Small business tax help website

How to Deduct Advertising Expenses

Where and how to deduct advertising expenses depend on the business structure of your business. If you are not a business owner you usually will not be able to deduct advertising expenses.

Job hunting expenses

If you are an employee looking for a new job, the cost of job hunting such as placing ads for job wanted, may be tax deductible as a job hunting expense.

Self employed business owners

A self employed business owner deduct advertising expenses on Schedule C or Schedule C-EZ, if qualified.

Partnerships and LLCs

If your business is a partnership or an LLC, then the advertising expenses are included in the Form 1065 in figuring out the profit and loss of the partnership or LLC. They are entered on the Other Deduction category on the Form 1065. Advertising expense are not separately stated items that pass through to partners and members so partners and members repot their net income or loss form the business on Schedule E and do not deduct advertising costs and expenses on their tax returns.

S Corporations

Like partnership, advertising expenses are taken into account when calculating the profit and loss of the S corporation. They are reported on the Form 1120S. Advertising costs are not separately reported to shareholders so the shareholders do not report them separately. Rather, they report the net income or loss from the business on Schedule E as a whole. Do not deduct advertising cost on individual income tax returns.

C Corporations

Advertising costs are included to determine the profit or loss of a C corporation. Advertising costs are reported on form 1120. The C corporation, unlike S corporation, pays tax on its net profit or loss. Shareholders do not report any income or loss from the corporation. Shareholders report dividend income from the corporation.