IRS Publication 535 - Business Expenses

Definition of 'IRS Publication 535 - Business Expenses'


A document published by the Internal Revenue Service (IRS) that provides guidance on what types of business expenses are and are not deductible. IRS Publication 535 covers the rules for deducting business expenses, and outlines the most common items taxpayers deduct.

In order to be deductible, a business expense must be considered both ordinary and necessary. "Ordinary" expenses are ones that are common in a particular industry, and "necessary" expenses are those that are helpful to conducting business. Cost of goods expenses, personal expenses and capital expenses are distinguished from business expenses, meaning that deducting costs from receipts in order to determine profits precludes those costs from also being deducted as a business expense. Capital expenses have to be capitalized rather than deducted.

Investopedia explains 'IRS Publication 535 - Business Expenses'


The IRS publishes a number of documents that provide additional information on business expenses: Publication 334 (Tax Guide for Small Business), Publication 463 (Travel, Entertainment, Gift and Car Expenses), Publication 525 (Taxable and Nontaxable Income), Publication 529 (Miscellaneous Deductions) and Publication 587 (Business Use of Your Home).

Certain types of business expenses, such as capital expenses, are treated differently than ordinary and necessary expenses. These will likely require the taxpayer to use different tax forms. The accounting method employed by the taxpayer determines when expenses can be deducted.



comments powered by Disqus
Hot Definitions
  1. Genuine Progress Indicator - GPI

    A metric used to measure the economic growth of a country. It is often considered as a replacement to the more well known gross domestic product (GDP) economic indicator. The GPI indicator takes everything the GDP uses into account, but also adds other figures that represent the cost of the negative effects related to economic activity (such as the cost of crime, cost of ozone depletion and cost of resource depletion, among others).
  2. Accelerated Share Repurchase - ASR

    A specific method by which corporations can repurchase outstanding shares of their stock. The accelerated share repurchase (ASR) is usually accomplished by the corporation purchasing shares of its stock from an investment bank. The investment bank borrows the shares from clients or share lenders and sells them to the company.
  3. Microeconomic Pricing Model

    A model of the way prices are set within a market for a given good. According to this model, prices are set based on the balance of supply and demand in the market. In general, profit incentives are said to resemble an "invisible hand" that guides competing participants to an equilibrium price. The demand curve in this model is determined by consumers attempting to maximize their utility, given their budget.
  4. Centralized Market

    A financial market structure that consists of having all orders routed to one central exchange with no other competing market. The quoted prices of the various securities listed on the exchange represent the only price that is available to investors seeking to buy or sell the specific asset.
  5. Balanced Investment Strategy

    A portfolio allocation and management method aimed at balancing risk and return. Such portfolios are generally divided equally between equities and fixed-income securities.
  6. Negative Carry

    A situation in which the cost of holding a security exceeds the yield earned. A negative carry situation is typically undesirable because it means the investor is losing money. An investor might, however, achieve a positive after-tax yield on a negative carry trade if the investment comes with tax advantages, as might be the case with a bond whose interest payments were nontaxable.
Trading Center