Advertising and Marketing Costs May Be Tax Deductible

As a small business owner, you may be able to deduct advertising and marketing expenses that help them bring in new customers and keep existing ones. Even better is that these deductions help small businesses save money on their taxes.

Generally, small businesses can’t deduct amounts they pay to influence legislation, which includes advertising in a convention program of a political party or any other publication if any of the proceeds from the publication are for, or intended for, the use of a political party or candidate. Here’s what else you need to know about this valuable tax deduction:

Advertising and marketing costs must be ordinary and necessary.

An ordinary expense is one that is common and accepted in the industry. A necessary expense is one that is helpful and appropriate for the trade or business. An expense does not have to be indispensable to be considered necessary. Advertising and marketing costs that are ordinary and necessary are tax-deductible.

Advertising expenses include:

  • Reasonable advertising expenses that are directly related to the business activities.
  • An expense for the cost of institutional or goodwill advertising to keep the business name before the public if it relates to a reasonable expectation to gain business in the future. For example, the cost of advertising that encourages people to contribute to the Red Cross or to participate in similar causes is usually deductible.
  • The cost of providing meals, entertainment, or recreational facilities to the public as a means of advertising or promoting goodwill in the community.

As always, don’t hesitate to call us if you have any questions regarding tax deductions that benefit your small business.