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Income & Expenses

Question: I am a sole proprietor and pay personal expenses out of my business bank account. Should I include the money used for personal expenses as part of my business income? Can I write these expenses off?

Answer:

  • You would include the money used to pay personal expenses in your business income when your business earned it.
  • You would not write off these expenses as business expenses because they are not ordinary and necessary costs of carrying on your trade or business.
  • Personal, living or family expenses are generally not deductible.
  • It is a good idea to keep separate business and personal accounts as this makes it easier to keep records.

Additional Information:


Category: Small Business, Self-Employed, Other Business
Subcategory: Income & Expenses

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The OMB number for this study is 1545-1432.
If you have any comments regarding this study, please write to:
IRS, Tax Products Coordinating Committee
SE:W:CAR:MP:T:T:SP
1111 Constitution Avenue NW
Washington, DC 20224