Business Expenses are costs incurred in the ordinary course of business. Generally, business expenses are deductible if they are ordinary, necessary, and are directly connected with a taxpayer's business activity. In other words, business expenses must be both ordinary and necessary before they can be deducted. An ordinary expense is one that is common and accepted in the taxpayer's field of trade, business or profession. A necessary expense is one that is helpful and appropriate for the development of the taxpayer's business.Business expense deductions are claimed on the federal income tax return using Schedule C. On schedule C, taxpayers list their business expenses and losses. Any net profit from Schedule C is then reported on line 12 of Form 1040 as well as on Schedule SE (Form 1040) and on Form 1040, Schedule 1.Business expenses are deductible only if they are ordinary and necessary. Ordinary expenses are common and accepted in the taxpayer's business or profession. Necessary expenses are those that are helpful and appropriate for the development of the taxpayer's business.Business expenses do not include personal, living or family expenses, or capital expenditures. In addition, business expense deductions do not include any personal expenses incurred by an employee for which an employer reimburses the employee under an accountable plan.
