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Business Expense Questions

When in business one may lower their adjusted gross income by applying applicable business expenses that will lower one’s taxable income. Knowing and understanding your business operations may help one to understand which business expenses are qualified business expense deductions. This is one benefit to being in business that there are business expense deductions that may not be allowable deductions as an employee.

What is a business expense?

Business expenses are the cost of operations for a trade or business. These expenses may be deductible when in business for profit. Read below where thousands of Experts have answered individual’s questions relating to a business expense.

When determining an income base for alimony payments, what deductible business expenses are allowed on a 1099 employee?

The ability to deduct business expenses has no relativity to a particular purpose such as alimony. Necessary and reasonable or customary and reasonable expenses are deductions allowed that are directly related to the cost of operation to one’s trade or business. Unless there is something specific in the divorce decree, one may assume that this is the basis used to determine allowable deductions.

If an employee routinely pays for a business expense and the reimbursement is added to their paycheck, should this be shown at the end of the year on the employee's W-2?

Reimbursements for employee expenses should not be included in their taxable income. Therefor is not necessary to show on their W-2 forms. There is a location on the W-2 for non-taxable items and can be used if the employee wants to keep record of the reimbursements.

Can a residential rental property be used for storage and qualify as a business expense deduction?

If the property is a residential rental that one owns, then this may or may not be used as a business expense. One may consider having the business rent the property from them; this could create an income obligation on your part as rental income. There could still be an issue, depending on what percentage of the property is occupied with property belonging to the business. If you are not going to use the rental property for rental income, an Expert may have insight in ways to take advantage of the storage that may generate a business expense that could qualify as a deduction.

Are there deductions for expenses incurred as an employee filing W-2 vs. 1099 filings?

There are no deductions from one’s adjusted gross income for expenses incurred by an employee as a W-2 filer. If one’s total deductions are less than the standard deduction allowance one may consider asking their employer to give them an expense reimbursement in the lieu of wages. The employer could reimburse the expenses and reduce your wages by that amount. This may create a business expense deduction for their business and could reduce your taxable income by the same amount.

Not all expenses incurred through business may be classified as a business expense when filing year end taxes. Business expense deductions may be directly related to the cost of operating a business. No part of any business expense should be comprised with one’s personal expenses. An Expert may have insight to qualified business expense deductions that may aide in lower one’s net taxable income.
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