You must capitalize, rather than deduct, some costs. These costs are a part of your investment in your business and are called capital expenses. Capital expenses are considered assets in your business. In general, there are three types of costs you capitalize.
Note: You can elect to deduct or amortize certain business start-up costs. Refer to chapters 7 and 8 of Publication 535, Business Expenses.
If you have deductible expenses that qualify as miscellaneous itemized deductions, you can deduct certain of those expenses only to the extent that they exceed 2% of your adjusted gross income. For an explanation of deductible and nondeductible expenses, refer toPublication 529, Miscellaneous Deductions.
There are three types of expenses that are subject to the 2% limit: unreimbursed employee expenses, tax preparation fees and certain other expenses.
Certain unreimbursed employee expenses are deductible as miscellaneous itemized deductions on Form 1040, Schedule A (PDF),Itemized Deductions, or Schedule A in Form 1040NR (PDF), U.S. Nonresident Alien Income Tax Return. To be deductible, the expense must be: