Deducting Miscellaneous Business Expenses

A quick guide on how to deduct miscellaneous expenses for your small business

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Miscellaneous expenses are business expenses that don't fit neatly into an IRS tax category. Claiming these expenses can help lower your taxable business income. You may keep track of these expenses throughout the year or wait until tax time to reconcile everything. Regardless of your approach, it's best to report these expenses so you can minimize taxes. Just be sure you have the records to justify what you're deducting.

Learn more about these expenses and how to report them on Schedule C if that applies to your type of business.

What Business Expenses Are Deductible?

Unlike personal expenses, business expenses are, for the most part, deductible. The IRS defines business expenses as expenses that are "ordinary and necessary." "Ordinary" means it's a common expense in your industry. "Necessary" means it's helpful and appropriate for your business. For example, a graphic designer would need graphic design software. That would be considered an ordinary and necessary expense.

Some business purchases may not be deductible. The list of the most common nondeductible business expenses is short, but it includes items like political or lobbying expenses, fines, and penalties.

If you're uncertain about what expenses are deductible, consult an experienced accountant.

What Are Miscellaneous Expenses?

The term "miscellaneous" is defined as "various, diverse, mixed," and we usually use it for circumstances when we can't figure out what category to put an item in. In tax terms, the IRS has specific categories for certain expenses listed on business income tax forms. For example, advertising and contract labor are specifically listed on lines 8 and 11 of Schedule C.

Other expenses can be deducted, but they don't fit any of the categories listed. These are miscellaneous expenses.

Listing Miscellaneous Business Expenses on Schedule C

Schedule C lists specific business expenses that you can deduct on lines 8 through 26. It lists "other expenses" on line 27a. The "other expenses" are miscellaneous business expenses.

All of your business expenses must fit into either a specific category (lines 8 through 26) or "other expenses" (line 27a). When you complete Schedule C, start by looking at all of your business expenses from your end-of-year income statement (your profit and loss statement).

Put expenses into specific categories where possible. The categories on your profit-and-loss statement should match the categories of specific expenses on Schedule C. If they don't match, take some time to put all of your year-end totals for expenses into these categories. Only those expenses that don't fit neatly into categories go into "other expenses" (miscellaneous).

When you have determined which expenses will be included in "other expenses," you will need to list these expenses in detail on Part V of Schedule C, then transfer the total to line 27a. The more detail, the better.

Miscellaneous Expenses List

The following list shows various business expenses that may be miscellaneous ("other expenses" on Schedule C), with suggestions about where they might be categorized. Qualifications for deducting some expenses are complicated, and some expenses may need to be amortized or depreciated over time rather than being deducted as expenses in a single year.

The suggestions in this list, which is not complete, are based on IRS Publication 535: Business Expenses. This information is general and is not to be construed as tax or legal advice. Check with your tax advisor about individual questions or situations.

Club Dues and Membership Fees

You may deduct costs for dues to professional organizations and any memberships that you can show are necessary to conduct your business. You may not deduct dues for personal or hobby clubs or groups, dues or memberships paid to country clubs, or dues for other recreational or social groups.

Credit Card Convenience Fees

You can deduct credit card late fees, annual fees, and any other fees charged by your business credit card.

Education and Training Expenses

An education expense for business owners may only be deducted if it maintains or improves skills required in your trade or business or is required by law. Travel expenses related to deductible education expenses for business owners or employees are reported under travel expenses on line 24a of Schedule C.

Franchise, Trademark, Service Mark, or Trade Name

Fees associated with the purchase of a franchise, trademark, service mark, or trade name can be deducted under "other expenses." However, if these expenses are part of your purchase of a business or of your business startup, they may need to be amortized (spread out over time) rather than listed as expenses. Check with your tax advisor.

Internet-Related Expenses

If you are just starting in business, internet setup fees should go into your startup costs, and they may need to be amortized. Otherwise, they may be listed as "other expenses."

Licenses and Regulatory Fees

Licenses and regulatory fees for your trade or business paid annually to state or local governments generally are deductible. Some types of licenses must be amortized.

Petty Cash

Small amounts spent with petty cash, like food for meetings or parking fees, may be listed in "other expenses." Be sure to keep petty cash slips to account for these expenses.

Moving Machinery

Moving machinery, whether it's from one city to another or from one part of a plant to another, is deductible. You can also deduct installation costs, but you must capitalize the costs of installing and moving newly purchased machinery. Capitalizing costs means considering the purchases as assets and depreciating them.

Outplacement Services

These are expenses for helping employees who are laid off, including career counseling and resume assistance.

Frequently Asked Questions (FAQs)

What are miscellaneous business expenses?

Miscellaneous business expenses are business deductions that don't fit into a category listed on an IRS tax form. For example, advertising, insurance, legal and professional services, and utilities are all listed on Schedule C. Other business expenses, like outplacement services and credit card conveniences, aren't listed on Schedule C and would be considered miscellaneous expenses.

What is not included as a miscellaneous business expense?

Any business expense that isn't deductible can't be included as a miscellaneous business expense. For example, bribes and kickbacks are illegal and can't be deducted as business expenses. Lobbying expenses also generally aren't deductible. These include funds expended for influencing legislation and participating in a political campaign for or against a candidate for public office.

Where do I list my miscellaneous expenses?

If you're a sole proprietor, miscellaneous expenses are listed on line 27a of Schedule C. These expenses are categorized in Part V of Schedule C, then totaled and entered on line 27a. On Form 1120 for corporations, line 26 is for "other deductions," and you must attach a statement detailing those deductions.