Tax Deductions: Nondeductible Expenses

Nondeductible Expenses

Below is a list of items considered non-deductible expenses:

List of Nondeductible Expenses

• Adoption expenses.
• Broker's commissions that you paid in connection with your IRA or other investment property.
• Burial or funeral expenses, including the cost of a cemetery lot.
• Campaign expenses.
• Capital expenses.
• Check-writing fees.
• Club dues.
• Commuting expenses.
• Fees and licenses, such as car licenses, marriage licenses, and dog tags.
• Fines and penalties, such as parking tickets.
• Health spa expenses.
• Hobby losses-but see Hobby expenses, earlier.
• Home repairs, insurance, and rent.
• Home security system.
• Illegal bribes and kickbacks-see Bribes and kickbacks in chapter 11 of Publication 535.
• Investment-related seminars.
• Life insurance premiums.
• Lobbying expenses.
• Losses from the sale of your home, furniture, personal car, etc.
• Lost or misplaced cash or property.
• Lunches with co-workers.
• Meals while working late.
• Medical expenses as business expenses.
• Personal disability insurance premiums.
• Personal legal expenses.
• Personal, living, or family expenses.
• Political contributions.
• Professional accreditation fees.
• Professional reputation, expenses to improve.
• Relief fund contributions.
• Residential telephone line.
• Stockholders' meeting, expenses of attending.
• Tax-exempt income, expenses of earning or collecting.
• The value of wages never received or lost vacation time.
• Travel expenses for another individual.
• Voluntary unemployment benefit fund contributions.
• Wristwatches.

Adoption Expenses

While expenses incurred during the process of adopting a child are considered a non-deductible expense, you may be able to claim a credit for those expenses. Please see Form 8839, Qualified Adoption Expenses, for more details concerning adoptions expenses.

Campaign Expenses

Any expenses incurred by a candidate while running for election are non-deductible. This is the case even if the candidate is running for reelection. Non-deductible expenses include costs incurred for qualification and registration fees for primary elections.

Legal fees. You may not deduct defense legal fees that arise from participation in a political campaign.

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Capital Expenses

Currently, any amount of moneys paid to purchase property that has a useful life that is substantially beyond the tax year or amounts paid to increase the value of prolong the life of the property, are not deductible. If the property is used as a home office or for work in general, you may be able to take a depreciation deduction. Please read Publication 946 for additional details. If the property is a car used in your work, also refer to Publication 463.

Check-Writing Fees on Personal Account

If may not take a deduction on the fees charged by a bank in connection to a personal checking account, regardless whether the account pays interest or not.

Club Dues

Dues paid for the cost of membership in any club organized for business, pleasure, recreation, or other social purpose are not a deductible expense. This may include business, social, athletic, luncheon, sporting, airline, hotel, golf, and country clubs. For a list of exceptions to this rule, please read the Dues to Chambers of Commerce and Professional Societies section under Unreimbursed Employee Expenses.

Commuting Expenses

Any commuting expense to and from work as part of your regular place of work, is not a deductible expense. However, the cost of any additional trips to the office or place of work to transport tools, instruments, or other items in your car are a deductible expense. This may include the rental of any additional vehicles to transport the items.

Fines or Penalties

Payments of fines or penalties to a governmental unit for violating a law, are not a tax deductible expense. This includes an amount paid in settlement of your actual or potential liability for a fine or penalty (civil or criminal). Fines or penalties include parking tickets, tax penalties, and penalties deducted from teachers' paychecks after an illegal strike.

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Health Spa Expenses

You cannot deduct health spa expenses, regardless if there is a job requirement relating to your physical condition. This also applies to any requirement for physical fitness as required of a law enforcement officer.

Home Security System

You cannot deduct the cost of a home security system as a miscellaneous deduction. However, if the system is implemented to protect a home office, you may be able to claim a deduction for a home security system as a business expense. Please check the Home Office section under Unreimbursed Employee Expenses, and Publication 587.

Homeowners' Insurance Premiums

You cannot deduct premiums that you pay or that are placed in escrow for insurance on your home, such as fire and liability or mortgage insurance.

Investment-Related Seminars

Any payment made to attend conventions, seminars, or similar meetings for investment purposes, are not a deductible expense.

