A tax deduction is a reduction in the income that is able to be taxed, essentially lowering the amount of taxes paid. The line between whether a certain tax expense qualifies as a tax deduction or not can be somewhat convoluted at times. If you deduct an expense that doesn’t qualify, it could cause you to face a tax notice or audit. While deductible expenses reduce your tax liability, non-deductible expenses don’t impact your tax bill whatsoever. Some expenses are always deductible, others can never be deducted, and others still are only deductible under specific circumstances.
A deductible expense is one you can subtract from your taxable gross income. Deductible expenses reduce your tax liability. A non-deductible expense, on the other hand, does not impact your tax bill. Certain expenses are always deductible, while others can never be deducted. Another category of expenses, however, are deductible only under specific circumstances.
Tax Deductible Expenses
Examples of expenses that are deductible include :
1. investment losses
2. Charitable contributions.
3. Home Office through Schedule C
4. Gambling losses
Medical Expenses which are
still deductible:
Alcoholism Treatment, Fertility treatment, Guide dog and service Animal, Stop
Smoking Programs, weight Loss programs
Non-Deductible Expenditures
Unfortunately, the vast majority of your
personal spending is not tax deductible. The money you spend on food, rent,
gasoline, entertainment, clothing and so on cannot be subtracted from your
taxable income base. The tax authority considers these natural expenditures as
opposed to a reduction in the amount of money you have at your disposal.
Examples of expenses that are always not
deductible include :
1. Fines and Penalties
2. Lobbying Expenses
3. Club dues
4. Political Contributions
5. Unreimbursed Employee Expense
6. Campaign Expenses
7. Commuting Expenses
Medical Expenses which are not
deductible:
Nonprescription drugs, health Club dues, Cosmetic surgery.
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