When discussing business expenses, a requirement for expenses to be deductible is that they be "ordinary...

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When discussing business expenses, a requirement for expenses to be deductible is that they be "ordinary...

When discussing business expenses, a requirement for expenses to be deductible is that they be "ordinary and necessary." What does "ordinary" mean in this context?What does "necessary" mean?What is a third requirement? And what does that mean?

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Answer 1

Answer #1

In this context, ordinary means that these expenses are common in the industry and most business owners in this line of business or trade would potentially expense these out.

Necessary means that these expenses which help in doing business are appropriate and the business owners will not be able to handle the business if they do not incur these expenses.

The third requirement is that these expenses should be reasonable.

Reasonable means that these expenses should be appropriate considering the facts and circumstances.

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Answer 2

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When discussing business expenses, a requirement for expenses to be deductible is that they be "ordinary...

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Ordinary and necessary business expenses are deductible only to the extent they are reasonable in amount....

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When discussing business expenses, a requirement for expenses to be deductible is that they be "ordinary...

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