J.K. Lasser's Small Business Taxes 2013: Your Complete Guide to a Better Bottom Line

Supplies, Materials, and Office Expenses

The cost of incidental supplies and materials used in your business is deductible as an ordinary and necessary business expense. This includes copy paper, cleaning supplies, and other miscellaneous costs. However, if you are on the cash basis and order such large quantities that the supplies or materials will last you more than a year, you can deduct only the portion of the cost related to supplies or materials expected to be used within the year.

Supplies used directly or indirectly in manufacturing goods are part of the cost of goods sold (see Chapter 4). The purchase of a capital asset (an item with a useful life greater than 1 year) cannot be written off merely by calling it a supply (although it, too, may be deducted through expensing, as explained in Chapter 14).

Usually, you need to retain receipts or other proof of any supplies and materials you deduct. However, the Tax Court in 1 case allowed a deduction for some office supplies based on the Cohan rule (explained in Chapter 4). Despite lack of receipts, the Tax Court estimated the amount of deductible expenses in this case.

Postage and Shipping

The costs of postage, delivery charges, courier and messenger charges, and other mailing and shipping costs are deductible. However, freight charges to obtain inventory are part of the cost of goods sold. Similarly, freight charges for business assets, such as furniture or equipment, are added to the basis of these assets and recovered through ...