Real Business Expenses: A Simple Guide for Small Business Owners

If you’ve ever wondered, “Is this a real business expense?”—you’re in the right place. Bookkeeping doesn’t have to be overwhelming or complicated. Today, I want to walk you through what truly counts as a business expense, so you can save money, reduce stress, and build a business that supports the life you want.

The “Ordinary and Necessary” Rule

The IRS uses a simple guideline: for an expense to be deductible, it must be both ordinary (common in your industry) and necessary (helpful and appropriate for your business). Think about what others in your field typically need to run their business. If it’s something you genuinely use to operate, it likely qualifies.

Examples of ordinary and necessary expenses:

• Office and operating supplies
• Subscriptions and software
• Advertising and marketing materials
• Bank fees, phone, and internet services

Don’t Miss These Deductions

Many new business owners overlook valuable deductions. Did you know you can often expense:

• Education and training (courses, workshops, books)
• Professional services (legal fees, bookkeeping help, tax prep, coaching)
• Materials and tools needed to create your products
• Mileage for business trips and deliveries
• A portion of your home office, if you use it regularly and exclusively for business

What You Can’t Expense

It’s just as important to know what doesn’t count. Personal items like haircuts, regular clothes (unless it’s a uniform), groceries, and household expenses aren’t deductible. Upgrades to your home for personal use don’t qualify either. The key is to separate your business and personal spending.

Simple Expense Tracking

The best way to stay on top of your expenses is to record them regularly. You can use a spreadsheet, an app, or even paper and pencil—whatever feels easiest. For each expense, jot down who it was to, what it was for, the amount, and the date. Do this weekly to keep things accurate and avoid forgetting details.

For mileage, only count business-related trips (like client meetings, supply runs, or deliveries). Keep a log of the date, destination, and miles driven. For your home office, you can deduct a portion of your rent or mortgage, utilities, and internet—just be sure it’s a dedicated workspace.

A Gentle Encouragement

Remember, you don’t have to do this perfectly. Building a business is a journey, and you’re learning as you go. Take it one step at a time, and trust that you’re being equipped for the work ahead. You’re not alone—there’s grace for the process.

Final Thoughts

Recording your expenses is 80% of bookkeeping. It’s like keeping a food journal: you’ll see where your money goes and find ways to save. Most importantly, it brings peace of mind and frees you to focus on what matters most.

If you want help getting set up, check out my Bookkeeping Made Simple resources or subscribe on YouTube for weekly support.

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