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calculating and substantiating actual expenses. In most • Repayments of income. 12:18 - 30-Jan-2020
cases, you will figure your deduction by multiplying $5 by • Subscriptions to trade or professional publications.
the area of your home used for a qualified business use.
The area you use to figure your deduction is limited to 300 • Supplies and materials.
square feet. For more information, see the Instructions for • Utilities.
Schedule C.
More information. For more information on deducting Expenses You Cannot Deduct
expenses for the business use of your home, see Pub.
587. You usually cannot deduct the following as business ex-
penses. For more information, see Pub. 535.
De Minimis Safe Harbor for • Bribes and kickbacks.
Tangible Property • Charitable contributions.

Generally, you must capitalize costs to acquire or produce • Demolition expenses or losses.
real or tangible personal property used in your trade or • Dues to business, social, athletic, luncheon, sporting,
business, such as buildings, equipment, or furniture. How- airline, and hotel clubs.
ever, if you elect to use the de minimis safe harbor for tan- • Entertainment expenses.
gible property, you may deduct de minimis amounts paid
to acquire or produce certain tangible property if these • Improvements to real or tangible personal property.
amounts are deducted by you for financial accounting pur- Improvements are amounts paid for betterments to
poses or in keeping your books and records. your property, restorations of your property, or work
that adapts your property to a new or different use.
If you have an applicable financial statement, you may
use this safe harbor to deduct amounts paid for tangible • Lobbying expenses.
property up to $5,000 per item or invoice. If you do not • Penalties and fines you pay to a governmental agency
have an applicable financial statement, you may use the or instrumentality because you broke the law.
de minimis safe harbor to deduct amounts paid for tangi-
ble property up to $2,500 per item or invoice. • Personal, living, and family expenses.
Amounts qualifying under this de minimis safe harbor • Political contributions.
should be included as other expenses in Part V of Sched- • Settlements or payments related to sexual harass-
ule C. ment or sexual abuse if such settlement or payment is
More information. For details on making this election subject to a nondisclosure agreement. You also can-
not deduct attorney fees related to such settlement or
and requirements for using the de minimis safe harbor for payment.
tangible property, see chapter 1 of Pub. 535.

Other Expenses
You Can Deduct 9.

You also may be able to deduct the following expenses.
See Pub. 535 to find out whether you can deduct them. Figuring Net Profit
• Advertising.
• Bank fees. or Loss
• Donations to business organizations.
• Education expenses. Introduction
• Impairment-related expenses. After figuring your business income and expenses, you
• Interview expense allowances. are ready to figure the net profit or net loss from your busi-
• Licenses and regulatory fees. ness. You do this by subtracting business expenses from
business income. If your expenses are less than your in-
• Moving machinery. come, the difference is net profit and becomes part of
• Outplacement services. your income on line 3 of Schedule 1 (Form 1040 or
• Penalties and fines you pay for late performance or 1040-SR). If your expenses are more than your income,
the difference is a net loss. You usually can deduct it from
nonperformance of a contract. gross income on line 3 of Schedule 1 (Form 1040 or
• Repairs and maintenance to real or tangible personal 1040-SR). But in some situations your loss is limited. This
property. chapter briefly explains three of those situations. Other

Chapter 9 Figuring Net Profit or Loss Page 39