In my last post, I discussed commingling funds and how difficult it can be for a bookkeeper to figure out if expenses are personal, or if they’re qualified business expenses. So that leads to the next question. What is a qualified business expense?
It varies from business to business. (You didn’t think there would be a simple answer, did you?) Qualified business expenses for an attorney or accountant are going to be very different from those of an electrical business or iron foundry.
Per the IRS, qualified business expenses are defined as those expenses that are both ordinary and necessary. “Ordinary” expenses are those that are “common and accepted” to your specific trade or business. “Necessary” means they are helpful and appropriate for your business. Not necessarily indispensable, but appropriate and helpful.
Now, not all expenditures are even expenses. Some are capitalized and should be depreciated instead of deducted.
If you’re interested in learning what qualified business expenses pertain to your business, call us today at 801-692-0032 to see if you qualify for a free strategy session. Our staff is ready to help you!