An expense is deductible on a Schedule C when it is ordinary and necessary for your business, when the personal share of it has been taken out, and when you can explain it from something written at the time. Most refused deductions fail the third test rather than the first. The expense was real, the money left the account, and there is nothing to show what it was for.
The useful thing to know is not another list of deductions. It is where the line falls, and which of the things people confidently claim do not survive a question.
Ordinary, necessary, and the part people skip
Ordinary means common and accepted in your line of work. Necessary means helpful and appropriate for it. Neither word means indispensable, and a deduction does not fail because the business could have survived without it.
The part that gets skipped is the third requirement, which is not in that phrase at all: an expense used for both business and personal purposes has to be split. Only the business share is deductible. This is where most of the real disagreement happens, and it is almost never about whether the expense existed.
A phone used for work and for everything else is not a business expense at 100 percent. Neither is a car. Neither is a broadband connection in a home where other people live. Claiming the full amount is the single most common way an otherwise legitimate expense becomes an indefensible one.
What gets refused most often
Two things, repeatedly.
Clothing. The rule is narrow. Clothing is deductible only where it is required for the work and is not suitable for ordinary everyday wear. The suitability test is objective: it does not matter that you would never wear the suit outside work, only that it could be worn. A branded uniform, protective gear, and specialised theatrical costume qualify. A suit bought for client meetings does not, however genuinely it was bought for client meetings.
The personal share of a phone or a vehicle, claimed in full. Covered above, and worth stating twice because it is that common.
Meals, and the 50 percent limit
Business meals are generally deductible at 50 percent of the unreimbursed cost. Not 100 percent, and there is no version of the rule where taking a client to lunch is fully deductible as a matter of course. A handful of exceptions exist, including meals treated as compensation to an employee and meals that are genuinely advertising, but they are exceptions and they are narrow.
The record has to show more than the amount. It has to show the business purpose and who was there. On the form itself, meals sit apart from other expenses for exactly this reason, which is one of the things a Schedule C asks you to separate.
Mileage, and the trap in 2026 specifically
If you use the standard mileage rate rather than actual costs, 2026 has two rates, not one:
- 72.5 cents a mile for 1 January to 30 June 2026
- 76 cents a mile for 1 July to 31 December 2026
A single 2026 mileage log therefore has to be split at 1 July and priced twice. For comparison, 2025 ran at one rate of 70 cents for the whole year, which is the normal pattern and is why this is easy to get wrong.
A great deal of published guidance states a single 2026 rate. Any page that does is wrong for half the year, in one direction or the other.
Whichever method you use, the record has to show the time, place and business purpose of the travel, plus the mileage. A total at the end of the year, reconstructed from memory, is the thing that fails.
What people leave out that they were entitled to
The refusals get the attention, but understated returns are at least as common, and nobody writes to tell you about them.
The deductible half of self employment tax. The employer equivalent portion of self employment tax is deductible against adjusted gross income. It is automatic if the return is prepared properly and simply absent if it is not. Note what it does and does not do: it reduces income tax only. It does not reduce your net earnings from self employment, and it does not reduce the self employment tax itself.
Self employed health insurance premiums, and this one has a rule that costs people real money. You can deduct premiums for yourself, your spouse, your dependents, and a child under 27 at the end of the year even if that child was not your dependent. The deduction cannot exceed your net profit from the business that established the plan.
The restriction is the part to read twice. You cannot include premiums for any month you were eligible to participate in a health plan subsidised by your employer or your spouse’s employer. Eligibility alone disqualifies that month. You do not have to have enrolled, or wanted to, or known about it. A spouse starting a job with health cover in September can quietly end this deduction from September onward, and because the test runs month by month rather than across the year, the earlier months usually survive.
The home office, frequently abandoned because working out the actual costs looks like more trouble than it is worth. There is a simplified method: 5 dollars per square foot, up to a maximum of 300 square feet, which caps that method at 1,500 dollars. It cannot exceed the gross income from the business use, and electing it means no depreciation and no actual home costs for that year. For a small room it is often close to the actual figure and takes minutes rather than an afternoon.
Why records decide it, not honesty
The question that settles a deduction is rarely whether the expense was genuine. It is whether it can be explained from something written at the time.
Publication 463 uses the phrase timely kept records with documentary evidence, and the emphasis on timely is deliberate. A log written as you went is evidence. The same log written in March for the previous year, from bank statements and recollection, is an assertion. They can contain identical numbers and carry entirely different weight.
This is the whole of the practical advice. A contemporaneous record turns a defensible position into a boring one.
What none of this changes
Deductions reduce the profit the tax is calculated on. They do not reduce the tax by the amount of the deduction, and a deduction is never a reason on its own to spend money. Spending a dollar to save a fraction of a dollar leaves you down by the rest.
Where the expense was going to happen anyway, claim it properly and record it properly. Where it was not, the deduction is not the reason to do it.
Where the expense was going to happen anyway, claim it properly and record it properly. Where it was not, the deduction is not the reason to do it. Getting the splits right is most of what preparing an individual return actually involves.