The information below includes both the income and expense categories available on both the mobile and web apps. Customers can use these categories to properly categorize any income or any expense received or made using their Lili account.*
Transactions that are categorized will be included in the reports (Expenses report, Profit and Loss, Cash Flows, Schedule C) and therefore Lili highly recommends categorizing the transactions right away, in order to keep your data up to date.
Income Categories
Debt Proceeds
Funds received from borrowing, such as loans or lines of credit. This is not typically considered taxable income.
Equity Contributions
Money or assets contributed to the business by the owners or investors in exchange for equity. This is not considered taxable income.
Interest
Earnings from interest-bearing accounts, loans given to others, or investments like bonds.
Nonbusiness Income
Income not related to the primary business activities, such as gifts, personal investments, or passive rental income. Depending on the type and source of nonbusiness income, this may or may not be taxable income.
Other Income
Miscellaneous income that does not fall under other specified categories, such as rebates, grants, or prizes.
Payroll
Income received from wages or salaries paid to the business owner, typically subject to payroll taxes
Sales
Revenue generated from selling goods or products, typically related to the core operations of the business.
Services
Income earned from providing professional or other types of services to clients or customers.
Tax Return
Refunds or credits received from overpayment of taxes in previous periods. Not typically taxable.
Expense Categories
Advertising
Expenses incurred to promote the business, including online ads, print ads, billboards, and sponsorships.
Bank Charges
Fees charged by banks for maintaining accounts, wire transfers, overdrafts, or other banking services. Lili categorizes those expenses automatically.
Business Insurance
Premiums paid for insurance policies that protect the business from risks such as liability, property damage, or worker's compensation.
Car Expenses
Costs associated with using a vehicle for business purposes, including fuel, maintenance, repairs, insurance, and depreciation. You can deduct either the actual expenses of operating the vehicle or use the standard mileage rate. For fleet operations (five or more vehicles) or leased vehicles previously using the standard mileage rate but switching to actual expenses, you must use actual expenses going forward.
Charitable Donations
Contributions made to eligible non-profits or charities, deductible within limits for business-related giving.
Commissions and Fees
Payments to sales agents, real estate agents, insurance agents, or other non-employees for achieving sales or completing transactions. Sales employees may receive commissions in addition to base pay for meeting specific sales targets, often calculated as a percentage of sales. Independent insurance agents earn commissions based on the type and amount of the policies they sell, while real estate agents typically receive commissions on property sales and are generally not employees of a company.
Contract Labor
Payments made to independent contractors or freelancers for services rendered to the business. This includes the total cost of contract labor for the tax year, covering individuals who are not treated as employees but perform services for your trade or business.
Cost of Goods Sold (COGS)
The total of all direct costs associated with producing or purchasing goods sold or services completed by the business, including raw materials and labor. These costs are reported on the income statement and exclude expenses related to marketing, sales, or distribution.
Credit Card
Transactions made with external credit cards (not Lili’s debit cards) synced to your account for business purposes, logged as a single expense. These transactions are included in expense reports but are not added to tax-related reports. Future improvements may allow for integration with the balance sheet.
Debt Payment - Interest
Interest paid on loans or credit lines used for business purposes. Deductible as a business expense.
Debt Payment - Principal
Repayments of the original loan amount. Not deductible as a business expense.
Dues and Subscriptions
Fees paid for memberships in trade associations, industry groups, or professional organizations, as well as subscriptions to trade publications relevant to the business.
Employee Benefits
Costs for benefits provided to employees, such as health insurance, retirement plans, wellness programs, and dependent care assistance. These contributions are deductible, excluding self-employed contributions to group-term life insurance.
Income Tax
Taxes paid on the business's taxable income, including payments made to the IRS. These are not typically deductible as a business expense.
Legal/Professional Services
Fees for legal, accounting, or other professional services necessary for the business.
Meals
Expenses for meals incurred during business travel or meetings. These expenses are typically deductible at 50%, based on either the actual costs or the standard meal allowance.
