What is the Ordinary and necessary test?
The ordinary and necessary test is the IRS standard for determining whether a business expense is deductible under IRC Section 162. An expense is ordinary if it is common and accepted in your trade or profession. An expense is necessary if it is helpful and appropriate for your business, though not necessarily indispensable. The test applies to all business deductions, including Meals deductions, travel, and operating costs. The IRS evaluates each expense based on the facts and circumstances of the specific business.
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