How do you know if a business expense is tax deductible? The tax code says you can write off “ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.” An ordinary expense is common or customary in your industry, while a necessary expense is one that is helpful or appropriate in the circumstances.

What is critical is that an expense meets both criteria and is properly substantiated. The IRS has challenged, and courts have denied, deductions for various reasons, including a lack of clear business purpose or records that failed to show a taxpayer was operating a business. Contact your Kemper advisor for guidance on substantiating business deductions.