You invest in your signs, just like you invest in other areas of your business, but at tax time, you might wonder, are my signs an asset or expense?
The answer makes a big difference in how you file your taxes, so it’s important to know what to consider.
The good news is that signage is typically a business expense you can write off on your taxes.
How to Categorize Signs as a Business Expense
To categorize signs as a business expense, first, you must determine how you’ll use them. Then, like most deductions, the IRS requires you to prove they are ordinary and reasonable for the industry. In other words, if your signage is like most signs in your area and industry, you can likely write off the expenses.
Always consult with your tax advisor before taking any deductions, but in general, here’s how to categorize the expense.
- Advertising expenses – Most outdoor signs or any signs used to grab your audience’s attention fall under advertising expenses. You’ll typically include these expenses with other marketing costs, such as newspaper or billboard advertisements.
- Standard office expenses – Any signage inside your establishment to help customers find their way or help your staff communicate is usually a part of the typical office expenses.
Proving Your Expenses Are Ordinary and Reasonable
Proving your signage is an ordinary and reasonable part of your business is much easier than proving your meals or travel were ordinary and necessary.
Advertising is common in almost any industry, so it’s easy to prove the ordinariness of the signage. Regarding reasonableness, keep your costs within the average of others in the industry so you don’t stand out like a sore thumb and risk an audit.
Overall, you must prove the signage is for business purposes, which is easy to do, and keep it within reason. However, this doesn’t mean boring. We can help you create signage that makes your company stand out while still allowing you the tax deduction for the advertising expense.
Example: Putting up construction site banners or signs is another great advertising opportunity for contractors and construction companies. These eye-catching banners not only promote your brand to passerby, but also serve an important safety function by making people aware of ongoing construction work. From branding mesh wraps around fencing to tall flag banners by the road, bold construction site signs get you noticed while keeping the public informed. And as discussed above, such advertising signage can likely be deducted as business expenses under the “large format printing” category. Consult your tax professional to be sure, but site banners and signs are generally considered deductible advertising costs. So boost your brand and site safety through vibrant construction banners and write them off at tax time.
Your business signage is a business expense in most cases, which means it can lower your tax liabilities. If you have any questions about how your signage can help your tax liabilities, consult your tax advisor, and when you’re ready to bring your business to the next level, we’re ready to help you create the perfect signs.
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