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Are business expenses deductible if paid for with personal money?

My boyfriend and I recently started up a small home business, and being that tax season is coming we were wondering on something.

1. What percent of a tax preparer’s and accountant’s fees are tax deductible for our business?

2. The tricky part- my boyfriend (he is the business owner) would be paying for these expenses with his own personal money, not money profited from the business. Does this matter?
We are a C-Corporation as well.

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2 Responses to “Are business expenses deductible if paid for with personal money?”

  1. v b said :

    Congratulations, you are a partnership.

    1. All partnership income is reported first on the form 1065, then on your individual tax returns. You report all professional fees on this form.

    2. The business expenses paid with personal funds are accounted for depending on your written partnership agreement. If that agreement say you pay for items yourself, you deduct them on schedule E. If that agreement doesn’t (or there isn’t one), then it’s considered to be paid by the partnership (with corresponding funds adding to capital) and reported ont he 1065.

  2. xtraheavy01 said :

    1)Well if your accountant did not split the bill between what he charged for personal 1040 and 1120, you should use a ratio. Depending on how involved the 1040 is. I would take 75% business and 25% personal.

    The 75% would be taken as a deduction on 1120
    The 25% would be taken as a miscel itemized deduction for 1040

    2) No. You would just credit his loan account for his out of pocket for the business.portion.


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