It is important for to keep your company’s name consistently in front of the public, particularly in a competitive business environment.
It can be helpful to be innovative in your marketing and promotional techniques, but where do you draw the line? In a recent case, the Tax Court upheld more than $160,000 in deductions over two tax years that the owner of a construction firm claimed for sponsoring his son’s motocross racing activities. (Evans, TC Memo 2014-237)
Background
Half a century ago it may have been enough to do quality work and rely solely on word of mouth to be successful. But in an era of strong competition you must pursue various advertising and promotional activities for your business to thrive.
These can range from basics techniques such as handing out business cards, to more aggressive methods such as television and radio ads and taking advantage of the quickly growing opportunities on social media websites.
And that costs money. Businesses may deduct these costs and the IRS treats them as a regular part of doing business. The tax deductions help defray the overall cost of ads and promotions that can lead to future growth.
Generally, the deducted expenses must be ordinary and necessary. In other words, they must have a clear connection to the business and its ability to reach customers, manage its brand or provide information about products or services.
Typically, deductible expenses may include the costs of:
- Signs and other outdoor advertising;
- Fees for radio, TV and online marketing;
- Services of advertising agencies or marketing firms;
- Copyrighting ads, logos and marketing slogans;
- Printed materials such as business cards with company logos, brochures and reports;
- Special events for customers; and
- Sponsorships of athletic teams and other activities that result in public recognition.
