Generally, all the expenses you incur to start and operate your business are deductible, however many are subject to various IRS rules; for example, start-up costs, vehicle expense, meals and entertainment, and use of a home office. Start by reading IRS publications (such as the Business Tax Kit) and looking at the tax returns for your form of business. For sole proprietors, that is a Schedule C. You can get IRS materials from the IRS Web site, from your CPA’s office, or by calling the IRS at (800) 829-3676. It is very important to set up a good bookkeeping system immediately upon going into business. QuickBooks Pro Accounting System or any accounting software package is recommended.