What Types Of Advertising/Marketing Expenses Can Small Businesses Deduct?

In the past advertising for small business owners mostly involved creating an ad for print, television or radio (a catchy jingle is always a good way to go), cold calling (rarely a pleasant experience), sending out flyers or being at a conference. The problem with these types of advertising is that it is difficult to gage the direct impact of their effectiveness. Additionally, they are often fairly costly, which for small business owners can be difficult to afford.

Over the past few years the avenues for advertising have grown exponentially. Many types of advertising don’t even cost anything, except time. You can buy ads on numerous social media outlets that appeal to your target market or if you want to go the free route, you can set up a social account, post regularly and build an audience. Alternatively, you can set up a website which you can then optimize so that google and other search engines display it when someone is looking for your product or service. Email newsletters are also another effective and direct way of reaching potential buyers. One of the great benefits of this type of advertising is that you better monitor the effectiveness of your chosen strategy.

Most types of advertising are deductible, with some specific exclusions that are mentioned below.

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While advertising is often used synonymously with marketing , in an accounting context it often refers specifically to actual ads such as:

Any costs incurred to set up and maintain your website usually fall under marketing/advertising costs as a website is a promotional tool. Some of these costs include:

There are a variety of costs that can be incurred to promote your business including:

Although conferences can be a bit pricey, it can be great way to get exposure for your product and establish credibility. Note that there are specific rules associated with the deductibility of conference expenses. Costs associated with conferences can be:

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Creative marketing services might include:

Your chart of accounts should reflect a meaningful breakdown of your marketing and advertising costs. The detail in your chart of accounts depends on what line items are important to monitor and analyze. You can use whatever nomenclature gives you the most clarity when reviewing your profit and loss and other expense reports. You can also have sub accounts for additional detail. And while detail can be very helpful in analyzing your expenses, you do want to make sure that you don’t have too many accounts as it can become overwhelming.

Other ways to classify accounts can be to use tags or class and location tracking in QuickBooks Online or Tracking categories in Xero. This is especially useful if you use a different marketing strategy for diverse products and services or geographic locations. By adding a tag or class, you can track expenses by the classification you have specified and monitor the effectiveness of your strategy.

A typical chart of accounts for marketing/advertising expenses might include the following :

Each of these accounts can have sub accounts for categories in which spending might be more significant.

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The restrictions below pertain specifically to print eg. Magazines and newspapers or Broadcast e.g. Television advertising

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