35 essential business expense categories for businesses of all sizes

Lumping software and office supplies expenses into one “miscellaneous” spreadsheet can feel like a no-brainer, right? 

Well, doing that is costing you tax deductions. 

When you sort business expenses into clear categories, you find legitimate tax write-offs that lower your taxable income and still keep you compliant with IRS rules.

Say you’re paying $200 a month for SaaS subscriptions. Categorized properly, that’s $2,400 in deductible business expenses over the year. Or take new equipment: if you spend $1,500 on a work laptop, you can deduct the full amount.

In this article, you’ll learn 35 ways to categorize business expenses and how to make expense tracking work for your startup or small business.

What are business expense categories?

Business expense categories are systematic groupings of all the costs incurred while your company is in operation. They make it easy for you to budget, track your spending habits, control costs, and analyze financial performance.

Why do you need business expense categories?

You gain these four advantages when you do:

1. Maximum tax deduction recovery

Proper categorization ensures you capture every deductible business expense, including home office costs, vehicle expenses, and equipment depreciation.

2. IRS audit protection and compliance

The IRS requires detailed records for expenses over $75. Clear categories with receipts and business purpose documentation meet those requirements and protect against IRS scrutiny during tax time.

3. Strategic cost control and budgeting

You see exactly where your money goes so you can cut costs and budget accordingly.

4. Tax return preparation without the headaches

Instead of scrambling through receipts during tax season, you’ll have a clear record that provides accurate cash flow forecasts throughout the year and makes filing simple.

Types of business expenses

Understanding these three major business expense types can help your business better manage budgets, assess profitability, and maintain strong cash flow.

Fixed Expenses

Fixed expenses, or overhead, are costs that remain the same regardless of how much business you do. They must be paid even if revenue dips.

Examples of fixed expenses: 

• Business loan payments

• Base employee salaries

• Insurance premiums

• Office rent or lease

• Depreciation

Periodic Expenses

Periodic expenses are irregular costs that occur sporadically throughout the tax year. They’re predictable, but they need to be budgeted for in advance.

Examples: 

• Equipment maintenance or repairs

• Annual license or permit renewals

• Seasonal inventory purchases

• Legal or consulting fees

• Marketing campaigns

Variable Expenses

Variable expenses, or prime costs, fluctuate with business activity. When sales increase, these costs usually go up too.

Examples: 

• Credit card processing fees

• Raw materials and supplies

• Shipping and delivery costs

• Commission-based payroll

• Utilities

What are deductible business expenses?

Deductible business expenses are costs that the IRS allows businesses to subtract from their total taxable income, creating direct tax savings. Knowing which expenses are tax-deductible can help you reduce your net income and tax liability.

The IRS "ordinary and necessary" standard

To qualify as tax-deductible, an expense must be both ordinary and necessary. 

An ordinary expense is common and accepted in your trade or business. Examples: 

• A graphic designer buying Adobe Creative Cloud

• A plumber buying pipe fittings

• A consultant paying for Zoom

A necessary one is helpful and appropriate for your business operations. Examples: 

• Business insurance

• Website hosting

• Accounting software

Fully vs. partially deductible expenses

Not all business expenses are fully tax-deductible, and some may have limitations or specific conditions. 

For example:

The IRS specifies that business owners must maintain records showing the amount, time, place, and business purpose of each deductible expense. It can be helpful to consult with a tax professional to ensure you’re fully up to date on current regulations and maximizing your business tax deductions.

35 business expense categories

The IRS allows deductions across dozens of categories, but missing even a few can leave money on the table. To make it easier, we’ve compiled a comprehensive list of 35 expense categories you should track:

1. Bank fees

Charges incurred from banking activities, including account maintenance, wire transfers, and overdraft fees.

 Example: Monthly service charges for a business checking account.

2. Mortgage costs

Expenses related to the mortgage of business property, such as interest payments and closing costs.

 Example: Interest paid on a mortgage for the company's office building.

