I often hear many creative things from clients… Can I deduct getting a massage? It relieves stress! Can I deduct my car? Can I deduct my trip to Las Vegas? Can I deduct my hair cuts? Can I deduct my gym membership?
Most of the answers to these questions are “It depends.” In order to be a deductible business expense, the expense must be ordinary and necessary for the business, not extravagant, and also primarily for the business.
You are probably wondering what is ordinary and necessary for my business? The tax code does not define that for you. Some court decisions say that it must be “appropriate and helpful,” others say it must be “normal, common, and accepted under the circumstances by the business community. “ Many people think everything is ordinary. It’s important to talk to a CPA firms here in Las Vegas about different types of transactions throughout the year to help you determine what is necessary and ordinary for your business.
Although there is nothing in the tax code that says a deduction is too big, IRS auditors look at deductions which our out of proportion with the business. The tax code generally looks down on lavish and extravagant expenses, but does not define what these terms are.
You need to make sure that both your business and personal expenses are separate. One way of doing this is creating separate bank accounts, one for business and one for personal. This will help you with record keeping and allow you not to mix your personal expenses into your business.
Although some of the above questions are funny, some of them may be valid deductions depending on your business!
If you have any questions regarding what is deductible for your unique business, please feel free to give me a call today. I would be happy to talk to you and help you get your business going in the right direction when it comes to accounting here in las vegas CPA firms.
