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The Basics of Expenses

The hardest thing in the world to understand is the income tax.

—Albert Einstein

What can I deduct as a business expense? How far can I stretch the envelope? What records do I need? What about expenditures that are part personal and part business? Are there business expenses that I can’t deduct on my tax return?

Expenses are frequently a trouble spot for business owners. We begin by looking at what an expense is and some of the more common (and uncommon) expenses. Next, we examine the two standards that all expenses must meet: the ordinary standard and the necessary standard. The chapter concludes by looking at nondeductible ...

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