Deductible Expenses are business expenditures that can be subtracted from a taxpayer’s total income to determine taxable income. These expenses reduce the amount of income that is subject to taxation, thus lowering the overall tax liability.
Examples of common deductible expenses include:
-
Operating Expenses: Costs incurred in the regular course of business operations, such as rent, utilities, and salaries.
-
Business Supplies: Items necessary for running the business, like office supplies and equipment.
-
Depreciation: A method of allocating the cost of tangible assets over their useful lives, allowing a portion of the cost to be deducted each year.
-
Interest Expenses: Costs incurred from borrowing funds for business operations.
Understanding what qualifies as a deductible expense is essential for accurate financial reporting and tax compliance.
« Back to Glossary Index