Cost of Materials and Inventory

• If you manufacture or assemble a product, the cost of materials, packaging and shipping are deductible. If you buy and resell products, the cost of inventory, packaging and shipping are deductible expenses.
  
  

Professional Services and Employee Costs

• Legal and other professional service fees, advertising costs, commissions and contractor's wages are all deductible. You can also deduct any salary paid to employees, payroll taxes and the cost of any benefits you provide for the employee.
  
  

Office Building Costs

• If you own the building your business is located in, then you can depreciate the cost of the building and deduct a portion of that cost each year. You can also deduct interest paid on a loan for the building and real estate taxes for the building. If you rent space for your business, you can deduct the amount paid for rent. You can also deduct the cost of utilities for your business, including electricity, gas, water and phone service. If you use a room in your home for your business, you can take a home office deduction for a portion of the cost of the home equal to the square footage percentage of the home that you use for business.
  
  

Office Expense and Other Operating Costs

• Office expenses include items such as office supplies, office equipment and furniture. Other operating costs include items such as cell phone expense, Internet provider fees, cable television and vending items.
  
  

Vehicle Expense

• You can deduct vehicle costs, such as gasoline and oil, that are associated with your business or you can deduct a standard mileage rate for the business miles for which you use the vehicle. If the vehicle is an income-producing item, such as a tow truck, then the actual cost of the vehicle can be deducted by depreciating the asset or the cost to lease the vehicle can be deducted. Interest on the auto loan for an income-producing vehicle is also deductible as well as the cost of repairs, maintenance, inspection fees and license tag renewal.
  
  

Travel, Meals and Entertainment Expenses

• Costs for travel, meals and entertainment for business purposes can be deducted. That includes expenses such as professional conferences and workshops and client meals and entertainment. Meals eaten locally are usually limited to 50 percent of the total expense. Meals eaten while traveling are considered part of travel expenses and are deducted at the full amount.