The ability to deduct business expenses is one of the biggest means of reducing your business's tax bill. But not everything you or your company pays for is deductible. Each expense must pass a few key tests before they are legitimate tax deductions. What are some of these tests? Here are three of the most common and most important. 1. The Expense Must Not Be Disallowed First, some categories of business expenditures are explicitly stated as not being allowed by the IRS rules.