Business Expense or Tax expense – what’s the Difference?

ByDesiree

Business Expense vs. Tax Expense: What’s the Difference?

If you’re running a blog or small business, you’ve probably heard the terms business expense and tax expense a lot. They sound similar, but they’re not quite the same — and knowing the difference could save you a headache at tax time.

Let’s break it down.

What Is a Business Expense?

A business expense is anything you spend money on to keep your business running. That could include:

  • Website hosting
  • Office supplies
  • Marketing tools

Basically, if you wouldn’t have bought it unless you were running your business — it’s a business expense. It also needs to be used exclusively for business, but we will get into those details in another post.

A whiteboard that says Business or Tax Expense? With post its that say: Yes, Deduct. No, Just track. Ask your CPA.

What Is a Tax Expense?

A tax expense usually refers to the taxes your business owes. Think of it like this:

  • You make money from your blog
  • You subtract your deductible business expenses
  • Then you pay taxes on the net income
  • That tax bill is your tax expense

So one is about running your business, and one is about what you pay to Uncle Sam.

Quick Comparison:

Business ExpenseTax Expense
PurposeKeeps your business runningWhat you owe on business profits
ExamplesHosting, courses, suppliesIncome tax, self-employment tax
Can it be deducted?YES (lowers your taxable income)NO (it’s the result of your income)

Let’s not mix up tax expense with a tax-deductible expense. Many business expenses are tax deductible which means that they reduce your tax expense.

Why would a business expense not be tax-deductible?

There are a few types of business expenses that are not tax deductible. Things like entertainment – taking a client to a sporting event for example, is not tax deductible. So it will be in your books as a business expense but not deducted on your taxes.

A picture of multiple pathways - one says taxes, one says business expense.

Why Do People Mix These Up?

Because taxes are confusing! A lot of small business and online business owners are doing this solo. It’s easy to assume that if you pay it for your business, it must be deductible. But nope — taxes themselves aren’t deductible (except in specific situations, which a tax pro can help with).

Real-Life Example:

Let’s say you make $10,000 from your blog this year.

  • You spend $2,000 on business expenses (hosting, tools, etc.)
  • That leaves $8,000 in taxable income
  • You might owe, say, $1,000 in taxes
  • That $1,000 is a tax expense, not a business expense

Keep It Simple: Track Everything

Use a tool like QuickBooks or a good spreadsheet to track all your spending. Label what’s a business expense. Then, when tax season rolls around, a bookkeeper or CPA can help sort it out.

Final Thoughts

The more organized you are now, the less you’ll panic later. Knowing what counts as a business expense vs. what’s just a cost of doing business (like taxes) helps you plan smarter — and maybe even keep more of what you earn.

Additional Resources

The IRS Small Business and Self-Employment Center is a great place to read up on what can be deducted. Yes, it’s a bit boring to read, but it’s the best place to get guidance. https://www.irs.gov/businesses/small-businesses-self-employed

Also check out my posts on How to Set Up a Simple Bookkeeping System — Even If You Hate Numbers and Think Tax Write-Offs Give You Money Back? Not Quite—Understanding the Difference Matters!

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