General Small Business Tax Deductible Categories

There are a number of small business tax deductible expenses that fall into three general categories: start up costs, operating costs and cost of goods sold. The bottom line rule for all business tax deductions is to assure you are only itemizing expenses that are used explicitly for business purposes. 

Start Up Costs

Start up costs is one of the most confusing business deduction categories because many of these costs can either be deducted or capitalized. Deductible expenses are those that do not add permanent equity to your business. For example, the cost to travel to recruit employees should be deducted. The cost of purchasing manufacturing tools may be capitalized.

Operating Costs

Operating costs include rent, maintenance, professional fees paid and even marketing expenses. This is basically any cost incurred for business purposes only that does not specifically relate to the goods or services you are selling.

Costs of Goods

The cost of bringing your goods to market, including raw materials, freight and storage, is a separate expense from the cost to operate your business. If you sell a service and not a good, then these deductions will likely be smaller for you. The most common cost of goods expenses are those incurred in the manufacturing business to actually make a product for sale. 

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