Even the best-intentioned employees can fall into the trap of mixing business and personal expenses. Business expenses are deductible for federal tax purposes (otherwise known as tax write-offs).
According to the IRS, a business expense is something ordinary and necessary – expenses that are commonplace in your trade or profession and which are helpful for your business. Employees can deduct reasonable work-related expenses, but personal expenses are not tax deductible.
Acceptable – business expenses:
- Travel expenses―If you are traveling for business for more than a day, your food and lodging is a business expense.
- Local transportation that involves travel between workplaces (cabs or public transit between offices)
- Dues or subscriptions to professional or business organizations
- Union dues
- Uniforms or other work clothes that are required for work and are not suitable for other wear
- Work-related educational expenses
- Tools and any supplies necessary for your work
- Home office expenses — only if the office is used exclusively for work
- Business use of your car (mileage shouldn't include personal trips)
Unacceptable – personal expenses:
- Commuting expenses – travel costs from home to work are your responsibility
- Fines or penalties, e.g. parking tickets
- Accreditation Fees – costs associated with continuing education are business expenses, but accreditation fees, such a bar or licensing exam, are considered personal expenses
- Business attire(unless it's a required uniform)
- Travel expenses for spouse or children if bringing family along on a business trip
When in doubt about whether something is a personal or business expense, consult the IRS Publication 535, Business Expenses. Also, make sure you’re familiar with your company's expense policy. For more information on employee expenses, download PEX Card's free Employee Expense Management Guide.