Quickbooks Expense Categories: Top 85 Tax-Deductible Categories

As an accountant, you know that keeping accurate and organized financial records is paramount. And when it comes to managing expenses in Quickbooks, mastering expense categories is essential. 

Not only does proper categorization provide a clear picture of where your money is going, but it also ensures you’re maximizing tax deductions for your clients or your own business. 

In this guide, we’ll delve deep into Quickbooks expense categories, exploring their importance, providing a detailed breakdown of over 85 tax deductible categories, and offering step-by-step instructions on how to manage them effectively. 

What is a Quickbooks Expense Category?

Think of expense categories as the buckets you use to organize your spending. In QBO, they are linked to your Chart of Accounts and allow you to classify each transaction. This not only keeps your financial data tidy but also provides valuable insights into your spending patterns. 

Why Do You Need Quickbooks Expense Categories?

Expense categorization is not just about tidying up your books, it’s about gaining a deeper understanding of your financial landscape and optimising your business for success. Here’s why it’s so vital:

• Financial clarity: See exactly where your money is going, identify areas for improvement, and make informed financial decisions.
• Tax optimization: Ensure you're claiming all eligible deductions and avoid potential issues during tax season.
• Streamlined reporting: Generate accurate and detailed reports for internal analysis or client presentations.
• Improved budgeting: Track expenses against your budget and identify potential overspending.

85 Essential Quickbooks Expense Categories

Here's an extensive list of tax-deductible expense categories you can use in QuickBooks. Remember, you can always customize these to fit your specific needs.

Advertising and Promotion 

This broad category covers various marketing efforts.

• Traditional Advertising: Print ads, television/radio spots, billboards.
• Digital Marketing: Online ads (Google Ads, social media), SEO, email marketing.
• Content Creation: Blog posts, videos, infographics.
• Promotional Materials: Brochures, flyers, giveaways.

Auto and Truck Expenses

If you use vehicles for business, track these costs diligently.

• Fuel: Gas, diesel, and other fuel types.
• Maintenance: Oil changes, repairs, tires.
• Insurance: Vehicle insurance premiums.
• Registration: License and registration fees.
• Depreciation: If you own the vehicle.
• Mileage: Track mileage for potential deductions using the standard mileage rate.

Bank Service Charges

Account fees, transaction fees, and overdraft charges.

Blueprints and Reproduction

• Costs associated with creating or copying blueprints, plans, and other documents.

Bond Expense

• Expenses related to surety bonds, often required in construction or contracting.

Building and Property Security

• Alarm systems, security cameras, monitoring services, security personnel.

Business Licenses and Permits

• Fees paid to obtain necessary licenses and permits to operate your business.

Commissions Paid

• Payments to sales representatives, agents, or independent contractors based on performance.

Computer and Internet Expenses 

Essential for most businesses today.

• Hardware: Computers, laptops, printers, monitors.
• Software: Operating systems, applications, subscriptions (e.g., Microsoft Office 365, Adobe Creative Cloud).
• Internet: Internet service provider fees, web hosting.
• Cloud Services: Cloud storage (e.g., Dropbox, Google Drive), online backup.

Conferences and Meetings

• Registration fees, travel expenses, accommodation, meals related to attending industry events.

Chemicals Purchased

Relevant for industries like agriculture, manufacturing, etc.

• Costs of chemicals used in production or operations.

Construction Materials Costs

• Raw materials, lumber, concrete, fixtures, and other materials used in construction projects.

Continuing Education

• Courses, workshops, seminars, and other professional development expenses.

Accounting Fees

• Payments to external accountants for bookkeeping, tax preparation, auditing, or consulting services.

Legal Fees

• Fees paid to attorneys for legal advice, representation, or document preparation.

Contracted Services

• Payments to independent contractors or freelancers for services rendered.

Depreciation Expense

• The gradual decrease in the value of assets over time (e.g., equipment, vehicles, buildings).

Dues and Subscriptions

• Membership fees for professional organizations, trade associations, industry publications.

Equipment Rental

• Rental costs for equipment used in your business operations.

Equipment Rental for Jobs

• Rental costs for equipment specifically used on client projects or jobs.

Special Events

• Costs associated with hosting or sponsoring events for marketing or promotional purposes.

