What counts as a deductible business expense on Schedule C?

To be deductible on Schedule C, a business expense must be: 1. **Ordinary** — common and accepted in your trade or business 2. **Necessary** — helpful and appropriate for your business You do NOT need to prove that an expense was indispensable — just that it was appropriate and helpful for your business. **100% deductible examples:** Business insurance, professional subscriptions, equipment (via Section 179), contractor payments, advertising, home office (exclusive use). **Partially deductible:** Business meals (50%), vehicle (business-use % or standard mileage), home office (if also used personally), mobile phone (business-use %). **NOT deductible:** Personal expenses, commuting, clothing (unless it's a uniform with no everyday utility), fines and penalties, client entertainment (since TCJA 2018). **The personal/business line:** The IRS allows deductions only for the business-use portion of mixed-use expenses. If you use your phone 70% for business, deduct 70% of the cost. **Documentation standard:** Keep receipts for all expenses. The IRS Cohan Rule may allow reconstructed records for some expenses, but receipts are always the safest approach.

  • Deductible: ordinary and necessary for your specific trade or business
  • Meals: 50% deductible with documented business purpose
  • Personal expenses never deductible — even if incurred while working
  • Mixed-use: deduct only the business-use percentage
  • Keep receipts — the IRS may disallow undocumented deductions

Related Questions

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