Certain business expenses are subject to very specific tax rules (and often to misinformation among taxpayers). Below are a few such expenses and the tax rules that apply.
For work uniforms to be tax deductible, the clothing must not be suitable for personal use outside the workplace. It doesn't matter that the employer requires the employee to wear the clothing while on the job. If the clothing is suitable for personal use outside the workplace, it is a nondeductible personal expense. Examples of deductible work uniforms would be a police uniform, a firefighter's uniform, and a medical professional's doctor and nurse work scrubs since these are not suitable for personal use outside the workplace.
Membership dues paid to various types of clubs (airline, athletic, country, hotel, social, sporting) are not a tax deductible business expenses in and of themselves. Meals and entertainment expenses incurred at the club are deductible business expenses, provided the various rules for meals and entertainment are met by the business owner.
Business gifts to clients, customers, and potential prospects are tax deductible up to a limit of $25 per recipient per year. Any amount in excess of the $25 maximum is a nondeductible business expense.
Fines and Penalties:
Fines and penalties incurred in a business are not tax deductible.
Federal Income Taxes:
Federal Income Taxes are not tax deductible.
Interest on Car Loans:
Interest paid by an “employee” on a car loan is nondeductible personal interest even if the auto is used for business purposes.
A “self-employed taxpayer” may claim the interest paid on the business use portion of a car as a deductible business expense.
This article was written by Donald M. Scherzi, CPA, CFP, LLC
Mike Lupo, SCORE Counselor
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