As a tax preparer I have people question me all the time about what can be claimed on their taxes. Here is a list of what NOT to claim:
Lunch – McDonald’s and other fast food restaurants are not tax deductible unless you are meeting with a client to discuss business. You may be meeting to go over the deals of a new contract or just to garner interest in your product or service which is allowable. Allowable meals and entertainment deduction typically has a 50% limitation on how much can be written off*. The same rule applies for your morning cup of coffee.
New Clothes – I know most ladies love new clothes and shoes, I’m no exception, but this is not a valid tax write-off. Now, if it is a uniform it is an allowable deduction. Think police, firefighters, nurses, doctors, mechanics, etc. A good rule to follow if you are confused is to ask yourself “Can I wear this when I’m not at work?” If the answer is yes then it’s not allowed. This same rule applies for personal grooming (haircuts, manicures, etc.) and accessories.
Your Child(ren)s School Supplies – If you have a business you are allowed to write-off your office supplies expense but that does not include notebooks, glue, and a scientific calculator for your children. That is a personal expense and should be treated as such.
Your Child(ren)s Tuition – If your child attends a private elementary, middle or high school the tuition is not tax deductible. Before and after school care however, is allowable via the child and dependent care deduction. Another option to reduce your tax liability on this type of tuition is to contribute up to $2,000 per year to a Coverdell Education Savings Account and use the tax-free distributions for qualified education expenses (tuition, books, uniforms, etc.). For higher education costs (college) there are three ways to offset these expenses for tax purposes, the American Opportunity Credit, the Lifetime Learning Credit, and a Tuition and fees deduction. The American Opportunity Credit can reduce your taxable income up to $2,500 with up to 40% of it being refundable for the first four years of college. The Lifetime Learning Credit can reduce your taxable income up to $2,000 and has no limit on the number of years you can apply this credit. The tuition and fees deduction will reduce your taxable income up to $4,000. These credits and deductions can’t be taken at the same time, nor can they be taken by both the parents and student at the same time.
Child Support – Your child(ren) will benefit from these payments but you will not for tax purposes. However, if you are paying alimony that is tax deductable and can reduce your tax liability (your ex was good for something).
Volunteered Services – It would be nice if there was a deduction to allow you to write-off time and labor donated to a non-profit organization, but unfortunately it’s not allowed. For example if I, the accountant, volunteered my time to a church to manage their accounting and bookkeeping I would not be allowed a deduction for the hours spent doing the work. However, I am allowed a deduction for any materials I purchase to do the job and $0.14 per mile for any miles driven in connection with my volunteerism.
ALL of your income donated to charity – It is wonderful that you are so generous, but the IRS will not allow you to get a tax deduction for giving all your money away. Usually, you can deduct up to 50% of your adjusted gross income for that year (30% for appreciated assets and contributions to private foundations). There is a plus side to this rule the remaining deduction can be carried over for the next 5 years and reduce taxable income for those future periods.
Unsure about any deductions, please feel free to leave your question below!