Facilities and Equipment

• Expenses related to office space, warehouse space, and equipment used in your business.

Fertilizers and Lime 

For agricultural businesses

• Costs of fertilizers and lime used in farming operations.

Food Purchases

For restaurants, catering businesses, etc.

• Costs of ingredients, raw materials, and food supplies.

Freight and Shipping Costs

• Expenses for shipping goods to customers or receiving inventory.

Freight and Trucking

• Costs associated with transporting goods via trucks or other freight services.

Freight Costs

• General expenses related to the transportation of goods.

Fuel for Hired Vehicles

• Fuel costs for vehicles rented or leased for business use.

Gasoline, Fuel and Oil

• Fuel costs for company vehicles or equipment.

Insurance

Protect your business with various types of insurance.

• General Liability: Covers common business risks.
• Professional Liability: Protects against errors and omissions in professional services.
• Workers' Compensation: Covers employee injuries on the job.
• Property Insurance: Protects your business property.
• Product Liability: (If applicable) Covers defects in products you sell.

Interest Expense

• Interest paid on business loans, credit cards, or lines of credit.

Janitorial Expense

• Cleaning services, supplies, and equipment.

Job Materials Purchased

• Materials used specifically for client projects or jobs.

Laboratory Fees 

For medical practices, research facilities, etc.

• Costs of lab tests or analyses.

Landscaping and Groundskeeping

• Maintaining the appearance of your business premises.

Linens and Lodging Supplies 

For hotels and hospitality businesses.

• Costs of linens, towels, and other guest room supplies.

Marketing Expense 

See Advertising and Promotion for more detail.

• Overall expenses related to marketing activities.

Materials Costs

• Costs of raw materials or supplies used in production or service delivery.

Meals and Entertainment 

Be mindful of IRS rules and limitations here. 

• Business Meals: Meals with clients or employees for business purposes (50% deductible).
• Entertainment: Events or activities for client appreciation or entertainment (generally not deductible).

Media Purchased for Clients

• Costs of media buys (print, TV, radio, online) on behalf of clients.

Medical Records and Supplies 

For healthcare providers

• Expenses related to storing and managing patient records.

Merchant Account Fees

• Fees charged by credit card processors for processing transactions.

Ministry Expenses 

For religious organizations

• Expenses related to religious activities, programs, and outreach.

Office Supplies 

The essentials for any office.

• Stationery, paper, pens, printer ink, toner.

Other Construction Costs

• Miscellaneous expenses related to construction projects (e.g., permits, inspections, waste disposal).

Other Job-Related Costs

• Miscellaneous expenses directly related to specific jobs or projects.

Outside Services

• Payments to external vendors or contractors for services not performed by employees.

Parts Purchases

• Costs of parts used in repairs, maintenance, or manufacturing.

Payroll Expenses 

One of the largest expense categories for many businesses.

• Salaries, wages, bonuses, commissions.
• Payroll taxes (Social Security, Medicare, federal and state unemployment).
• Employee benefits (health insurance, retirement plans).

Postage and Delivery

• Costs of mailing, shipping, and courier services.

Printing and Reproduction

• Printing documents, reports, and marketing materials.

Product Samples Expense

• Costs of providing samples to potential customers.

Professional Fees

• Payments to professionals like consultants, lawyers, aand ccountants (see specific categories above).

Purchases 

Track purchases carefully based on their purpose.

• Hardware for Resale: If you sell hardware, track the cost of goods sold.
• Parts and Materials: For use in services or manufacturing.
• Resale Items: Track the cost of goods sold for any items you resell.
• Software for Resale: If you sell software, track the cost of goods sold.

Reference Materials

• Books, journals, subscriptions, and online resources used for research or professional development.

Rent Expense

• Rent paid for office space, retail space, or other business property.

Repairs and Maintenance

• Costs of repairing and maintaining equipment, vehicles, and property.

Research Services

• Expenses related to conducting research for your business.

Restaurant Supplies 

For restaurants and food service businesses

• Dishes, cutlery, cookware, and other non-inventory supplies.

Salon Supplies, Linens, Laundry 

For salons, spas, and similar businesses

• Costs of supplies, linens, and laundry services.

Seeds and Plants Purchased 

For agricultural businesses

• Costs of seeds, plants, and other agricultural inputs.

