Ordinary And Necessary Expenses - O & NE

Expenses incurred by individuals for their business or primary employment. "Ordinary and necessary" expenses are categorized as such for income tax purposes, and these expenses are generally considered tax deductible in the year they are incurred.

These expenses are outlined in Section 162(a) of the Internal Revenue Code and must pass basic tests of relevance to business, as well as necessity.

This section of the tax code is the source of a large number of deductions by individuals, especially in years of transition between jobs or careers. Typical expenses that can be included in the "ordinary and necessary" group include a uniform for work or business software purchased for a home computer.

Startup costs associated with setting up a new business may also be tax deductible, but typically must be spread out over several years; these costs do not qualify as ordinary and necessary for IRS purposes.


Investment dictionary. . 2012.

Look at other dictionaries:

  • ordinary and necessary expenses — n. Expenses that are normal, expected, and appropriate to the conduct of a business. The Essential Law Dictionary. Sphinx Publishing, An imprint of Sourcebooks, Inc. Amy Hackney Blackwell. 2008 …   Law dictionary

  • IRS Publication 463: Travel, Entertainment, Gift, And Car Expenses — A document published by the Internal Revenue Service that provides details on which business expenses may be deducted from individual or self employment tax obligations. Deductions for travel, entertainment, gifts or transportation related… …   Investment dictionary

  • ordinary — 1. noun At common law, one who had exempt and immediate jurisdiction in causes ecclesiastical. Also a bishop; and an archbishop is the ordinary of the whole province, to visit and receive appeals from inferior jurisdictions. Also a commissary or… …   Black's law dictionary

  • ordinary — or·di·nary adj: of a kind to be expected from the average person or in the normal course of events; broadly: of a common kind or degree an ordinary proceeding compare extraordinary Merriam Webster’s Dictionary of Law. Merriam Webster. 1996 …   Law dictionary

  • necessary — This word must be considered in the connection in which it is used, as it is a word susceptible of various meanings. It may import absolute physical necessity or inevitability, or it may import that which is only convenient, useful, appropriate,… …   Black's law dictionary

  • IRS Publication 535 - Business Expenses — A document published by the Internal Revenue Service (IRS) that provides guidance on what types of business expenses are and are not deductible. IRS Publication 535 covers the rules for deducting business expenses, and outlines the most common… …   Investment dictionary

  • Public Policy Limitation on Deduction for Business Expenses — Brief Introduction: Deduction for Business Expenses Section 162(a) of the Internal Revenue Code allows for taxpayers to deduct ordinary and necessary expenses paid or incurred in carrying on a trade or business from their gross income. [26 U.S.C …   Wikipedia

  • Form 2106-EZ: Unreimbursed Employee Business Expenses — A tax form distributed by the Internal Revenue Service (IRS) and used by employees deducting ordinary and necessary expenses related to their jobs. Ordinary expenses are those generally considered as common in a particular line of business;… …   Investment dictionary

  • running expenses — noun plural : daily, current, or ordinary and necessary expenses : operating costs …   Useful english dictionary

  • Form 2106: Employee Business Expenses — A tax form distributed by the Internal Revenue Service (IRS) and used by taxpayers seeking to deduct expenses incurred while conducting business. In order for business expenses to be deducted, they must be considered ordinary and necessary.… …   Investment dictionary

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.