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Our previous newsletter gave you an overview of different kinds of allowable deductions, be they personal miscellaneous expenses, unreimbursed employee expenses, home office expenses, business expenses, income producing expenses, and so on.
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It is now a good time to find out what miscellaneous deductions are specifically listed by the IRS as nondeductible expenses in Publication 529 - Miscellaneous Deductions.
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Just like the deductible ones, nondeductible miscellaneous expenses may be either for personal or business use, and sometimes both. Here are some nondeductible expenses we think are most relevant for you.
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Club dues paid to an organization cannot be deducted if one of the main purposes is to conduct entertainment activities for members or their guests, or provide members or their guests with access to entertainment facilities. This includes business, social, athletic, luncheon, sporting, airline, hotel, golf, and country clubs. Dues paid to airline, hotel, and luncheon clubs are not deductible either.
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Health spa expenses are not deductible even if there is a job requirement to stay in excellent physical condition, such as might be required of a law enforcement officer.
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Commuting expenses, meaning the cost of transportation between your home and your main or regular place of work, are not tax deductible. If you haul tools, instruments, or other items in your car to and from work, you can deduct only the additional cost of hauling the items, such as the rent on a trailer to carry the items.
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| Fines or penalties you pay to a governmental unit for violating a law cannot be deducted. This includes an amount paid in settlement of your actual or potential liability for a fine or penalty (civil or criminal). Fines or penalties include parking tickets, tax penalties, and penalties deducted from teachers' paychecks after an illegal strike. |
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Tax Penalties incurred for failing to pay your estimated taxes timely or file your tax return timely or for substantially understating business income are not deductible. This includes tax penalties sustained with sales tax, excise tax, and payroll tax returns.
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You cannot deduct expenses to produce tax-exempt income. You cannot deduct interest on a debt incurred or continued to buy or carry tax-exempt securities.
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If you have expenses to produce both taxable and tax-exempt income, but you cannot identify the expenses that produce each type of income, you must divide the expenses based on the amount of each type of income to determine the amount that you can deduct.
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Commissions paid on the purchase of securities are not deductible, either as business or nonbusiness expenses. Instead, these fees must be added to the taxpayer's cost of the securities. Commissions paid on the sale are deductible as business expenses only by dealers.
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Investment related seminars, even if you are interested in investing company funds, do not qualify as a tax deduction. Travel, meals and cost of the seminar are also not deductible.
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Bribes and kickbacks are illegal. Engaging in the payment of bribes or kickbacks is a serious criminal matter. Such activity could result in criminal prosecution. Any payments that appear to have been made, either directly or indirectly, to an official or employee of any government or an agency or instrumentality of any government are not deductible for tax purposes and are in violation of the law. A kickback is a payment for referring a client, patient, or customer. The common kickback situation occurs when money or property is given to someone as payment for influencing a third party to purchase from, use the services of, or otherwise deal with the person who pays the kickback.
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You cannot deduct a loss based on the mere disappearance of money or property. However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual.
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You cannot deduct contributions made to a political candidate, a campaign committee, or a newsletter fund.
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You cannot deduct campaign expenses of a candidate for any office, even if the candidate is running for reelection to the office. These include qualification and registration fees for primary elections. Advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate are not deductible.
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Job hunting expenses for a new trade or business are not deductible.
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Education expenses you incur to meet the minimum requirements of your present trade or business, or those that qualify you for a new trade or business, are not deductible. This is true even if the education maintains or improves skills presently required in your business.
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| You cannot deduct professional accreditation fees, such as accounting certificate fees paid for the initial right to practice accounting, bar exam fees and incidental expenses in securing initial admission to the bar, or medical and dental license fees paid to get initial licensing. |
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| Professional reputation and expenses to improve it are nondeductible. You cannot deduct expenses of, for instance, radio and TV appearances to increase your personal prestige or establish your professional reputation. |
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| You generally cannot deduct travel expenses you pay or incur for a spouse, dependent, or other individual who accompanies you (or your employee) on personal or business travel unless the spouse, dependent, or other individual is an employee of the taxpayer, the travel is for a bona fide business purpose, and such expenses would otherwise be deductible by the spouse, dependent, or other individual. |
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Amounts paid or incurred to demolish a structure are not deductible. These amounts are added to the basis of the land where the demolished structure was located. Any loss for the remaining un-depreciated basis of a demolished structure would not be recognized until the property is disposed of.
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Business attire, unless it's protective equipment, or a uniform that would not be worn during non-working hours, is not a deductible item.
You cannot deduct the cost of a wristwatch, even if there is a job requirement that you know the correct time to properly perform your duties.
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You cannot deduct the expenses of lunches with co-workers, except while traveling away from home on business.
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You cannot deduct the cost of meals while working late. However, you may be able to claim a deduction if the cost of the meals is a deductible entertainment expense, or if you are traveling away from home.
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The value of wages never received or lost vacation time cannon be deductible either.
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You cannot deduct the expenses of adopting a child but you may be able to take a credit for those expenses.
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| Burial or funeral expenses, including the cost of a cemetery lot, are not deductible. |
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You cannot deduct the cost of a home security system; however, you may be able to claim a deduction for a home security system as a business expense if you have a home office.
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You cannot deduct premiums you pay on your life insurance. You may be able to deduct, as alimony, premiums you pay on life insurance policies assigned to your former spouse.
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| Charitable contributions of time are not a write off. Your time means nothing to the IRS and that’s just how it translates onto the tax return. |
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| Personal, living or family expenses are not deductible as business expenses or anywhere else on your tax return. These expenses should be paid from personal funds and kept separate from your business. |
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Personal legal expenses, such as those for custody of children, breach of promise to marry suit, civil or criminal charges resulting from a personal relationship, damages for personal injury, preparation of a will, property claims or property settlement in a divorce, are not deductible.
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Remember that this list of nondeductible miscellaneous expenses is not comprehensive.
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To make sure your miscellaneous deductions are in accordance with the IRS regulations, make sure you keep in touch with your tax professional, as well as with our newsletters.
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