Advertising your business can cost big money. Fortunately, the Internal Revenue Service recognizes these business expenses and allows you to deduct the cost on your taxes. Increased advertising is believed to boost sales and generate more taxable income in the future.
Sponsoring an event for a good cause, like supporting your local nonprofit with free food and beverages as a means of marketing, is considered tax-deductible by the IRS. The event is considered goodwill advertising to keep your name before the public with reasonable expectations of gaining business in the future. The IRS requires you conduct business during the event which could include a sales pitch or product demonstration, and the event must not be considered overly luxurious. The event must be open to the general public in order to be 100% deductible. Take pictures or video to prove your event was business related. You must provide records to prove the business purpose, the amount of all expenses, and the date and location of the event.
Advertising is the process of marketing your business to targeted, potential customers. Advertising your business allows you to share your company’s brand, products, and services in hope of gaining new business. Advertising expenses can include business cards, informational brochures, advertisements in print publications, direct mail, and technology advances like text messaging, social media marketing, stock image purchases, online advertisements, and your website. The costs of your website domain name registration fees, monthly hosting fees, and development of your website are considered tax deductible.
The IRS considers a membership to your local chamber of commerce, business leagues, real estate boards, trade associations, and professional organization tax-deductible if the purpose of your membership is not related to entertainment purposes. If you advertise with an organization, it may be considered deductible as an advertising expense and not a business expense. You can deduct expenses directly related to attending business meetings or conventions of the above listed organizations. Membership fees for country clubs, sports clubs, and other clubs that provide meals (especially alcohol) and entertainment are not considered tax deductible as they are not conducive to conduct business.
The IRS considers advertising expenses to be tax deductible but all businesses are different so you should confirm your unique business situation with your preferred tax professional. As a standard the IRS requires all deductions to be reasonable and in line with your total taxable sales. You should keep receipts, canceled checks, and detailed supporting documentation for all related advertising expenses.