As an independent contractor, sole proprietor or small business owner, you pay more taxes than employees. At the same time, you are also eligible for additional tax deductions. In fact, one of the many advantages of being self-employed is the possibility of reducing the amount paid by canceling some professional expenses (such as telephone and internet fees, continuing education or business travel), plus some personal expenses.
However, not all business or personal expenses are tax deductible. If you deduct money on your tax return that doesn’t qualify, you’ll be subject to a tax assessment or penalty. Although the tax code changes slightly from year to year, adding new expenses that are deducted and excluded, it is useful to know what is generally considered not an expense, but the government central and federal.
What are non-recurring expenses?
Non-taxable income is a personal or business expense that you cannot deduct from your gross income when you file your taxes. On the other hand, these deductible expenses are expenses you can deduct, reducing your tax bill.
In the United States, most taxpayers have two options when it comes to tax deductions. You may be able to claim the standard deduction, which is a fixed amount (adjusted annually for inflation) that is tax-free based on factors such as your filing status, age, disability status and whether someone else claiming you as a dependent.
On the other hand, you can take itemized deductions, which is when you deduct the expenses directly from your gross income. If you think your deductions will exceed the standard deduction ($13,850 for individual taxpayers in 2023), it makes sense to put in more effort. and to clarify. You only have to worry about non-reimbursed expenses if you list something.
What are non-recurring expenses?
Non-exempt business expenses are business expenses that the government deems to be indirectly related to your business or not necessary for your business. Although you can include these expenses in the cost of your purchase, you cannot deduct them from your taxes.
Different states and cities have different policies for certain expenses. Some places may allow you to deduct expenses, while others may not. You may want to consult an accountant or tax professional to make sure you understand the local laws. These funds are generally unpaid.
Budgeting is the expenses associated with starting your business. The Internal Revenue Service (IRS) generally does not consider pre-employment expenses to be deductible expenses, such as the purchase or lease of a business vehicle or the purchase of business property.
However, you may be able to recover some of your expenses in later years by deducting depreciation or amortization. In addition, the IRS allows you to deduct certain business start-up expenses (generally up to $5,000 per year), such as registration fees for setting up a limited liability company (LLC) or purchasing an Internet domain name.
Daily travel expenses, such as travel expenses to and from your office or place of work, are not deductible. Expenses related to a business trip, such as a meeting with a client outside of your usual place of work, are not taxable. (Of course, this deduction only applies to the expenses of those involved in your business, you cannot deduct the expenses of a spouse or friend who comes on a business trip.)
Food allowances are deducted. In general, you can deduct 50% of food and beverages related to your work, such as meals with a client, supplier, employee, partner, or consultant. The 2021 Consolidated Appropriations Act temporarily increased the deduction of business food expenses to 100% in 2021 and 2022 (it expires in 2023), as long as the food took place in a restaurant.
However, you can deduct the full amount of food in some cases. For example, depending on local law, you may be able to fully deduct food and beverage expenses if they are related to social activities for employees (such as holiday parties) or if they are part of the job. are sold to customers (such as items purchased for a company). which will be corporate events).
Almost always non-reimbursed entertainment expenses, such as hotels, gyms, theaters or sporting events. Recreational facilities, such as swimming pools, tennis courts or lounges, are also not excluded.
However, if food and drinks are part of the entertainment, you can deduct some of these food expenses. These expenses must be purchased separately from the entertainment (as shown on the receipt or invoice).
Donations are not deductible. Although you can spend what you want for your customers, employees, partners or others, you cannot
Political election expenses and political expenses, including expenses related to participating in political campaigns for public office, are not deductible. Even if your support for the candidate is related to your business, you cannot deduct these costs as a tax deduction.
Political donations include all indirect donations, such as advertising for a political party convention or publication, tickets to a political party, or tickets to an inaugural ball or similar event. defined as a party or a supporter.