Reflection of the Week

Deductible Business Expenses That Can Save You Thousands
Happy Friday, all!

I hope you had a good week. You may have noticed that I’ve been slightly slow in dropping MDB episodes due to tax season. But we just dropped one and will return to our regular schedule next month.

In the most recent episode, I cover what makes a business expense deductible, the savings that come with deductions, unexpected deductions, and the importance of bookkeeping. By the end of the episode, you’ll have a clear picture of how to make the most of your expenses and keep your money in your business.

Episode Highlights

Deductible expenses must be ordinary and necessary.

Deductions are powerful. Every dollar you deduct reduces your taxable income, directly lowering the amount of taxes you owe. However, two key rules must be satisfied to deduct a business expense: the expense must be ordinary and necessary.

To be ordinary, the expense must be common and accepted in your industry, such as a yoga mat for a yoga instructor. To be necessary, the expense must be helpful and appropriate for your business operations.

Before you write off something, ask yourself whether a business like yours typically needs this expense and whether it serves a legitimate business function. If yes, you may have a deduction on your hands.

Don’t forget unexpected deductions.

While rent and office supplies may come to mind as deductible business expenses, consider whether these unexpected events apply to you:

• Pet expenses — If a dog protects your office or warehouse, the dog’s food, training, and vet bills may be deductible.
• Coaching — Hiring a business coach, taking leadership training, and even going to therapy for stress management related to business might qualify as expenses needed to run and lead a company.
• Your home office — If you have a dedicated space in your home exclusively used for business, you can write off some of your rent, utilities, and internet costs.
• Marketing and promotions — Hosting an industry event, running a giveaway, collaborating with influencers, and paying for digital ads all count as deductible expenses as long as they are directly tied to promoting your business.
• Work-related attire- Buying branded uniforms or specialized attire for your business is a legitimate business expense.
• Business retreats — If you take your team on a business retreat to strategize and improve company culture, that expense could be deductible. Make sure you document the business purpose with an agenda and good notes.

Good bookkeeping is just as important as knowing the rules.

Without solid record-keeping, you might miss valuable deductions or struggle to justify an expense in the event of an audit. Here are some tips to keep your books in order:

• Separate personal and business finances — Keeping separate personal and business bank accounts and credit cards makes tracking deductible business expenses much more manageable.
• Use accounting software — Accounting software, such as Quickbooks or Wave, can help automate tracking, helping to ensure nothing gets overlooked when tax season rolls around.
• Save your receipts — The IRS requires proof of deductions, so keep digital or physical copies of receipts and invoices.
• Work with a professional –– A professional bookkeeper or accountant can help you

 

Questions of the week

1. Are the business expenses you’re claiming truly “ordinary and necessary” for your industry, or are you making assumptions that could be challenged in an audit?
2. Have you overlooked any unexpected deductions—like home office use, professional development, or marketing efforts—that could reduce your taxable income?
3. What systems do you have in place to track and document your business expenses, and how confident are you that you’re capturing everything you need to support your deductions?

 

Tool of the Week: QuickBooks Online

QuickBooks Online is a game-changer when it comes to maximizing your deductions and staying audit-ready. This cloud-based accounting software helps you:

• Track income and expenses in real-time
• Automatically categorize transactions from connected bank accounts
• Upload and store receipts for every deductible purchase
• Generate profit and loss reports to spot trends and make smart financial decisions
• Collaborate seamlessly with your bookkeeper or accountant

Whether you’re a solopreneur or scaling a team, QuickBooks Online gives you the financial clarity and control to make the most of your business deductions—all while saving time and reducing stress during tax season.

Pro tip: Set aside 30 minutes each week to review your categorized transactions and upload any missing receipts. Your future self (and your tax preparer) will thank you.