The Internal Revenue Service or the IRS allows businesses to deduct the ordinary and necessary costs spent on marketing and advertising activities. These activities include promoting your brand and making your products or services known in the market with the goal of getting new customers or keeping the existing ones loyal to your business.  

There are several strategies to market and advertise one’s business. And whether you are a small business owner, an independent contractor, or a company of one, it is essential to know its rules and limitations to maximize its tax deductibility while reaping the benefits of advertising. 

 Business Advertising 

The following are examples of advertising or marketing activities that can be considered ordinary and necessary expense for your business: 

• Advertisements on radio, newspapers, television, or magazines. 
• Creation and management of social media accounts or business websites. 
• Hiring designers and copywriters to manage business websites or social media accounts. 
• Email marketing. 
• Printing of business cards, catalogues, or brochures. 

• Company giveaways with business brand or logo. 
• Product demonstrations or attending trade shows. 

Goodwill Advertising 

The IRS also allows businesses to deduct institutional or goodwill advertising that indirectly advertises the business to the public but with reasonable expectation to gain business in the future. Sponsoring contests, tournaments, or prizes, and promoting charity works or contributions to Red Cross, UNICEF, or other similar organizations are some of the examples of goodwill advertising. Meals provided to the public as part of goodwill advertising are also fully deductible and are not subject to the 50% meal deductibility limit. 

Social Media Marketing 

Marketing through different digital media platforms is probably the fastest and most efficient way to reach your potential clients. Moreover, your social media marketing costs from content creation, design, digital ads, and tool subscriptions are 100% deductible. 

Giveaways 

Business gifts given to anyone have a deductibility limit of $25 for each person per year. Your business giveaways are not subject to the limit if they meet all the following requirements: 

• Each item costs $4 or less, 
• The business name or brand logo is clearly imprinted on them, and;  

• The item is one of the identical items that you intend to distribute.  

Examples of these are pens, coasters, mugs, bags, cases, notebooks, etc. Promotional signs or display racks that are meant to be used on the business premises of the recipient are also not subject to the $25 deduction limit. 

Website Development 

A website gives your business online presence, accessibility, and credibility. And the costs spent to manage and develop a website such as web hosting fee and hiring designers are tax deductible. However, it will be considered a business start-up cost if the website was developed pre business operation. Accumulated start-up costs up to $5,000 and below can be an outright expense but amount in excess of the $5,000 limit must be capitalized. Expenses for recurring web changes such as photo updates or blog contents are deductible marketing expense.  

Trade Shows 

Joining trade shows is a fun and exciting marketing activity that widens your business network and gives you lots of potential business opportunities if done the right way. The costs of signing up, registration fees, promotional materials, fliers, or giveaways items for the trade show are all fully deductible. If a trade show will require you to travel away from home, the cost of transportation, accommodation, and other travel-related expenses are deductible subject to the IRS rules for travel expenses. Note that meals spent on travel-related expenses are subject to the 50% deductibility limit. 

Want to learn more? 

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