Small Business Expenses: A Checklist For Owners And Managers

Fleet managers and owners face some unique small business expenses. That said, many of those expenses are tax-deductible, according to the IRS.

That’s good news because keeping track of these costs — and writing them off on your taxes — can actually save your business hundreds, if not thousands, of dollars at the end of the year.

In this article, we’ll discuss the most common small business expenses as well as some sneaky expenses you might not have considered so you can start keeping track of cash flow.

Table of Contents

• What Does The IRS Consider Small Business Expenses?
• Small Business Expenses Checklist
• Manage Expenses By Controlling Fuel Costs

What Does The IRS Consider Small Business Expenses?

In the most basic and general sense of the term, small business expenses are any costs a company pays to keep the doors open, the lights on, and the work flowing smoothly.

But, not all of the costs associated with doing business are tax-deductible. For that, we have to turn to the more specific definition of small business expenses put out by the United States Government.

According to the Internal Revenue Service:

A deductible small business expense is one that is both ordinary and necessary for the regular operation of your company.

An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.

It’s also worth noting that even though an expense may be ordinary and necessary, you still may not be allowed to deduct it in the year you paid or incurred it.

To make sure you have the most up-to-date information possible, always consult a tax attorney who is familiar with your industry and where you do business.

Small Business Expenses Checklist

Some expenses — such as wages and compensation — apply to all businesses, while others may only apply to a few. Use this checklist to identify the cost categories that apply to your fleet.

Common Small Business Expenses

1) Fuel

Fuel is one of the largest small business expenses across every industry. Plumbing businesses, for example, spend a lot of money getting their technicians and tools to and from appointments and service locations.

Similarly, landscaping companies often require heavy equipment that can both reduce gas mileage and increase the cost of doing business.

In most cases, fuel expenses can be deducted from your taxes so you can save money at the end of the year.

2) Tools

Technicians working in service industries — again, plumbing and landscaping are prime examples — rely on specialized tools to get the job done.

These tools are often expensive enough that your employees can’t afford to purchase them on their own. Your business can purchase the tools for your employees to use and categorize them along with other expenses to be deducted from taxes at the end of the year.

3) Vehicles

Another big part of fleet-based small business expenses are costs associated with putting vehicles on the road.

Whether your business pays for its work trucks or semi trucks outright or leases them from another company, you can write off a large chunk of the cost come tax time. You may even be able to spread the deductions out over multiple years thanks to the IRS’s depreciation program.

Again, talk to an attorney or tax professional for more information on these small business expenses.

4) Wages And Compensation

Employee salaries, gross wages, commissions, bonuses, and other types of compensation count as small business expenses and are, therefore, tax-deductible.

There are many rules that your business must follow when it comes to wages and compensation so be sure to double- and even triple-check the IRS guidelines so you don’t miss something.

5) Software

If your plumbing or landscaping fleet uses vehicle or driver tracking software of any kind, the cost of said software — be it a one-time outlay or a recurring thing — may fall into the category of small business expenses.

In fact, any kind of software that helps your business operate can be considered ordinary and necessary, and can, therefore, qualify as tax-deductible.

6) Licenses And Permits

Any payments your fleet makes toward licenses for drivers and permits for vehicles are considered ordinary and necessary small business expenses — and, therefore, deductible from your taxes.

Your business may even qualify to deduct other licenses and permits (e.g., operating licenses, trade licenses, land-use permits, and building permits) depending on the industry in which it operates and the activities it undertakes.

7) Business Meals

If your business chooses to reimburse its employees for meals eaten while on the job, you can deduct 50% of those expenses over the course of the entire year. This may not seem like much at first, but costs can quickly add up.

For example, if you pay $20 three times a week for pizza for your landscaping crew for an entire year (e.g., 48 work weeks), you’ll spend almost $3,000.

If you keep track of those receipts, you can deduct $1,500 off your taxes in April.

8) Telephone

Another large expense for many businesses is the cost of maintaining a telephone system. Like utilities, your business can deduct telecommunications fees for its brick-and-mortar location. In many cases, this also includes any payments you make for internet and cell phone service.

So, for example, if you provide your plumbing technicians with a company cell phone, both the initial cost of those cell phones and the monthly cost of connecting to a service provider are tax-deductible.

9) Utilities

If your business has a brick-and-mortar location, you’re going to need to include utilities on your list of small business expenses. Services such as electricity, water, sewage, natural gas, and trash pickup qualify.

Even if you run your landscaping business out of your home, you can deduct a certain percentage of the utilities (based on the size of your office/workspace) from your end-of-year tax bill.

10) Office Expenses And Supplies

This category of office expenses is very broad and includes anything that employees might use on the job.

Examples include:

• Cleaning products
• Printer paper
• Computer hardware
• Pens and pencils
• Fax machines
• Phone hardware
• Notebooks
• Company letterhead

You can also deduct certain supplies as office expenses even though your employees use them offsite.

For example, you may stock your plumbing technician’s work van with pens and custom-printed forms. Or, you may provide your landscaping team with clipboards and business letterhead so they can write estimates.

If you keep track of what you spend on these items, you can deduct the total cost from your taxes at the end of the year.

Sneaky Small Business Expenses

1) Uniforms

If you supply your employees with company uniforms (e.g., shirts, hats, pants, gloves, etc.), the cost of those uniforms is considered a small business expense.

2) Book And Magazine Subscriptions

Specialized books, magazines, and journals — purchased individually or as a subscription — that are directly related and applicable to your business may be tax-deductible.

That said, not all publications fall into this category. A local newspaper, for example, would not qualify to be included, but an industry-specific commercial fleet, plumbing, or landscaping magazine would.

3) Gifts

Gifts for clients, vendors, employees, or anyone else are often fully tax-deductible.

For example, if you give your technicians and drivers a fuel card as a gift during the holidays or you give a client a company-branded hat, chances are high that you can write the cost of those gifts off your taxes come April.

4) Medical Expenses

If one of your plumbing technicians or someone on your landscaping team is hurt on the job and your company pays for their medical treatment, you may be able to write the cost off your taxes.

However, some medical costs are deductible, while others are not. Be sure to check with a tax attorney in your area to see exactly what qualifies.

5) Bank Fees

The IRS considers bank fees small business expenses and allows you to take them off your taxes.

Such fees include:

• Interest paid on business loans
• Interest paid on ongoing credit lines
• Interest paid on business credit cards
• Monthly maintenance fees
• Overdraft fees

You may even be able to deduct fees and expenses related to running customer credit card payments.

6) Real Estate Taxes

Deductible real estate taxes are any state or local taxes, including taxes imposed by U.S. possessions, on real estate levied for the general public welfare.

For an expense to be considered real estate taxes, the taxing authority — the county in which your business resides, for example — must base payment calculations on the assessed value of your business’s real estate and charge taxes uniformly against all property under its jurisdiction.

Manage Expenses By Controlling Fuel Costs

Fuel is one of the largest small business expenses that any fleet-based company will face. Coast can help you manage and control fuel costs better.

Our card provides controls and visibility that work for your business — including instantaneous cost tracking and line-item detail — as well as an online expense management platform that empowers you with real-time information related to your fleet.

For more information on how Coast can help you control fleet costs and streamline your fleet management program, visit CoastPay.com today.