The moment a solo founder gets a business bank account and company card, they face a daily question: does this go on the company card or not? Most founders develop an intuition for it. The problem is that intuition and IRS rules don't always match.
Putting a personal expense on the company card doesn't make it deductible. It makes it a potential tax problem — either a misclassified deduction or an unreported fringe benefit. The IRS doesn't care what card you used. It cares what the money was for.
The IRS standard: ordinary and necessary
IRC §162 allows deduction of "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business." Two words do the heavy lifting:
- Ordinary: common and accepted in your industry. A software subscription is ordinary for a tech founder. A yacht rental is not.
- Necessary: helpful and appropriate for your business. It doesn't have to be indispensable — but it must have a genuine business purpose.
The practical test: could you explain this expense to an IRS agent with a straight face and a business purpose? If yes, it's probably deductible. If you'd be reaching for justifications, it's probably not.
Clear yes: put it on the company card
| Category | Examples | Deductibility |
|---|---|---|
| Software & SaaS | AWS, GitHub, Notion, Linear, Figma, Slack, Zoom | 100% |
| Professional services | CPA fees, attorney fees, contractor invoices | 100% |
| Advertising & marketing | Google Ads, LinkedIn, domain registration, website hosting | 100% |
| Office supplies | Paper, printer ink, desk items, postage | 100% |
| Business travel | Flights, hotels, rental cars for business trips | 100% |
| Coworking / office | WeWork passes, dedicated desk memberships | 100% |
| Professional development | Industry conferences, trade publications (subscriptions) | 100% |
| Business insurance | E&O, general liability, professional indemnity | 100% |
| Business meals with clients | Documented client meals with business purpose | 50% |
The gray zone: requires substantiation
These expenses are potentially deductible but require documentation of the business-use percentage or specific business purpose. Without documentation, they become audit risks.
| Expense | Rule | Documentation needed |
|---|---|---|
| Laptop / computer | Business-use percentage deductible | Document % of time used for business vs. personal |
| Home internet | Business-use percentage deductible | Document % of usage attributable to business |
| Cell phone | Business-use percentage deductible | Document % of usage; primarily-business phones are easier |
| Second monitor / peripherals | 100% if exclusively business | Note where it lives and that it's not used personally |
| Books / online courses | 100% if directly business-relevant | Keep a note on business connection |
| Subscriptions (Netflix, Spotify) | Almost never deductible | Don't try — very narrow exceptions |
If your cell phone is primarily for business and you have a separate personal phone, it's 100% deductible. If it's your only phone, most CPAs recommend deducting 50–75% and keeping a brief written note on your rationale. The IRS accepts reasonable estimates backed by a short explanation.
Clear no: does not belong on the company card
These expenses are either personal in nature or, in the case of wellness and lifestyle items, create taxable fringe benefit issues when run through the company (covered in depth in Post 5).
- Personal groceries and household supplies
- Gym memberships and fitness apps (taxable fringe benefit for >2% S-Corp shareholders — see Post 5)
- Personal clothing (very narrow exceptions for uniforms/costumes used only for business)
- Commuting costs — driving from home to your regular office is personal, not deductible
- Personal vacations (even if you check email)
- Wellness stipends and lifestyle purchases
- Personal gifts over $25 (business gifts deductible up to $25 per recipient per year)
The gym membership trap
Many founders run gym memberships through the company card thinking it's a business expense. For >2% S-Corp shareholders, this should actually be reported as taxable income on your W-2. Running it through the company card without the W-2 treatment creates a quiet compliance problem that compounds annually. Post 5 covers this in full.
Documentation rules that protect you in an audit
The IRS requires receipts for all business expenses over $75. Best practice is to keep receipts for everything — the overhead is minimal and the protection is real.
- Receipt for every expense over $75 (IRS requirement)
- Receipt for everything is best practice regardless of amount
- For meals: document the date, location, business purpose, and who attended
- For travel: keep the business purpose note ("client meeting with Acme Corp")
- Photo the receipt immediately and upload to your accounting software — paper receipts fade
- Bank statements and credit card statements alone are NOT sufficient for IRS purposes — they show amounts but not business purpose
Business driving in your personal vehicle is deductible — either at actual prorated cost (fuel, depreciation, insurance) or at the IRS standard mileage rate (70¢/mile for 2025). You need a mileage log: date, origin, destination, business purpose, and miles. Apps like MileIQ track this automatically in the background.
The dual-use trap
Dual-use expenses — where something serves both business and personal purposes — are the most common audit trigger. The IRS doesn't disallow them, but it requires you to deduct only the business-use proportion and document your basis for that proportion.
The danger: founders who claim 100% on genuinely dual-use items (a home computer that also runs their Netflix, a phone that handles personal calls) invite scrutiny on everything else. A conservative, documented approach is worth more than squeezing every possible deduction.
Business meals: the 50% rule
Business meals are deductible at 50% — but the substantiation requirements are real. The IRS requires you to document: (1) the amount, (2) the date, (3) the place, (4) the business purpose, and (5) who attended and their business relationship to you.
Important 2025 update: the 50% deduction for meals provided to employees through a company cafeteria or eating facility has been eliminated for amounts paid after 2025. This primarily affects larger companies, but if you're reimbursing employees for team meals at the office, the rules changed.
Frequently asked questions
- Can I put my home office on my company card?
- Generally no. Home office expenses are typically paid personally and reimbursed through an Accountable Plan — not charged directly to a company card. The Accountable Plan route avoids creating taxable income for S-Corp shareholders. Direct-charge approaches can create complicated tax treatments depending on your entity type.
- Is a business meal 100% tax deductible?
- No. Business meals are generally 50% deductible under IRC Section 274. The meal must have a clear business purpose, be with a client, prospect, or business associate, and you must document the amount, date, place, business purpose, and names of attendees. Entertainment expenses (tickets, sporting events) are not deductible.
- Can I deduct my cell phone as a business expense?
- Yes, if the phone is used for business. If it is used for both personal and business purposes (which is most founders), only the business-use percentage is deductible. To keep this simple, many founders use a second line or have the company pay for a phone used primarily for business. The IRS requires business use to be the primary purpose.
- Can I deduct my home internet as a business expense?
- Yes, the business-use portion of your home internet is deductible. If you use it 80% for work, 80% of the cost is deductible. For S-Corp shareholders, the cleanest approach is to reimburse yourself through an Accountable Plan with the same business-use percentage applied.
Disclaimer: This article is general educational content and does not constitute legal or tax advice. Tax laws change and your specific situation may differ. Consult a qualified CPA or attorney before making tax or legal decisions. All figures reference IRS guidance current as of the publication date.