What qualifies as a fully deductible business expense?

Paying employee salaries qualifies as a fully deductible business expense because it is a necessary cost incurred in the operation of a business. Expenses related to employee compensation are directly tied to the presence of workers who provide services that generate revenue for the business. The IRS allows businesses to deduct salaries and wages paid to employees as ordinary and necessary business expenses, reflecting the importance of labor in producing goods and services.

On the other hand, purchasing office furniture, while it may contribute to the business, is typically considered a capital expenditure. This means that its cost may need to be spread out over several years through depreciation rather than being fully deductible in the year it is purchased. Buying personal items for a home office does not qualify as a business expense since the items are not strictly for business use. Utilizing personal funds for business use might involve a mix of personal and business expenses, complicating the deductibility and typically requiring further documentation to substantiate the business nature of the expense.