Starting Your Business

What are Business Expenses

Supplies & Materials

Unless you have deducted the cost in an earlier year, you generally can deduct the cost of materials and supplies actually consumed and used during the tax year.

If you keep incidental materials and supplies on hand, you can deduct the cost of the incidental materials and supplies you bought during the tax year if all three of the following requirements are met:

1) You do not keep a record of when they are used,

2) You do not take an inventory of the amount on hand at the beginning and end of the tax year, and

3) This method does not distort your income.

You can also deduct the cost of books, professional instruments, equipment, etc., if you normally use them up in less than a year.

However, if the usefulness of these items extends substantially beyond the year they are placed in service, you generally must recover their costs through depreciation.

Important References:  

Publication 535 Business Expenses
Schedule C (Form 1040) Profit or Loss from Business
Instructions for Schedule C (Form 1040)
Schedule F (Form 1040) Profit or Loss from Farming
Instructions for Schedule F