What are the categories of deductible expenses for Subchapter S entities?

Subchapter S corporations have a variety of expenses, some of which are deductible. Below is a brief summary of the different categories of dectuctible expenses.

1. Employee Compensation and Benefits: Salaries, bonuses, health insurance, and payroll taxes.
2. Rent and Lease: Office and equipment lease payments.
3. Depreciation and Amortization: Depreciation of business assets and amortization of intangible assets.
4. Interest: Loan and credit card interest on business debt.
5. Supplies and Materials: Office supplies and small equipment.
6. Professional Services: Legal, accounting, and consulting fees.
7. Marketing and Advertising: Advertising costs, website development, and promotional materials.
8. Travel and Meals: Business-related travel expenses and 50% (or sometimes 100%) deductible meals.
9. Taxes: State and local business taxes, franchise taxes, and property taxes.
10. Insurance: Business and health insurance premiums.
11. Education and Training: Employee education and professional development.
12. Bad Debts: Deduction for uncollectible accounts.
13. Business Utilities: Electricity, internet, and phone bills.
14. Charitable Contributions: Charitable donations (passed through to shareholders).
15. Meals and Entertainment: Meals (50% deductible, or 100% for restaurant meals in certain years).

Each of these expenses must be ordinary and necessary for the operation of the business to be deductible, and the S-corp must maintain proper records and documentation to support the deductions.

Hopefully our summary of the various categories of expenses was useful, but if you’re unsure about specific deductions or need help with proper categorization, it’s always a good idea to consult with us. Schedule a meeting here!