Surprisingly, 43% of small business owners are entering zeros on that line of their business return or on their Schedule C. What’s more remarkable is that 27% of owners aren’t even aware that the IRS allows them to write off legitimate marketing expenses.
Not taking those expenses is like volunteering to pay more taxes than you have to, which makes about as much sense as ignoring a job order from a valued client. You wouldn’t do that, so why would you skip something as valuable as writing off what you spent on things like business cards, your website (and the hosting fees), holiday gift cards to clients, advertising, and those slick brochures you had printed.
Even though only a bare majority of small business owners write off their marketing expenses — why, that is, wasn’t reported — 70% say marketing is a good investment. If you want evidence of that, here’s a collection of studies and research that will help you understand why marketing, and online marketing in particular, is important.
Besides those routine and obvious marketing costs listed above, what other types of marketing costs are deductible? Did you hire a web designer to update your site? The fees are deductible as a marketing expense (unless that designer is a W-2 employee.)
Some agencies are creating videos to promote themselves. Even if you filmed it yourself, the cost of having it edited professionally is deductible. Did you rent or buy a video camera for the project? The purchase may be expensable if the camera is only used for the business.
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Team sponsorships are a marketing expense. But be careful of those season tickets. If the only one who goes to the game with you is your brother-in-law, that’s not any kind of a deductible expense. On the other hand, client gifts up to $25 are deductible, so be sure to write off the cookie platters and floral arrangements you send for every job order.
Some firms, especially those with a staffing division, offer a prize or some other reward for making a referral. Restaurant gift cards are popular and, unlike taking a client out yourself, these fall under marketing and promotion, not entertainment, so aren’t limited to the 50% write off.
If you’ve already filed your return and only now are realizing you do have more deductions than you claimed, file an amended return. It may be a hassle, but it might be worth a few hundred dollars or even more in your pocket. As long as the expense is reasonable, and you can document it, take it.