Which Expenses Are Deductible for Your Small Business?

When you're a small business owner, promotional expenses are to be expected. Some of your expenses will be deductible, whether as a related advertising expense or something else. Other expenses, however, aren't deductible. As a rule, the IRS expects your deductible expenses to be tied in some significant way to how your business is run.

Normally there are three different types of deductible expenses: regular advertising, PR, and expenses related directly to marketing.

Regular advertising expenses can come from a large variety of things, from printed materials (like business cards) media spots, phone book advertisements, and even internet ads. The expense you incur by maintaining your business site is probably tax deductible, but depending how you actually use the site (in other words, there's a difference between just promoting your company with a website versus actually running your entire business from it) it may or may not qualify as an advertisement expense.

PR expenses would be anything created to generate a good relationship between your business and the surrounding community. Some companies sponsor a local sports team, or send out samples of their products to entice people to buy more.

Marketing expenses encompass a wide range of activities, including offering monthly prizes and such for your customers. If you happen to offer a dinner for two at a neighborhood restaurant, both the cost of promoting the drawing and the meals can be deducted as a marketing expense. This way, instead of the usual half-off stipulation for food related expenses, it falls under the promotional heading and can be deducted in its entirety.

The problem is that, while some things are deductible, there are also many things that aren't. Expenses incurred during lobbying activities is subject to a limit of two thousand dollars each year. Included in this stipulation are any and all expenses that are connected to a government-related political campaign, and any expenses that come with trying to sway the public's opinion in such political issues. Small business owners sometimes find themselves at odds with the IRS when dealing with matters that fall into both the personal and business categories. But remember, even if an expense seems to fall into both categories, that doesn't necessarily mean you can't deduct it.

To backup your deduction claim, always keep a copy of your invoice on hand, and any proof that you paid it. It's also good practice to keep a copy of your ad for reference. And lastly, when in doubt, don't hesitate to contact a professional advisor, particularly one who specializes in small business matters.