How to Know If a Transaction Is a Business Expense

One of the biggest questions small business owners ask is: “Does this count as a business expense?” The IRS uses two simple rules that make this much easier to understand:

✔ Ordinary

It’s common and accepted in your industry.

✔ Necessary

It’s helpful and appropriate for running your business.

If an expense meets both criteria, it’s usually safe to treat it as business‑related. For example:

• Software you use to run your business

• Office supplies

• Professional services

• Mileage for business travel

• Advertising and marketing

• Tools or equipment you use for work

Where owners get confused is with “mixed‑use” items — things like cell phones, home internet, or personal vehicles. These can be partially deductible, but they need to be handled correctly.

A bookkeeper can help you categorize expenses properly and set up rules in QuickBooks so future transactions are automatically sorted. If you want to learn more, check out expense categorization basics.