Future Business Leaders of America (FBLA) Business Calculations Practice Test

For tax purposes, which of the following is considered a deductible expense?

1. Personal purchases

2. Business travel expenses

3. Luxury items

4. Gifts to friends

The correct answer is: Business travel expenses

Business travel expenses are considered deductible expenses for tax purposes because they are necessary costs incurred while conducting business activities. According to tax regulations, expenses that are directly related to the operations of a business, such as transportation, lodging, meals (within certain limits), and other related costs incurred while traveling for work, can be deducted from the business's taxable income. This deduction helps businesses reduce their overall tax burden, recognizing that travel is often essential for business growth and operations. In contrast, personal purchases, luxury items, and gifts to friends do not qualify as deductible expenses because they do not pertain to business activities. These expenditures are generally viewed as personal and do not serve a business function, thus failing to meet the criteria for tax-deductible expenses.