What is a Reasonable Business Expense?
When a business owner needs to claim a
business expense deduction, he has she needs to know what can
be claimed in one cannot be. The business expenses must be
“ordinary and necessary”.
Since there are so many types of business
expenses, there is no clear-cut rule that will tell you what
business expenses are allowed by the IRS and what not. There
are general categories of business expenses that are tax
deductible but many business owners find that they have
business expenses that may not fall into those categories.
If the IRS ever disputes any business
expense deductions, the courts usually rule with a business
expense is ordinary and necessary for taxpayer using two
separate points of view. The business expense must be
reasonable for that tax payer claiming the deduction, not any
other tax payers, at the time that the expense was made.
As long as there is a reasonable cause, then
the business expense should be considered reasonable and
Document Your Business Expense Reasons
The reason behind why you are making a
business decision to spend their money, and collect a business
expense, matters a great deal. You should making a habit to
write down the reasons behind all business expense
These may not get you off the hook if you in
trouble with the IRS but it will serve as a proof that you
truly believed at the time of making a business expense that it
is a good decision for the business.