5 Expenses You Never Knew Were Not Tax Deductions
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In a previous post, I talked about 10 tax deductions entrepreneurs tend to miss. These tax deductions were common things that cause entrepreneurs to leave money on the table every single year! Leaving money on the table is never good. Documenting things incorrectly that can potentially bite you in the butt in a year…. And for sure may be worse!
When you set up your systems on the accounting process in your business, you always win. You can do your accounting on spreadsheets or cloud-based accounting systems. My favorites are Xero, QBO, Freshbooks, and Wave. You get into the groove of thorough documentation in using any one of these systems.
When DIY’ing your own books correctly, you understand what valid expenses are. You also know the amount to deduct from things that are partially deductible. When it’s time to delegate your bookkeeping, your accountant/bookkeeper is the number one person to go to. They help you understand how to properly organize these write-offs.
Today I want to talk about 5 things bloggers and entrepreneurs, unfortunately, cannot write off. Even though we all wished at some point they were tax deductible. They may or may not come at a surprise to you. They also may or may not be annoying, to say the least.
Client Gifts
If your love language is gift giving, this may be a problem for you! I know so many women go above and beyond to show their appreciation for their clients, and that’s wonderful.
You may be that person going above the average handwritten Christmas or birthday card. You may be compelled to give your client something extra special from Home Goods or TJ Maxx.
Be informed before you marking these gifts as a tax-deductible expense at the end of the year. Realize that a $50 planner from Erin Condren or the Day Designer, are not tax deductible. Only $25 out of the total amount you spent is!
According to the IRS, you can write off only $250 for the entire year. Specifically $25 per client.
Around $250 would be a great budget for gifting your clients for the entire year. Your accounting system has this feature of setting up yearly budgets.
If you’re into handmade cards like I am ( I love my Silhouette Cameo!), this may not be a huge problem for you.
On the other hand, some of my favorite places to get client gifts from are Etsy, Zazzle, and other creative sites. These sites are filled with cute, personalized mugs, tumblers, notebooks, etc.
This way you’re sending meaningful gifts that allow you to stay within the law AND remain within a budget!
It’s funny when things go full circle:
Back when I worked at an accounting firm, we would do Secret-Santa and have a strict limit of how much we would spend.
Then when I worked in an emergency room as a manager for medical scribes, I would be in charge of selecting the scribe of the month. We would always keep it simple by giving them a $25 gift card to either Starbucks or Panera.
This is also why you see so many gift card sections at the beginning rate of $25!
Commuting
In the previous post about tax deductions, we talked about travel being a deductible expense. But watch out! Don’t waste your time trying to document your weekly trip to the coffee shop or library to take a break from your home office! This commute is not deductible when you are alone or with a colleague who is not receiving any of your services! My favorite mileage tracking app is Mile IQ!
You can track your mileage when meeting with potential or current clients. Mileage tracking is especially important for photographers. They run around their city like a chicken with their head cut off trying to make every engagement shoot and wedding memorable with exclusive locations.
Event planners also should be cognizant of tracking their mileage. They have to meet up with their clients with tons of vendors like florists, bakers, venues, etc. It can get expensive not knowing what is and is NOT a deductible mileage. Let’s not talk about decreased car values with so many miles put into it!
Other places to document mileage legally:
- Post office to ship packages you sell (yes, you Etsy sellers)
- Travel to anywhere you meet your potential and repeating clients
- Mileage when you have gone on a business trip
- Conferences that are essential for your business
Want to avoid leaving money on the table?!
Download my FREE Tax Deductions Checklist Now!
Lunches alone or with colleagues
To piggyback off of commuting not being a deductible expense, realize that when you eat lunch when you’re alone (and not traveling out of town) is not a deductible expense!
Nope doesn't even try to constitute your convenient but delicious lunch at the Cheesecake Factory when you decided to work downtown in Atlantic Station.
For the rest of 2016, I am dedicating time to make meaningful connections in person and online. I plan on going out to coffee and lunch with local entrepreneurs I meet. Since these people would be considered my, colleague (because we are not soliciting services to one another), our excursions are not tax deductible.
To be able to document meals and entertainments as a write off for your business, you would have to record it at 50%.
Your Wardrobe
So you are an entrepreneur going to several networking events, holding in-person workshops, speaking engagements, etc.
Before entrepreneurship, you probably was someone who never really liked dressing up. Went to college classes in the same clothes. You worked in your home office in your pj’s.
You would think since you have to actually put on clothes instead of being in your pj's or yoga pants it would be a deductible expense, but no. According to the IRS Publication 529, if the clothes that you purchased for your profession can be worn outside of work, it is not deemed as tax deductible.
This one was a HUGE bummer for me! My pregnancy body to now is like night and day. After purging most of my clothes (after reading The Life Changing Magic of Tidying Up), I had zero clothes. Nada. Because my hips didn’t lie!
Let’s not begin to talk about clothes from your early 20s not being suitable in your later 20s and 30s. These entrepreneur makeovers can get expensive!
Hiring a stylist or makeup artist is deductible. As long as it's for your business photo shoots, blog posts, and speaking engagements.
I know for fashion bloggers, not being able to deduct your clothes can be a HUGE bummer! Thier main job is to stay on top of the latest trends. --- Even I brought back the choker!
Many times, fashion bloggers are compensated for the clothes they wear by the store owner. And beauty bloggers can be given makeup to try out. Sponsorships baby!
When you’ve outgrown your clothes (literally and figuratively), a way to make your clothes deductible is through a charitable contribution. You donate your trendy (or in my case too small) clothes to your local GoodWill or another thrift store. Estimate the value, and reap the benefits that way! OR, if you’re a fashion blogger, sell your gently used clothes and accessories!
But what about glamorous evening gowns? Like when celebrities go to award shows?
Another way to have your clothing deductible is if you’re invited to a gala or other prestigious event for work. You wouldn’t wear this on any other occasion. So these types of formal wear can potentially be deductible. (Please consult with your tax expert and or CPA for further advice!)
Travel expenses with family
When you travel for business, you are only allowed to have your expenses, as the business owner, deducted.
As a mommy blogger, this is tough because you do bring your children to so many events.
A great way to do this is to buy everything on a personal, keep receipts, and reimburse your ticket from your business account.
Back during my short stint as a mommy/lifestyle blogger, my daughter and I would be invited to local events. Companies that want your business as an influencer would not require you to spend your own money.
Want to avoid leaving money on the table?!
Download my FREE Tax Deductions Checklist Now!
Thank you so much for taking the time to read this blog post! I hope it has helped you in understanding the things that you cannot write off! For further, more detailed reading straight from the IRS, click here and here!