Mortgage Interest
Interest paid on mortgages for business-owned properties, deductible as a business expense. For sole proprietors using part of their home as a business office and the deduction flows to Line 30 on Schedule C. For multi-member LLCs, S-Corps, partnerships, and C-Corps, mortgage interest on business property is deductible on the entity’s tax return, but home office deductions typically require formal arrangements or reporting at the individual level.
Office Expenses
General expenses for running an office, such as supplies, furniture, or software.
Office Utilities
Costs for utilities such as electricity, water, internet, or phone service for a dedicated office building used by the business. For personal residences used as a home office, utility expenses must be calculated and reported using Form 8829.
Other Expenses
Miscellaneous expenses that don’t fall into other predefined categories but are necessary for the business.
Owner’s Draw
Withdrawals of money or assets by the owner for personal use. Not deductible as a business expense.
For sole proprietorships and single-member LLCs only.
Owner’s Distribution
Profits distributed to the owners or shareholders. Not treated as an expense for tax purposes.
Partnerships, multi-member LLCs, and S corporations only.
Payroll Tax
Employer-paid taxes on employee wages, such as Social Security and Medicare taxes.
Payroll Wages
Gross wages paid to employees, including regular and overtime pay.
Pension/Retirement
Contributions made by the business to employee retirement or pension plans, such as SEP, or SIMPLE plans, are deductible. For sole proprietors and single-member LLCs, contributions for the owner are reported on Schedule 1 (Form 1040), line 16. For multi-member LLCs, partnerships, S-Corps, and C-Corps, contributions for employees are deductible on the entity’s tax return, while owner or partner contributions may require separate reporting.
Rent or Lease
Payments for renting office space, buildings, vehicles, machinery, or equipment used for the business. For leased vehicles with terms of 30 days or more, the deduction may need to be reduced by an inclusion amount. Report the business portion of these rental costs appropriately.
Repairs and Maintenance
Expenses for fixing or maintaining business property or equipment, including incidental repairs that do not add to the property's value or extend its life. The cost of your own labor is not deductible, and amounts spent to restore or replace property must be capitalized rather than deducted.
Returns and Allowances
Reductions in revenue for product returns, refunds, or discounts given to customers.
Supplies
Costs for consumables used in the business, such as stationery, cleaning materials, or small tools. Generally, you can deduct the cost of supplies consumed and used during the tax year, unless previously deducted. For incidental supplies without inventory records, you may deduct the cost of purchases if this method clearly reflects income. High-dollar purchases for supplies like books or professional specialty tools that last beyond a year must typically be depreciated instead of fully deducted.
Taxes/Licenses
Deductible expenses include taxes and fees necessary to operate the business, such as, real estate and personal property taxes on business assets, annual business licenses and highway use taxes. Non-deductible items include federal income taxes, self-employment tax (except the deductible portion), estate or gift taxes, property improvement taxes, and sales taxes on business purchases (treated as part of the asset cost). Taxes collected on behalf of buyers are also not deductible unless a portion is retained as income.
Travel
Expenses for business-related travel, including lodging, transportation, and other costs incurred while away from your tax home (typically your main place of business). Travel expenses for spouses, dependents, or others are not deductible unless they are employees, the travel serves a legitimate business purpose, and the expenses would otherwise qualify as deductible. Expenses for meals and entertainment should not be included here; meals are typically reported separately. Travel expenses cannot be deducted if the employment away from home exceeds one year.
* Subject to the customer's specific Lili plan. Please refer to Lili's plan comparison table to see which plans support the expense categories and which plans support the income categories.
Lili is a financial technology company, not a bank. Banking services are provided by Sunrise Banks, N.A., Member FDIC. The Lili Visa® Debit Card is issued by Sunrise Banks, N.A., Member FDIC, pursuant to a license from Visa U.S.A., Inc. The Card may be used everywhere Visa debit cards are accepted.
Wire Transfer services are provided by Column Bank N.A., Member FDIC. All wires are subject to acceptance criteria and risk-based review and may be rejected at the sole discretion of Column Bank N. A. or Lili App Inc.