There are many ways for businesses to lower their tax liability with deductions and credits that set off taxes directly with qualifying expenses—you’ll find 92 potential tax deductions in this article. Typically, tax law requires deductible business expenses to be ordinary (common and accepted in your trade or business) and necessary (helpful and appropriate for your trade or business). But even some expenses, no matter how relevant they are to the nature of your business, are not deductible.
Although there may be some limited exceptions, this list covers thirteen common expenses that the IRS does not considers deductible on either a business or individual income tax return.
Don’t Even Try Deducting These 13 Business Expenses:
1. Automobile expenses attributed to personal vehicle use
You may use your personal vehicle for work purposes or work vehicle for personal purposes, but when deducting expenses for gas, repairs, etc., be sure that you can easily show they were necessary parts of your work.
2. Check-writing fees on a personal checking account
While many banks offer unlimited checks per month, some try to limit check-writing by charging fees when clients write over a certain amount in a month. For example, a bank would give you three free checks each month and then charge fees and interest for any others. You cannot deduct these fees on your business or personal taxes.
3. Clothing (excluding uniforms or specialized gear)
This applies to everyday wear or anything you can wear outside of work. However, you can deduct uniforms or specialized gear such as lab coats or gloves that protect researchers or bright vests and hard hats used by architects when they’re on site. Essentially, the clothing must be specifically required by your employer to be deductible.
4. Club and membership dues (even if used for legitimate business purposes)
While your golf club membership may be a great way to network and your hotel club membership might come with some great travel rewards for sales roadshows, the cost of joining and maintaining these memberships are not something you can deduct.
5. Volunteer hours
Giving back is a great way to save on business taxes while helping your community and boosting employee morale. When it comes to making your charitable contribution count toward tax deductions, you cannot deduct the hourly time you or your employees spend volunteering.
10. Political contributions (including lobbying and campaign expenses)
The phrase “separation of church and state” also applies to businesses and state and federal political issues. Money given to political groups or candidates running for public office are not deductible, even though they seem charitable in nature. The same goes for donations made to groups who lobby for law changes.
6. Federal taxes
This should go without saying, but you can’t deduct the money you owe as your tax liability on your taxes.
7. Fines and penalties from a governmental agency
No, your parking ticket is not a tax deductible expense. Neither are late fees paid on federal or state taxes owed with your tax return.
8. Losses from selling personal property
Again, this is one area of business and personal life where the line is clear as can be—you cannot deduct the value of any lost earnings from selling anything you own personally for less than it is worth in your possession. This includes the sale of your home, furniture, or car.
9. Groceries (if you work from home)
While you can deduct the snacks and meals you buy for your team to enjoy at the office, the IRS will be interested in any groceries you claim as deductible business expenses if you’re working from a home office. This also applies to the drinks, meals, or snacks you buy while working from a coffee shop or restaurant.
10. Life and/or disability insurance premiums
Generally, businesses can deduct the amount they cover of employee health insurance premiums, but certain life or disability insurance premiums are not deductible. For example, life insurance premiums that cover the life of an officer of the company aren’t deductible if the company is the beneficiary of the policy.
11. Residential telephone service
If you have one landline in your home, even if you use your home phone line for business purposes—including a home office—you can’t deduct the costs, charges, or taxes on your phone bill. There are exceptions for long-distance calls and second phone lines.
Cell phones are a different story. You can deduct your cell phone bill if you can provide call logs and records that show the calls and overall usage were necessary for doing business. Just like bank accounts and credit cards, we highly recommend keeping your personal and business lines separate for tax purposes—and a healthy work-life balance!
12. Travel expenses for accompanying guests
You can deduct what your business spends on business related travel for employees or even speakers, thought leaders, and others you need in order to carry out business plans. But you cannot deduct the travel expenses for any personal travel companions they bring along. This includes spouses, children, or other dependents.
When it comes to determining what to deduct on your business taxes, always speak with your accountant or tax preparer and ask lots of questions! A good business tax provider will want to hear a lot about your business and how it changes from year to year. If you’re an inDinero client, your tax questionnaire will play a huge part in capturing that information.
Our team has a wealth of knowledge of tax law and are always looking for ways help business owners maximize their tax benefit and minimize risk. We’ve even created The Entrepreneur's Business Tax Pack including a guide, checklist, and workbook for getting ready for tax season.