Can I claim advertising costs as a business expense?

Advertising, marketing and promotion costs to bring in new customers and keep existing ones are valuable tax deductible business expenses, that allow small businesses to save money on their taxes.

The Internal Revenue Service (IRS) states that advertising and marketing must be ordinary and necessary to be tax deductible.

They classify this as follows:

• An ordinary expense is one that is common and accepted in the industry.
• A necessary expense is one that is helpful and appropriate for the trade or business. An expense does not have to be indispensable to be considered necessary.

Examples of what you could claim for:

• Reasonable advertising expenses that are directly related to the business activities.
• An expense for the cost of institutional or goodwill advertising to keep the business name before the public if it relates to a reasonable expectation to gain business in the future. For example, the cost of advertising that encourages people to contribute to the Red Cross or to participate in similar causes is usually deductible.
• The cost of providing meals, entertainment, or recreational facilities to the public as a means of advertising or promoting goodwill in the community.

What isn’t tax deductible

Generally, small businesses won’t be able to deduct amounts they pay to influence legislation.

Date published Nov 26, 2021 | Last updated Jul 8, 2022

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.