What is business expense? Simple Definition & Meaning

Definition of business expense

A business expense is a cost incurred by a business in order to operate. These expenses are tax deductible, meaning they can be subtracted from the business's taxable income. To qualify as a business expense, the cost must be:

Ordinary, accepted, and common in the business's trade
Necessary, appropriate, and useful in operating the business

For example, a restaurant may deduct the cost of food and supplies used to prepare meals, while a law firm may deduct the cost of legal research materials.

In some cases, an expense may be both business-related and personal, such as a cell phone used for both business and personal calls. In these cases, the court will determine whether the expense is primarily business or personal. For example, if a self-employed individual uses their personal vehicle for business purposes 80% of the time, they may deduct 80% of the vehicle's expenses as a business expense.

Overall, business expenses are important for businesses to track and deduct in order to reduce their taxable income and increase their profits.

Simple Definition

Business expenses are the costs that a business has to pay to keep running. These costs can be things like rent, supplies, and salaries for employees. When a cost is considered a business expense, it means that the business can take it off their taxes and pay less money to the government. To be a business expense, the cost has to be something that is normal and necessary for that type of business. Sometimes, a cost can be both for business and personal use, and in those cases, the court will decide how much of the cost can be deducted from taxes.

Legal Definitions - business expense

Definition of business expense

Simple Definition