What Counts as a Business Expense When You’re a Creative Entrepreneur?

You just bought a bundle of art supplies on sale, an online course to help you run your business, or maybe upgraded your packaging to give customers a better unboxing experience. While you’re excited to be growing your creative business, you might also be wondering: is any of this really a business expense I can write off on my taxes? 

Knowing what counts - and what doesn’t - as a business expense is incredibly important. It can save you trouble later around tax time and more importantly, correctly recording business expenses gives you accurate insight into how much you’re spending (and what your true profits are). 

Tracking expenses doesn’t have to feel boring or overwhelming. This guide is designed with creative businesses and entrepreneurs in mind, so you’ll walk away feeling more confident about your numbers (without having to deep dive into “how to” videos). 

Why Business Expenses Matter

Before we dive into the details, let’s talk about why all of this matters: 

• Business expenses = deductions, more deductions = lower taxable income. The more business expenses you have, the more deductions you have. Every deduction/qualified business expense you have reduces the income you’re taxed on. 

• Clarity and peace of mind. When you track expenses correctly, you’ll always know where your money is going (and avoid last-minute receipt search and find). You’ll have the clarity needed to make sound financial decisions. 

• Better business decisions. Seeing your actual expenses organized, helps you spot unnecessary spending and make smarter spending choices (i.e. all those software subscriptions you weren't aware of). 

• Easier to grow and plan ahead. Accurate records give you the confidence to plan ahead, whether that’s saving for new equipment, hiring help, or scaling your shop. 

What Is a Business Expense, Really?

A business expense simply defined is anything spent that is considered ordinary and necessary for running your business. The two key words to remember are ordinary and necessary as they are what the IRS focuses on and what you should focus on when determining if a cost is a business expense. 

• Ordinary means that the cost is common and accepted for your business/industry. 
• Necessary means that the cost is helpful and appropriate for your business/industry. 

A good test is this: Can you clearly explain why this cost supports your creative work or business? If the answer is yes, it’s most likely a business expense. 

Common Business Expenses for Creative Entrepreneurs

The following is a list of common business expenses you might see for a creative entrepreneur. This list is not meant to be 100% inclusive of every type of business expense, but aimed to provide a guideline and help you determine what would be deductible specifically to your creative based business. 

Supplies & Materials - Anything you use to create your product or deliver your service:

• Art supplies (paint, brushes, canvases, fabric, speciality paper, beads, etc.)
• Craft tools or raw materials 
• Wholesale product purchases 
• Printer ink, packaging materials, shipping labels
  
  

Tech & Software - Subscriptions or digital tools that help you run your business:

• Canva Pro, Adobe, design tools 
• Website hosting or domain costs
• Email marketing software
  
  

Education & Growth - Investments in your learning or network: 

• Online courses, eBooks, memberships 
• Networking groups 
• Conferences, workshops, or coaching (if related to your business) 

Travel & Events - Costs related to events or places traveled for business reasons: 

• Craft fairs, art shows, pop-ups
• Any supplies purchased for events (i.e. a display shelf or business sign) 
• Mileage, parking, hotels, or travel meals  

Utilities & Workspace - Expense tied to where you work: 

• A portion of internet or phone bills (if used for business) 
• Workspace or studio rental 
• Storage for finished products or supplies 

Shipping & Fulfillment - Everything related to getting products to customers: 

• Postage (if you are paying for shipping) 
• Shipping insurance
• Etsy or Shopify shipping labels
• Packaging upgrades
  
  

Professional Services - Outside help that supports your business: 

• Bookkeepers or accountants
• Tax Preparers or CPAs
• Virtual assistants
• Legal advice 
• Business consulting
  
  

The Grey Areas (What Might Count or Not Count)

When determining what counts as a business expense, there may be a few a grey areas where the answer doesn't seem straightforward. A few common examples of things that may be a little tricky to determine are: 

1) Clothing 

• Yes, it's a business expense: branded uniform employees wear, clothes or for a photoshoot, or clothing required for your work
• No, it's not a business expense: everyday clothing, even if worn to a business event

2) Meals 

• Yes, it's a business expense: lunch with a client or colleague where business is discussed 
• No, it's not a business expense: grabbing takeout one night on your way home from the office

3) Promotions 

• Yes, it's a business expense: product samples, giveaways 
• No, it's not a business expense: personal gifts that aren’t directly tied to promoting your business  

Tips for Tracking Your Expenses

Here a few quick tips to help you stay organized when tracking business expenses: 

• Keep personal and business finances separate - see this article for why this is so important! 
  
  
• Save receipts (paper or digital—email inbox counts!)
  
  
• Use tools that work for you. A simple spreadsheet works really well if you’re just starting out. QuickBooks, Xero, or other cloud based accounting platforms can automate more as you grow. 

• Schedule “money dates”. Block out 30 minutes once a month for reviewing your expenses so you don’t fall behind.

Final Thoughts 

You don’t have to perfectly organize every expense or panic about the details. Instead, focus on building good habits and consistency moving forward.

If you’re ever unsure about an expense, circle back to these two questions: 

• Was it necessary for the business? 
• Was it ordinary for the business? 

And generally speaking, if your answer is yes to both of those questions, chances are it's a business expense.  

The content on this website is for informational purposes only and does not constitute financial, tax, accounting, or legal advice. Reading blog posts or other materials on this site does not form a professional relationship. Services are only provided under a signed engagement agreement. You should consult with a licensed professional before making any decisions based on the information provided.