3. Office supplies

Everyday items used in the operation of a business.

Example: Purchasing printer paper, pens, and notebooks for staff use.

4. Marketing

Costs associated with promoting the business's products or services.

 Example: Expenses for running a social media advertising campaign.

5. Business meals

Expenses for meals with clients, partners, or employees during which business is conducted.

 Example: Paying for dinner during a meeting with a potential client to discuss a proposal.

6. Company car usage

Costs related to using and maintaining vehicles owned or leased by the business.

 Example: Fuel and maintenance expenses for a delivery van.

7. Client gifts

Expenses for gifts given to clients or customers as a gesture of appreciation or goodwill.

Example: Sending branded gift baskets to loyal customers during the holidays.

8. Dues and subscriptions

Fees for professional memberships, associations, or subscription services relevant to the business.

 Example: Annual membership dues for a trade association or subscriptions to industry journals.

9. Employee benefit programs

Costs of benefits provided to employees beyond their regular wages.

Example: Company contributions to employee health insurance premiums or retirement plans.

10. Insurance

Premiums paid for policies that protect the business from various risks.

Example: Payments for general liability insurance or property insurance.

11. Legal expenses

Fees paid for legal services necessary for business operations.

 Example: Attorney fees for drafting contracts or handling a lawsuit.

12. Employee salaries

Wages and salaries paid to employees, including bonuses and commissions.

Example: Monthly payroll expenses for staff members.

13. Depreciation

The allocation of the cost of tangible assets over their useful lives.

Example: Annual depreciation expense for office equipment like computers and furniture.

14. Employee loans

Funds lent to employees, often with the expectation of repayment.

Example: Providing an advance on salary to an employee for emergency expenses.

15. Foreign earned income

Income earned from business activities conducted outside the home country.

 Example: Revenue from consulting services provided to an international client.

16. Licenses and permits

Fees paid to obtain or renew legal permissions required for business operations.

Example: Cost of renewing a food service license for a restaurant.

17. Raw materials

Costs of basic materials used in the production of goods.

Example: Purchasing steel for a manufacturing company producing automotive parts.

18. Shipping

Expenses incurred when sending products to customers or receiving supplies.

Example: Paying courier services for delivering online orders to customers.

19. Utilities

Ongoing expenses for essential services required to run the business premises.

Example: Monthly payments for electricity, water, and internet services.

20. Business travel

Costs associated with travel for business purposes, including transportation and lodging.

Example: Airfare and hotel expenses for attending an industry conference.

21. Software

Expenses for purchasing or subscribing to software tools necessary for operations.

Example: Subscription fees for project management software.

22. Employee training 

Costs of programs and resources to improve employee skills and productivity.

Example: Fees for a workshop on advanced sales techniques for the sales team

23. Continuing education

Expenses for courses or programs that enhance professional knowledge relevant to the business.

Example: Tuition for an accountant taking advanced courses in tax law

24. Maintenance and repairs

Costs for the upkeep and fixing of business property and equipment.

Example: Repairing a broken piece of machinery on a production line.

25. Charitable contributions

Donations made to qualified charitable organizations which may also offer tax benefits.

Example: Donating funds to a local nonprofit organization or sponsoring a community event.

26. Moving expenses

Costs of relocating your business operations or equipment.

Example: Hiring movers to transport office furniture or machinery to a new location.

27. Startup expenses

Pre-opening costs incurred before your business begins operating.

Example: Market research, business registration fees, initial advertising, or staff training.

28. Credit and collection fees

Costs of collecting overdue payments or writing off bad debts.

Example: Collection agency fees, processing costs for bounced checks, or legal fees for debt recovery.

29. Medical expenses

Health-related costs deductible for self-employed individuals. 

Example: Self-employed health insurance premiums, dental insurance premiums, or long-term care insurance.

30. Amortization

Spreading out the cost of intangible assets over time.

Example: Patent costs, startup costs, or goodwill spread out over 15 years.

