Nobody wants to pay more taxes than they have to and one way you can bring the bill down is with small business marketing expenses that are tax deductible.
Before you read further, please keep in mind, the tax deduction ideas provided in this article are for informational purposes only. Not all ideas may be applicable to your particular situation. You should speak with a professional tax advisor for all your tax filing related need.
Small Business Marketing Expenses That Are Tax Deductible
According to the IRS, businesses can deduct expenses that help them bring in new customers and keep existing ones, including expenses for advertising and marketing. Advertising and marketing costs must be:
● Ordinary - Expenses that are common and accepted in the industry.
● Necessary - Expenses that are helpful and appropriate for the trade or business. An expense does not have to be indispensable to be considered necessary.
Here are some marketing expenses that are usually deductible:
● Website - Customers expect your business to have a website, which means you’re going to have to spend money and invest in one for your business. Once your business website is active and it’s helping you do business, there will be regular maintenance updates, upgrades, and continuous tweaks that will need to be taken care of. What you pay for a new website is a deductible expense. If you hire a website developer or digital marketing agency to handle updates for your business website, those costs count as marketing expenses that are eligible for a tax deduction.
● Promotional Print Materials - Printing costs can add up fast, especially if you’re having a custom print job done, printing in color, or adding extra elements like a gloss finish. Promotional print materials are usually eligible for a deduction and can include:
○ Business Cards
○ Direct Mailers
○ Product Brochures
○ Tradeshow Displays
● Social Media and Other Digital Marketing Campaigns - If your business does some type of digital marketing, most of the expenses will be deductible. Some tax deductible digital marketing expenses you should keep track of include:
○ Google AdWords and Pay-Per-Click (PPC) Campaigns
○ Facebook, Instagram, and Twitter Campaign Ads
○ Social Media Marketing
○ Influencer Marketing
○ Display Banner Ads
○ Email Marketing
○ The cost of outsourcing digital marketing campaigns if you hire a marketing consultant or firm.
● Traditional Advertising - Every type of traditional advertisement (newspaper ads, TV spots, full-page, glossy magazine ads, etc.) is usually tax-deductible. If you hire a marketing agency to purchase ads for you, their fees will be what you claim. Keep a record of the signed insertion order (the contract you sign with the newspaper, TV station, magazine publisher, etc.) for every ad you purchase. Make sure it includes a detailed description of which ads you’re buying and for how much. If the agency you hire is handling the insertion orders for you, keep a record of the paid invoice for their services.
● Start-Up Marketing Expenses - You can deduct the marketing expenses you incur before the official launch date of your business. According to the IRS, a start-up expense is deductible if:
○ It’s a cost you pay or incur before the day your active trade or business begins.
○ It’s a cost you could deduct if you paid or incurred that expense to operate an existing active trade or business in the same field as the one you entered into.
Some of these expenses include:
○ Business Cards
○ Posters and Banners
A start-up can deduct the expense of hiring a marketing or public relations agency to help prepare a press release, media campaign, launch event, or any other efforts that help you start off strong when your business begins. Talk to your accountant about your start-up expenses and how you can get the most back at tax time.
● 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.
The IRS will want to see receipts or paid invoices as proof for every marketing expense you deduct. You can also keep a log of what each marketing expense was used for and how it helped your business bring in revenue. The more information you keep, the better prepared you’ll be to justify your deductions if you are ever audited by the IRS.
If you want to know more about marketing expenses, you can read our article “A Summary of Industry-Based Marketing Costs” or contact us.
Tags: small business taxes