Advertising & promotion
Overview
Advertising activities include most of the things you do to get the word out about your business or draw attention to a product or sale.
Criteria
- Ordinary and necessary: An expense is ordinary if it’s common to your profession. A necessary expense is one that’s appropriate or helpful in developing or maintaining your business.
- Current expense: will benefit your business for less than one year
- Directly related to your business: not personal
- Reasonable in amount: reasonableness is dependent on the circumstances and not limited to a specific dollar amount
What is deductible
- Business cards
- Mailing lists / mailing list software
- Brochures
- Branded giveaway items
- Posters
- Web site design, development and maintenance
- Goodwill advertising: brand building that fosters a positive image for your business
- Ex: sponsoring a little-league team
- Case: The tax court allowed a gas station owner to deduct the cost of providing free beer to customers as a good-will advertising expense since it improved business.
What to collect
- Name of vendor
- Date
- Amount of expense
- What you used to pay for the expense
- Enter all of this information into your Expense Tracking System
Gotchas
- Personal expenses, even if they might help your business are not deductible. For example, expenses related to inviting customers to your daughter’s wedding are not deductible.
- Advertising to influence government legislation is not deductible
- Do not deduct time and labor
Tip: Make sure you can show a clear connection between the advertising activity and your business.
Bad debts
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