Tax Savings Calculator

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Business expenses are the cost of running a business, which are usually deductible if the business operates to make a profit. By using business expense deductions, you can reduce your taxable earnings.  According to the IRS, a business expense must be both ordinary and necessary to be deductible. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business.

Generally, you cannot deduct personal, living, or family expenses. However, if you have an expense for something that is used partly for business and partly for personal purposes, divide the total cost between the business and personal parts, and deduct the business part.

For example, if you use part of your home for business, you may be able to deduct expenses for the business use of your home. These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation. If you use your car in your business, you can deduct car expenses. If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage.