Foundation 10 of 20 · Record
What Can a Small Business Write Off? Deductions and Recordkeeping
A Cost You Cannot Prove Is a Tax You Chose to Pay.
"What can I write off?" If you throw away receipts, you may be paying tax on money you already spent running the business. Here is what a small business can write off, what counts as proof, and a three-word habit that keeps it.
Last Updated: 10/25/2026 · Written by Dr. Paul Borosky, DBA, MBA
The Short Answer
What Can a Small Business Write Off?
Textbook Definition
A business deduction is an expense that is both ordinary, meaning common and accepted in your industry, and necessary, meaning helpful and appropriate for your trade or business, and that is subtracted from income to determine taxable profit.
In Plain English
A business can generally deduct the normal costs of running the business, like materials, supplies, fees, and rent, which lowers the profit you are taxed on. But only if you can prove each cost with a receipt, invoice, or bank record.
Why It Matters
Why Do Honest Owners Overpay on Taxes?
A business is taxed on what it keeps, not on everything it takes in. The paint, the canvas, the booth fee, and the supplies come off the top before anyone counts what is left. That is the good news. The catch is that the IRS says small business owners must be able to prove expenses to deduct them.
Owners who throw receipts away, or never write down what a purchase was for, end up paying tax on money they already spent. Not because anyone cheated them. Because honesty needs paperwork. The proof is called documentation, and keeping it organized is the whole job.
Signs you have this problem:
- You throw receipts away, or lose them in pockets and bags.
- You report your sales to your tax preparer and little else.
- You pay cash at markets or fairs and keep no record.
- You cannot say what you spent on supplies last year.
- You assume your preparer will "figure out" your costs.
- You have a shoebox of receipts with no idea what half of them were for.
What It Looks Like
What It Looks Like When the Receipts Are Gone
From the Fabled Forest · Chapter 10
Hazy Hazel is the best painter in the forest, hidden in a booth almost nobody can find. She reported every coin she took in, honestly, to the Revenue Office. Ninety coins last year. And nothing else, because receipts cluttered her sketchbook, so she threw them all away.
Doctor Owl had her guess her costs: paint, canvas, frames, booth fees, brushes. About seventy-seven coins. She had kept about thirteen and been paying tax as if she kept ninety. But a cost she could not prove did not count.
He gave her one pouch, three words on the back of every receipt, and one page of totals a month. Then she asked the general store, the fair, and the bank for copies of the year before. Most of it was still there. Agnes accepted the documented costs, and Hazel owed considerably less than the year before.
Hazel's story is Chapter 10 of Accounting and Finance for Small Businesses, Book 2 of Dr. Paul's Fabled Forest Business School Series.
The Fix
How to Keep Records That Support Your Deductions in 5 Steps
This teaches the habit, not the law. Which costs you can deduct, and how much, depends on your business and the year's rules.
Use one place for every business receipt.
A pouch, an envelope, or one folder on your phone. One. Paper and photos both work, as long as they all go to the same place.
Write what it was for, the moment you get it.
Three words on the back, or in the photo note: "canvas, fair paintings." In six months you will not remember what a $40 slip from the hardware store was.
Sort and total once a month.
Empty the pouch, sort by kind (supplies, fees, rent, travel), add each pile, and write the totals on one page. That page is what your tax professional will want.
Recover what you can from suppliers and your bank.
Lost receipts are not always gone. Stores, venues, and suppliers often keep records, and your bank or card statement shows the date and amount. Ask before you give up on a cost.
Keep the records, not just the totals.
The IRS says the general rule is to keep records three years, depending on the action, expense, and event recorded. Some records need longer. Ask your tax professional what applies to you.
Dr. Paul's Insight
The most expensive habit in small business taxes is paying cash with no record. Card and bank payments leave a trail even when the receipt is lost. Cash leaves nothing. If you buy at markets, fairs, or from vendors who do not give receipts, write your own slip on the spot: date, amount, who, what for. And run every business purchase through the business account, so the bank statement becomes your backup record.
Sample: A Monthly Receipt Summary
One page a month. Keep the slips behind it.
| Kind | Receipts | Total |
|---|---|---|
| Paint and supplies | 6 | $310 |
| Canvas and frames | 3 | $420 |
| Booth and event fees | 2 | $150 |
| Equipment (new easel) | 1 | $60 |
| Month total | 12 | $940 |
Sample for illustration. Ask a tax professional which costs are deductible for your business.
Watch
Video: What Small Business Owners Can Write Off
What Can a Small Business Write Off? Deductions and Recordkeeping
Dr. Paul sets up the one-pouch receipt system and a monthly summary page on screen.
From the Book
Why Would I Keep Paper?
Chapter 10 · Recordkeeping and Business Deductions
Best-Kept Secret, Best-Lost Receipt: A Squirrel's Sketchbook
"Can you prove it?"
"Prove it?"
"The paint. The canvas. The booth. Do you have the receipts?"
Hazel looked at him with real surprise.
"I'm a painter," she said. "Why would I keep paper?"
Could Hazel prove three years of costs she had already thrown away? Find out in Chapter 10. Book 2 of Dr. Paul's Fabled Forest Business School Series.
Get the Book on Amazon →FAQ
Business Deduction Questions
What expenses can a small business deduct?
What records do I need to prove a business deduction?
How long should I keep business receipts?
Can I deduct something I paid for personally?
Keep Going
Related Foundations
Recordkeeping connects to four foundations. The receipt is where every one of them starts. New to a term on this page? Every one is in the accounting and finance glossary.
Foundation 9 · Tax Planning
Deductions lower the bill. Tax planning makes sure the money is there.
Foundation 2 · Bookkeeping
Every receipt becomes a line in your weekly ledger.
Foundation 3 · Chart of Accounts
Named categories make your monthly receipt totals quick.
Foundation 6 · Bank Reconciliation
Your bank statement backs up costs when a receipt goes missing.
Written by Dr. Paul Borosky, DBA, MBA, business consultant and author with an MBA focused in finance. Tax rules vary, so talk with a qualified tax professional about your own situation. Want help setting up records your tax professional will thank you for? See fractional CFO services.
This page is for general educational purposes only. It is not legal, financial, tax, accounting, or lending advice. Tax rules change by place and by year. Dollar figures are illustrations. The Fabled Forest and its characters are fictional. For decisions about your own business, consult a qualified professional.