A nondeductible expense is something you cannot claim when you file your taxes. Now, some people get confused as to what can and cannot be deducted, especially if they hope to get some money back. Some clients have incorrectly claimed something which resulted in issues including penalties and audits. That is the last thing you want to happen. Below you will find a small list of possible nondeductible expenses.
Note: This is a partial list of possible deductions you cannot claim. Think of this as a general template. For a more comprehensive list, you can visit efile.
1) Capital Expenses
That is the money you spend through your company to maintain the basic operations, including vehicles, land, and other fixed assets. That is why they cannot be deducted because they are considered the lifeline to your business.
2) Driver License
Do you have a company car you rely on to keep your business up and running? A pizza place would fall into this category. Pizza places make deliveries every day. They need their driver license to remain current so they can fulfill their promise to the customer. This is one expense that cannot be deducted. Once again, your license is needed to stay in business, especially when you account for more home deliveries than in-person stops.
3) Marriage and Pet Licenses
Pets need to have a valid license to be legal, even if they remain indoor pets. The same thing with a marriage license. Most states do not consider “living together” being married. You need to show proof that you are married. However, you are not going to get a tax break for that.
4) Insurance and Rent
Once again, this falls under “necessities.” You need home insurance to keep your property safe, especially if something happens to it. Your rent or mortgage payments are also considered “necessities.” You pay rent so you have a place to live in. Most tax and legal professionals do not consider this a “valid right-off.”
5) Personal Expenses
Some clients make the mistake of thinking they can claim “personal expenses” no their forms. This could include anything from groceries to online shopping. You cannot do that. Uncle Sam is not going to be too happy with you if you try it.
6) Lost Time
Do you have lost vacation time at work? Do you have sick time you failed to use when you had the chance? Most employers have the rule of “use it or lose it.” The same thing goes for Uncle Sam.
You are not allowed to claim your lost work time on your tax forms in hopes you can get some money back.
7) Lost Wages
Do you have any lost wages? You are better off talking to your boss about this issue, especially if you work for a small company. You cannot claim it. Lost wages are considered “work-related.”
8) Traveling Expenses
Do you travel for work? Talk to your boss about it. He or she should give you a form so they will then reimburse you for the expenses. This is not an Uncle Sam issue.