The fact that you as a business owner have a receipt or can prove that you incurred an expense does not by itself make it tax deductible. Only business expenses that are ordinary, necessary and reasonable in amount are tax deductible.
Ordinary means that most other business owners who work in your same business also commonly pay for these things.
Necessary means that whatever you spent money on assists you in doing business. In fact, you might not be able to do business and earn money if you didn’t make these expenditures.
Reasonable is always subjective.
In some situations, there are special rules for specific types of business expenses –
- Gifts – You deduct no more than $25 of the cost of business gifts you give directly or indirectly to each person during your tax year.
- Meals – must have a business reason and only 50% is tax deductible. In some cases, it is not deductible.
- Entertainment – football games or golfing fees are no longer deductible.
- Social club dues – are not deductible.
- Mileage – only business miles are deductible if you keep a written record, document business miles, and the business reason.
- Travel – document dates, amounts paid, what you did, agendas and business purpose.
To allow these deductions you must keep the invoice supporting the expense, credit card statements and bank statements. It is your responsibility to prove it is a business expense, plus you paid for it.
