What is a business expense?
A business expense is money spent to run the business, as the IRS sees it. This cheat sheet covers how to think about one and where people get it wrong. The detail is further down.
How to think about it
- Ordinary means common. An ordinary expense is one that is common and accepted in your field of business.
- Necessary doesn't mean required. A necessary expense is helpful and appropriate for your business. It doesn't have to be indispensable.
- Split mixed costs. If an expense is partly business and partly personal, separate the two. The personal part generally isn't deductible.
- Lavish doesn't count. Travel meals that are lavish or extravagant can't be deducted. A meal isn't disallowed just because it costs more than a fixed dollar amount.
Where people get it wrong
- Expensing an asset. A purchase with lasting value, like a fleet of company vehicles, is recorded as an asset and depreciated over its useful life.
- Paying for a companion's upgrade. If a spouse who isn't an employee comes along, the deductible hotel cost is what a single room would have cost.
- Estimating. You can't deduct amounts you approximate or estimate.
- Mixing charges. Personal and business costs on the same transaction create audit problems. Keep them separate.
Business expense vs. expenditure
| Expense | Expenditure | |
|---|---|---|
| What it is | The cost of resources used up to generate revenue in a period | Spending to acquire something of lasting value |
| Accounting treatment | Recorded on the income statement, reducing profit for the period | Recorded as an asset, then converted to expense through depreciation or amortization |
| Travel example | Hotel stays and airfare | A fleet of company vehicles |
How it works on Engine
Engine travel reporting uses booking and billing data captured in the platform, filterable by department, project, team or cost code. Trips booked outside Engine are not automatically included. Reporting complements the accounting system your finance team already runs rather than replacing it.
Questions
What qualifies as a business expense?
A cost of operating your business that is ordinary and necessary. Ordinary means common and accepted in your field. Necessary means helpful and appropriate for your business.
What is the difference between an expense and an expenditure?
An expenditure is spending to acquire something of lasting value, recorded as an asset. An expense is the cost of resources used up in a period, and it reduces profit for that period.
Are business travel costs business expenses?
Travel away from home on business can be. The IRS lists transportation, lodging, non-entertainment meals, dry cleaning, business calls and tips, and you can generally deduct only 50% of business meal costs.
Are reimbursed business expenses taxable to employees?
It depends on the plan. Reimbursements under an accountable plan aren't reported as pay. Reimbursements under a nonaccountable plan are.
Sources
- Internal Revenue Service, Publication 334 (2025), Tax Guide for Small Business, accessed November 2, 2026.
- Internal Revenue Service, Publication 463 (2025), Travel, Gift, and Car Expenses, accessed November 2, 2026.
- Engine, Business travel breakdown: Expenditures vs. expenses, accessed November 2, 2026.
- Engine, Travel Expense Reporting: A Complete Guide, accessed November 2, 2026.
- Engine, Travel Reporting and Analytics, accessed November 2, 2026.