Knowing you can claim something as a business expense often takes the sting out of spending money. But there are also many things you can't claim as business deductions, and knowing what you can and can't claim can save you a lot of money (and a big headache) come tax time. So today, we'll talk more about tax deductions and six expenses you can't claim as business deductions.
Keep in mind, this post is meant to serve as general information and is not tax or legal advice. Therefore, before claiming any deductions, make sure to speak with your tax advisor.
Typically, you can deduct mileage as a business expense if you use your personal vehicle for business purposes. But if you commute to and from your place of business, that's considered personal use, and you can't claim it as a deduction. You also can't deduct parking fees or tolls related to your commute. So, if you can walk, bike, or take public transportation to work, you may want to consider doing so to save some money.
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Do you have a dedicated space in your home that you use exclusively for business purposes? Then you can claim it as a home office deduction. But if you use any part of your home for both business and personal purposes (like a bedroom that you also use as an office), you usually can't claim it as a deduction.
You can often deduct 50% or 100% of business-related meals and entertainment costs, but only if there's a clear business purpose. So, let's say you take a client out to lunch to discuss business—that would be deductible. But if you go out to lunch with a friend or co-worker just to catch up, that's not deductible.
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You can't deduct any expenses that are considered personal, even if they're related to your business. So, for example, you can't deduct the cost of a haircut or dry cleaning if you wear business clothes every day. Other personal expenses include vacations, tickets to sporting events, and membership to gyms or clubs (unless they're directly related to your business).
You can deduct the cost of business-related gifts as a promotional expense, but you can't deduct the cost of personal gifts. That's true even if the gift is given to a business associate or client. Keep in mind, there are limits on how much you can deduct for business gifts.
You can deduct the cost of travel expenses if they're related to your business. However, you can't deduct the cost of travel for personal reasons (even if you mix business and pleasure).
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These are just a few examples of expenses you can't claim as business deductions. For more information on what you can and can't deduct, speak with your tax advisor or visit the IRS website.
Of course, we're here to help too!
The team at Two Roads is experienced in helping small businesses with maximizing tax deductions, and we're always happy to help. Contact us today to learn more about our tax services.
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