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Most Common Tax Deductible Misconceptions

PCPA Blog Article Post Featured Image - Tax Misconceptions

Tax deductibles are necessary expenses that help businesses earn more income, meaning that it can be anything that is helpful for your company to move forward.

These are typically subtracted from your payment before taxing, from office rentals, salaries, budget for the equipment, utility costs, and other professional fees. 

Seeing as it encompasses a variety of administrative expenses in your business, it’s easy to mistake something tax-deductible when they are not.

These minor blunders can count as tax fraud or negligence, both of which can lead to costly consequences. That’s why the list below explores some of the common items that are not considered tax-deductible according to the IRS guidelines.


1. Business-Related Entertainment 

Many businesses throw event parties to entertain clients and build rapport, and while all the expenses are to push your brand forward, it’s not necessarily viewed as essential in the eyes of the IRS.

People were allowed to document the specific details behind the event – from the business goal down to who it is for, but since 2017, entertainment purposes are not considered deductible anymore. 


2. Business Travel 

Tax deductions involving business travel can be confusing for many as it is often regarded as deductible, but only if the primary purpose is for business instead of pleasure.

Traveling with your family, friends, or partner is considered a personal affair, but if the vacation involves meeting with a client one night to talk business, then that particular dinner is deductible. 

Other examples include extending your business trip to spend a full day lounging around.

Even if most of the trip was geared towards business, the extra day spending for leisure will not be counted as deductible. 


3. Commute or Transportation 

Commuting to work may seem like a necessity for your business, but it’s not a concern for the IRS.

Regardless of how far you live from your place of employment, the transportation expenses will all have to come from your pocket. 

The only exception to this is when you are self-employed, which makes your daily commute a significant part of your business since your workplace often varies. 


4. Political Contributions 

Organizations that support a particular candidate may help your community, but any donations you make to help the political party will not be considered tax-deductible.

Any political contributions will have to come from you, even if the candidate you support is elected. 


The Bottom Line: The Importance Of Knowing What is Tax-Deductible 

Accurate and efficient accounting goes beyond handling your books. Experts can ensure you don’t accidentally commit tax fraud when you mistakenly claim something as tax-deductible, which can understandably be confusing for many. 

For start-ups looking for ways to brush up on the basics, our accounting firm in Indianapolis can help deliver quick and quality results with your accounting and taxing needs.

Get in touch with us if you’re looking for reliable CPAs in Indianapolis, we’re the best to call today! Book your appointment with us and see how we can help you. 

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About Pattar & Co. CPA

Pattar & Co. CPA is an expert in all areas of accounting with offices in Indianapolis & Fort Wayne. We provide tax, bookkeeping, payroll, and accounting services to individuals and businesses across Indiana. If you’re looking for a knowledgeable local CPA in the area, let’s talk!

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