replace in your business. Website designers may also deduct digital supplies such as stock photography or website plugins.

Other Expenses. Continuing education, bank or credit card fees, membership dues, client gifts, industry subscriptions, etc. The IRS says anything that is "ordinary and necessary" for running your business is deductible. So, graphic designers, you cannot deduct chocolate while chocolatiers may... 

Want a handy little reference sheet so you can remember these categories and others? I thought so. Click the photo below and sign up to receive your free cheat sheet.