Holiday Shopping Tax Tips for Business Owners

Every year, Black Friday (the day after Thanksgiving) pulls millions out of bed to shop the latest deals. While most may be eying gifts for loved ones, the savvy business owner can take advantage of potential tax savings during year-end holiday sales.

In addition to price tag discounts, you may claim a tax deduction on purchases like computers, furniture, software, and printing.

But be sure the expenses qualify for a deduction. Also, heed other potential pitfalls, like reduced cash flow and the timing of purchases.

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Business expense deductions

To qualify as a business deduction on your federal tax return, a claimed purchase must be:

• Ordinary (common in the industry), AND
• Necessary (appropriate and helpful)

Any purchases meeting those requirements may be tax-deductible on your year-end return. This may include business expense deductions for:

• Technology and electronics, like computers, keyboards, and printers
• Business card processing fees
• Software subscriptions
• Office supplies, like pens, paper, ink
• Marketing and advertising (think ‘printing materials’ in terms of Black Friday deals)
• Office furniture and equipment, like shelves, desks, and chairs

However, there are some restrictions on what qualifies as tax-deductible. Next, we’ll look at some business expenses you probably can’t deduct from your taxes.

Non-deductible business expenses

Whether you’re perusing the computer store shelves or hitting the racks at a retail outlet on Black Friday, be sure what you’re buying qualifies for a business expense deduction. Otherwise, you may be in for a rude awakening when tax time comes.

For instance, the following expenses are not tax-deductible:

• Business clothes (unless it’s a uniform, safety equipment, or other apparel you couldn’t use outside of the business)
• Gifts more than $25 (given from a business to an individual)
• Personal expenses

Personal vs. professional business expenses

There may be a temptation to claim a partial deduction for personal items you sometimes use for business. For instance, you could buy a printer for 50% business and 50% personal. Or, items for your home office that you use for non-office related activities throughout the year.

But by “splitting” the use of an object, you are opening yourself up to a potential audit risk with the IRS. In other words, the IRS looks for this commingling of business vs. pleasure in determining which audits to assess.

Document the times you use an asset for its intended business purpose.

Year-end holiday shopping

It’s easy to get pulled in by flashy “SALE” signs, especially during the holiday season. But be sure you’re spending money on value-added items to your business — not just decor or simple cosmetics.

You might not need to buy that new curved, ultrawide computer monitor if your current one works just fine.

Not only could frivolous expenditures cause you to spend more than you’re saving, but you could also run into cash flow issues later in the year when you don't have enough saved for investment.

That said, taking advantage of Black Friday timing can save tax dollars on more expensive buys, like computers, TVs, or other high-value equipment.

For these purchases, small businesses can expense the full cost of an asset even if bought at the end of the year. This means that, for 2024, you could expense on your federal return:

• $1,220,000 in qualifying business purchases, OR
• Taxable income, whichever is less

For this reason, timing matters. Be sure to consult with a tax professional for rules that may be unique to your situation, though, and keep in mind state income tax laws may differ from federal.

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