Rules of Deductibility - Optimizing Your Write Offs & Minimize Your Tax Bill

Rules of Deductibility - Optimizing Your Write Offs & Minimize Your Tax Bill


One of the most common questions I get from business owners is “What am I allowed to deduct?”

The answer boils down to two key issues:

  1. Is it directly related to your business?
  2. Is it an ordinary and necessary expense for your business?

Let me give you an example of what I mean by this.

I went to Costco the other day and in my cart I had 4 items:

  • A case of paper
  • Keurig Coffee refills
  • A set of Barbie dolls, &
  • A pack of highlighters

I know, I know, I know… you’re thinking this is total hog wash or that I’m some kind of super human with a will of steel.

Who on this planet can leave Costco with ONLY 4 items in their cart?

That’s a story for another time my friends. 

If we were to examine the contents of my cart, the items that meet the criteria of: 

  • Directly related to my business, and
  • Ordinary and Necessary for my business would be

The case of paper, the coffee refills, and the highlighters.

Each of those items was for my office except for the Barbie dolls. 

Each of those items would also be reasonably deemed as ordinary and necessary for a business of my industry (accounting practice).

Paper for my printer, coffee refills for what I offer to clients, and highlighters for office supplies.

Barbie dolls isn't’ something that could be reasonably be considered a necessary and ordinary expense for my business type. 

In reality, those dolls were for my daughters.

Could they have been for my office as toys for my clients kids when they came in to have their taxes done? 

Possibly. I have purchased toys in the past for the littles to occupy their time while the adults handle business.

But at the end of the day, this was not the case in this circumstance. These barbie dolls came home with me for my girls. 

 The lesson here is that it is necessary to both be truthful in your dealings.

There are things that are clearly directly related to your business.

These things you can deduct without fear or worry.

A critical question to ask yourself is:

“If I didn’t have my business, would this expense be incurred?” That is a pretty solid start to connecting the expenditure to the business purpose.

An old farm saying is “Pigs get fat, hogs get slaughtered.”

This applies when deciding what to deduct in your business.

Be honest, be reasonable, and be diligent.

I always say, just because the government lies cheats and steals doesn’t mean we should as well.

The government has a system that is ruthlessly efficient at overwhelming small businesses and taking their hard earned profits in the form of taxes.

Fight back with a system of your own.

The Tax Reduction University or TRU Tax Savings System is designed to

Educate you and provide the knowledge you need to save money on taxes,

Evaluate that knowledge and understand how it applies to your fact pattern, and

Execute on that knowledge with clear and actionable steps to achieve results.

Change the way you view taxes forever and STOP wasting money on taxes!

All The Tools You Need To Build A Successful Online Business

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The TRU Method Of Choosing A Financial Advisor


Financial Planning Ties In With Tax Planning To Achieve Tax Savings Now And In The Future.


Here Are Some Key Questions And Considerations When Choosing A Financial Advisor:


  1. Understand What Licenses The Advisor Holds And What Those Licenses Enable Them To Do For You
  • Some Solutions Require Certain Education And Legal Licensing. Knowing If The Advisor Has Limitations On What They Can Provide Is Vital.


  1. Understand If The Advisor Is A Fiduciary
  • In Essence A Fiduciary Must Place Your Needs And Interests Ahead Of Their Own And Act In Your Best Interest. 


  1. Understand The Role The Advisor Will Play In Your Financial And Tax Planning

- How Often Will They Meet With You And What Is The Purpose And Agenda Of Those Meetings?


  1. Understand How, When, And By Whom The Advisor Gets Paid For Their Time, Energy, And Effort
  • We All Have A Right To Earn A Living And We All Have A Right To Have Transparency Around What We Pay For Services.


  1. Understand If The Financial Advisor Is Captive To Their Firm Or Broker Dealer
  • Is The Advisor Only Able To Provide Solutions Provided By Their Firm (Captive) Or Are They Able To Meet Your Needs With Tools From A Variety Of Sources (Independent)?


TRU Recommends Working With A Certified Financial Planner (CFP). 

These Are Professionals Who Should Value Comprehensive Planning And Be Able To Integrate Tax Planning As Part Of The Value That They Provide.



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