Shop Expense

• Miscellaneous supplies and expenses related to operating a workshop or shop.

Small Medical Equipment 

For healthcare providers

• Costs of smaller medical devices and instruments.

Small Tools and Equipment

• Costs of tools and equipment that are not considered capital assets.

Storage and Warehousing

• Expenses for storing inventory or business materials.

Subcontractors Expense

• Payments to subcontractors for services rendered.

Taxes – Property

• Property taxes paid on business property.

Telephone Expense

• Landline, mobile phone, and fax expenses.

Tools and Small Equipment

• Costs of tools and equipment used in your operations.

Travel and Meetings 

See Conferences and Meetings for more detail

• Expenses related to business travel.

Conference, Convention, Meeting

• Costs of attending or hosting conferences and meetings.

Travel Expense

• Airfare, accommodation, transportation, meals, and other travel-related expenses.

Travel Expenses for Drivers

• Expenses incurred by employees who travel for work, including drivers.

Truck Maintenance Costs

• Maintenance and repair costs for trucks used in your business.

Uniforms

• Costs of uniforms or protective clothing for employees.

Utilities

• Electricity, water, gas, internet, and waste disposal.

Vaccines and Medicines 

For healthcare providers, veterinary clinics

• Costs of vaccines and medicines.

Worker’s Compensation Insurance

• Premiums paid for workers' compensation insurance.

How Do You Create And Manage Expense Categories On Quickbooks?

QBO makes it easy to create, customize, and manage your expense categories:

1. Access the Chart of Accounts: Go to "Settings" (gear icon) > "Chart of Accounts."

2. Click on “New” on the right-hand side of the viewport.

3. On clicking  "New," you will see the following drop-down menu. You can fill in the details around the “Account name” (Compulsory) and “Account number” (Optional). 

4. Once you have filled in the “Account name” and “Account number,” select “Expenses” under the “Account type” option.

5. On clicking on “Expenses” under the “Account type,” the “Detail type” opens up to a corresponding drop-down menu. Pick the “Detail type” that best suits your new account. 

6. Once you have filled in all the above details, you have the option to make this a subaccount. On clicking “Make this a subaccount,” you’ll see the below interface.

7. Now, you’ll have to pick the best option that suits you under the “Parent Account.” You’ll also need to add an associated description, which is optional. 

8. If you do not wish to make this a subaccount, you can leave the checkbox unmarked. You can just add a “Description” that best fits the account you are creating. Once done, you can also check the option to “Use for billable expenses.” 

You can check the “Use billable expenses” option while creating a chart of accounts to track expenses intended for client invoicing effectively. This feature ensures accurate reimbursement by allowing you to easily add client-related costs to their invoices. 

9. On clicking the “Use billable expenses” option, you will see a drop-down appear. Pick the option that best suits your needs. 

10. Once done, you can hit on the “Save” option. 

11. Now that you have added your “New Account,” you can use the search bar provided to look up the account under the “Chart of Accounts” tab. 

Also Read

• Quickbooks Chart of Accounts: Everything You Need to Know

How Fyle Can Help

QuickBooks Online is a robust accounting platform, but managing expenses can sometimes feel disjointed. Fyle bridges that gap with a seamless Quickbooks integration that streamlines expense tracking and ensures your financial data is always accurate and synchronized.

Here's how Fyle enhances your QuickBooks experience through its smart integration:

• Effortless Setup: Connecting Fyle to your QuickBooks account is a breeze. The self-serve process is quick and straightforward, requiring no coding or IT support. Simply use your QuickBooks credentials, and you'll be up and running in minutes.
• Accurate Chart of Accounts Mapping: Fyle automatically imports your Chart of Accounts from QuickBooks, ensuring that expenses are categorized correctly. This eliminates manual data entry and reduces the risk of errors.
• AI-Powered Expense Coding: Fyle leverages AI to intelligently code your expenses based on the data imported from QuickBooks (vendors, customers, projects, etc.). This saves you time and ensures accuracy.
• Bi-directional Sync: Changes made in Fyle are automatically reflected in QuickBooks, and vice versa. This two-way synchronization keeps your data consistent across both platforms.
• Easy Troubleshooting: Fyle provides instant notifications if any errors occur during the mapping or export process. You can easily troubleshoot these issues directly within the Fyle dashboard.