What is the Ordinary and necessary standard?
The ordinary and necessary standard is the IRS requirement that business expenses must meet two criteria to qualify as tax deductions. A cost is ordinary if it is common and accepted in your trade or industry, while a necessary cost is helpful and appropriate for conducting business operations. This standard applies to all business deductions, including operating costs, professional services, and employee benefits. Expenses that are personal, lavish, or unrelated to business activities fail this test. Travel expenses must meet this standard to be deductible.
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