In the very early stages of setting up an online biz, which I hope to step into when I move back to the states in a year. I've been studying/working/travelling around the world for the past 5 years or so, so I'm not as conversant on home business deductions as some of you will be. My question is if I throw up a site in the next 6 mos, use my paypal business account to accept payment, but outsource most of the work, whether that cost of outsourcing can be claimed as a business expense. E.g. I source clients offline who need websites, but farm the site construction out to another firm. Let's say $700 in revenue from client, I pay $200 to site designer and pocket the $500...is that $200 cost something I can expense, and if so, what is it deductible as, category-wise? Thanks in advance.