Expected small business deductions

The IRS is aware that it costs money to make money, so it has anticipated a number of deductions that any small business might have. Here are the typical business deductions as listed on Schedule C, the Profit or Loss from Business, Self-Employment income tax form.

First they want you to focus on the “Cost of Goods Sold” -- this is what it cost you to manufacture or purchase the products you sold. Here is what they want to know:

• Cost of your inventory (at beginning and end of year)
• Cost of items withdrawn for personal use
• Cost of labor (what you paid to others, not your own labor)
• Materials and supplies

Then they want to know what you spent on expenses to run the business. On Schedule C, the 21 featured expense categories are listed alphabetically instead of being grouped by topic. Here they are:

• Advertising
• Car and truck expenses
• Commissions
• Contract labor
• Employee benefit programs
• Mortgage interest (on business property)
• Other Interest
• Legal and professional
• Office Expense
• Outside Services
• Pension and profit sharing plans - contributions
• Rent or lease
  • machinery, vehicles, equipment
  • other business property
• Repairs and maintenance
• Supplies (not included in cost of goods)
• Taxes and licenses
• Travel
  • Travel
  • Meals and entertainment
• Utilities
• Wages
• Other expenses
• Expenses for business use of home

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