It depends on how you structure your business first of all. In general, however, expenses that directly contribute to the generation of revenue are deducted to arrive at net income that is passed on to the business owners. How you report this depends on the structure of your business. S Corporations and simple one-person LLC's use different forms to report income. For instance, a sole proprietor would typically report revenue and expenses on a schedule C, with net income transferring on page 1 of the form 1040. On the schedule C, certain expenses, such as home office expense, vehicle costs, utilities, etc. are reported and offset revenues. However, there are certain rules related to each expense that should be explored before listing all related expenses. For example, one method of claiming home office expense calculates the portion of expenses relative to the square footage the actual space used for business comprises in the home.