31. Inventory

Products or materials held for resale or production, deducted as cost of goods sold (COGS).

Example: Packaging materials.

32. Pension contributions

Employer contributions to employee retirement plans. 

Example: 401(k) matching, SEP IRA contributions, or profit-sharing contributions.

33. Telecommunications

Business-related communication services. 

Example: Office phone lines, internet service, business mobile plans, or VOIP systems.

34. Employee transportation benefits

Subsidies or allowances for employee commuting.

Example: Transit passes, parking benefits, or commuter subsidies.

35. Interest

Interest on business-related loans and credit. 

Example: Equipment loan interest or business credit card balances.

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How to categorize and track business expenses for your startup or small business: 5 best practices

Categorizing and tracking business expenses can help with both financial reporting and optimizing business tax deductions. Here are five best practices to help you manage your expenses efficiently:

1. Consider your business structure and industry

Your startup or small business's legal structure (sole proprietorship, partnership, corporation, etc.) and the industry you operate in influence how you should categorize expenses. Different industries have unique costs, and certain expenses may be more prevalent or fall under special rules depending on your sector.

Tailor your expense categories to reflect your specific business needs and the common business expenses you often encounter. For example, a tech company might include "Software Development Costs," while a retail store might have "Inventory Purchases."

2. Rely on digital tools for automation

Accounting software and digital tools integrate with bank accounts and business credit cards for automated expense categorization. These tools reduce errors and save time.

Rippling offers AI-powered transaction categorization and integration with your accounting systems so you can close the books faster.

3. Review financial accounts regularly 

Regular reviews of your financial accounts will help you stay on top of your expenses, identify discrepancies, and adjust your budgets as needed. Taking a proactive approach helps ensure that your financial data is current and accurate.

Set aside time each month to reconcile bank statements, review expense reports, and assess your financial health.

4. Assign a category for every transaction

Consistently assigning a category to every transaction prevents misclassification or expenses slipping through the cracks. This makes for more accurate financial statements and simpler tax preparation when the time comes.

Create a comprehensive list of expense categories and train all your financial personnel to use them consistently.

5. Centralize expenses using a single business credit card account

Using a dedicated business credit card for all expenses centralizes your spending, making it easier to track and manage. It also separates personal and business expenses, which is a best practice for legal and tax purposes.

Opt for a card that offers benefits relevant to your business, such as cashback on office supplies or travel rewards, and use it exclusively for business transactions.

What other business expenses are tax-deductible?

In addition to the common expense categories, here are some additional tax-deductible business expenses to consider:

Work Opportunity Tax Credit (WOTC)

A federal tax credit available to employers who hire individuals from certain target groups, like veterans, ex-felons, or individuals receiving government assistance, who have consistently faced significant employment barriers.

New Markets Tax Credit

A credit that encourages investment in low-income communities by providing tax incentives to investors in Community Development Entities.

Intellectual property protection

Costs associated with securing patents, trademarks, or copyrights to protect your business's intellectual property.

Environmental cleanup costs

Expenses incurred from cleaning up environmental contamination, such as the removal of hazardous materials from a business site, can be tax-deductible under certain conditions.

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Non-deductible expenses

Although some business expenses can be written off, some are specifically disallowed by tax law. Knowing which ones are non-deductible helps ensure you're compliant and avoid complications when filing your taxes. Below are some typical examples of expenses you can't deduct:

Personal expenses

Any costs that are personal and not directly related to the operation of the business cannot be deducted. Mixing personal expenses with business finances can lead to complications and potential penalties during audits.

Example: Using company funds to pay for personal groceries, clothing, or family vacations.

Client entertainment

Expenses for entertainment activities provided to clients, such as sporting events, concerts, or recreational outings, are generally not tax-deductible. The IRS doesn’t allow business tax deductions for entertainment to prevent abuse of this category.

Example: Purchasing tickets to a baseball game or paying for a round of golf for a client.

