There are many items and facets in the cost of operating a company or business. Some of these items are eligible for special business tax deductions and credits, some simply cut into the profit a business, and in doing so reduces a business’s tax liability by lowering its taxable income. Advertising and promotional costs that promote the business to customers and clients can fall into both categories.
For people that document their tax deductions, it’s important to understand that every deduction is an independent listing on the tax return that decreases taxable earnings by the worth of the deduction. The procedure for tax deductions in regards to your business is a little different. As you know, a company’s taxable income comes from their total earnings minus their expenses. Well, because marketing and advertising expenses are imperative in running a company, these costs are indeed deductible.
With all of that said, when it comes to marketing and advertising, a company can only deduct these costs when they are normal and imperative. In other words, you can only deduct advertising and marketing expenses when they have a direct connection to the company and the potential to get to the consumer. For example, contributions or gifts are not qualified for deductions because they do not establish the company to the customer.
So as long as there is a clear connection between your marketing efforts and your business, you can deduct these expenses from your taxable income. These ordinary efforts include and print, email and media marketing, branding and other forms of corporate identity, utilizing marketing firms for all of your advertising efforts, customer events, copywriting, website design or upgrades, billboards, signs, and many other things.
Being able to deduct advertising costs from your taxable income is a great reason to spend more money on marketing. However, with all of this said, let’s not forget the most important thing when it comes to why you should spend money on advertising and marketing: it increases your bottom line! We all know the old adage… you have to spend money to make money. Properly budgeting for marketing is beyond imperative for a business today, word of mouth can take you places, but just relying on that often eventually leads to a stand still.
We wrote this article because there are many business owners who miss these routine deductions. There are many people that feel they just can’t afford to spend money on marketing, however, once the tax benefits are understood, you should have a new, fresh take on your marketing budget.