Prepaid expenses (12-month rule)
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Can You Write Off Prepaid Expenses?
Short answer: Yes: cash-basis businesses can deduct prepaid services like insurance or rent if the benefit doesn't extend beyond 12 months or past the end of next year.
Longer prepayments are deducted over time.
Records to keep: Keep receipts or invoices, proof of payment, and a note of the business purpose for each expense.
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Prepaid expenses (12-month rule)
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General Business
Other Expenses
Tax Write-Off Rules
Yes: cash-basis businesses can deduct prepaid services like insurance or rent if the benefit doesn't extend beyond 12 months or past the end of next year.
BizWriteOffs provides educational information only and is not tax, legal, or accounting advice. Deductibility depends on your specific facts and records. Consult a qualified tax professional.
Business justification
Yes: cash-basis businesses can deduct prepaid services like insurance or rent if the benefit doesn't extend beyond 12 months or past the end of next year. Longer prepayments are deducted over time.
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