Political contributions

Donations made to political parties, candidates, or political action committees are not deductible as business expenses. This rule exists so that businesses cannot reduce their taxable income through political influence.

Example: Contributing funds to a political campaign or sponsoring a political event.

Fines and penalties

Payments for fines or penalties resulting from violations of laws or regulations are not tax-deductible. The IRS does not allow business tax deductions for expenses that result from illegal activities or non-compliance.

Example: Paying a fine for violating environmental regulations or incurring penalties for late tax payments.

Automate expense management with Rippling 

Automate expenses with complete control. Expense reporting with real-time policy checks, seamless approvals, and direct accounting integration. That’s Rippling.

 Rippling consolidates all of your company’s finances — from payroll and benefits to corporate cards and expense management–giving you an up-to-date view of cash flow across your company and offering unprecedented control over spending patterns.  

 While most expense management solutions only allow for basic employee-manager approval chains, with Rippling expense management’s advanced policy engine, you can set hyper-custom policies based on the vendor, dollar amount, and expense category, helping you block out-of-policy expenses with ease. You can also tee up automated workflows that help you control spend, like triggering an alert when a department’s expenses sharply increase. 

With Rippling, you can: 

• Automatically route expenses and bills to the right approver every time. 

• Flag out-of-policy spending with hyper-custom policies, like by vendor or value, for further review. 

• Close the books faster with AI-powered transaction categorization and integration with your accounting systems.

Business expense categories FAQs

How can expenses be written off for a business?

Business expenses become tax write-offs when they meet IRS requirements for ordinary and necessary costs. Proper documentation, including receipts and business purpose records, supports these deductions on your tax return.

What tax deductions are available for a business?

Small businesses can claim numerous tax deductions, including office supplies, travel expenses, utilities, employee salaries, depreciation, and business loan interest. The home office deduction provides additional savings for self-employed individuals.

Work with an accountant to identify all eligible deductions and ensure compliance with IRS regulations.

Why are business expense categories important?

Business expense categories are essential for many reasons. Here are a few of the key ones: 

• They help keep your financial records organized, making it easier to track where money is spent.

• Categorizing expenses correctly is vital for tax purposes, so you can claim all eligible business tax deductions and remain compliant with tax laws, reducing the risk of audits and penalties.

• Understanding your spending patterns allows you to make better budgeting and strategic decisions to improve profitability.

What are the IRS’s business expense categories?

The IRS doesn't mandate specific categories, but requires that deductible expenses must be both ordinary (common in your trade or business) and necessary (helpful and appropriate). Common IRS-recognized categories include:

• Advertising and marketing

• Vehicle expenses

• Employee wages and benefits

• Rent or mortgage interest

• Utilities

• Office supplies

• Legal and professional services

• Travel expenses

• Health insurance premiums

Small business owners should categorize expenses to meet IRS guidelines while accurately reflecting their spending and aligning with their needs.

What is the expense category for business cards?

Business cards fall under the “advertising and marketing expenses” category since they promote your business's products or services. Their costs are generally considered a tax-deductible business expense when used for networking and marketing purposes.

How do I make sure my expense categories are correct?

To make sure you categorize your business expenses correctly, you can: 

• Work with an accountant or tax advisor familiar with your industry

• Leverage accounting and bookkeeping tools that offer standardized categories and can automate the tracking process

• Review IRS guidelines and updates to understand which expenses you can deduct and how they should be categorized

• Apply categories consistently across all transactions to maintain clear and organized records

• Keep detailed records and receipts for all expenses, noting the date, amount, and business purpose for each transaction

Can personal expenses ever be deducted as business expenses?

Generally, personal expenses are not deductible as business expenses. However, if an expense serves both personal and business purposes, you may be able to deduct the portion attributable to business use. For example, home office expenses and vehicle business use can be partially deducted based on business usage percentage. Keep meticulous records and consult a tax professional to help determine how much you can deduct.

This blog is based on information available to Rippling as of August 25, 2025.