Life Insurance Premiums

Any life insurance premium payments are not a deductible expense. However, you may be able to deduct, as alimony, premiums you pay on life insurance policies assigned to your former spouse. See Publication 504, Divorced or Separated Individuals, for information on alimony.

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Lobbying Expenses

Any lobbying expenses incurred during the course of a year are not a deductible expense. Such payments include efforts meant to:

1. Influence legislation,
2. Participate, or intervene, in any political campaign for, or against, any candidate for public office,
3. Attempt to influence the general public, or segments of the public, about elections, legislative matters, or referendums, or
4. Communicate directly with covered executive branch officials in any attempt to influence the official actions or positions of those officials.

Payments made for research, preparation, planning, or coordinating any lobbying activities are also a non-deductible expense.

Covered executive branch official. A covered executive branch official, for the purpose of using communications efforts for the purpose of lobbying, is any of the following officials.

• The President.
• The Vice President.
• Any officer or employee of the White House Office of the Executive Office of the President, and the two most senior level officers of each of the other agencies in the Executive Office.
• Any individual serving in a position in Level I of the Executive Schedule under section 5312 of Title 5, United States Code, any other individual designated by the President as having Cabinet-level status, and any immediate deputy of one of these individuals.

Dues used for lobbying. You may not deduct portions of dues to an organization if the (tax-exempt) organization notifies you that part of the dues or other amounts you pay to the organization are used to pay nondeductible lobbying expenses.

Exceptions. If you incur certain necessary expenses that are necessary to maintaining and carrying on your trade or business, you may deduct certain lobbying expenses. These include:

1. Expenses for attempting to influence the legislation of any local council or similar governing body (local legislation). An Indian tribal government is considered a local council or similar governing body.
2. In-house expenses for influencing legislation or communicating directly with a covered executive branch official as long as the expenses for the tax year does not exceed $2,000 (not counting overhead expenses).
3. If you are a professional lobbyist, you can deduct the expenses you incur in the trade or business of lobbying on behalf of another person. Payments by the other person to you for lobbying activities cannot be deducted.

Lost or Mislaid Cash or Property

Normally, you may not deduct a loss based on the mere disappearance of money or property. However, if the loss came as a result of an accident, this may qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. See Publication 547 for more details.

Example. A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. The diamond falls from the ring and is never found. The loss of the diamond is a casualty.

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Lunches With Co-workers

You cannot deduct the expenses of lunches with co-workers, except while traveling away from home on business. See Publication 463 for information on deductible expenses while traveling away from home.

Meals While Working Late

You cannot deduct the cost of meals while working late. However, you may be able to claim a deduction if the cost of the meals is a deductible entertainment expense, or if you are traveling away from home. See Publication 463 for information on deductible entertainment expenses and expenses while traveling away from home.

Personal Legal Expenses

Personal legal expenses are not a deductible expense. These may include the following:

1. Custody of children.
2. Breach of promise to marry suit.
3. Civil or criminal charges resulting from a personal relationship.
4. Damages for personal injury ( please see Unlawful discrimination claims section).
5. Preparation of a title (or defense or perfection of a title).
6. Preparation of a will.
7. Property claims or property settlement in a divorce.

Such legal expenses are not deductible, whether or not these expenses result in a loss of income-producing property.

Political Contributions

Contributions made to a political candidate, a campaign committee, or a newsletter fund are not deductible. This includes expenses related to advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate.

Professional Accreditation Fees

Payments made for professional accreditation fees are not a deductible expense. These include the following cases:

• Accounting certificate fees paid for the initial right to practice accounting.
• Bar exam fees and incidental expenses in securing admission to the bar.
• Medical and dental license fees paid for initial licensing.

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Professional Reputation

Any expenses related to radio and TV appearances to increase your personal prestige or establish your professional reputation, are not tax deductible.

Relief Fund Contributions

You cannot deduct contributions paid to a private plan that pays benefits to any covered employee who cannot work because of any injury or illness not related to the job.

Residential Telephone Service

Any charges (including taxes) for basic local telephone service for the first telephone line to your residence are not a deductible expense, regardless whether it is used in a trade or business.

Stockholders' Meetings

Any transportation costs and other expenses incurred to attend stockholders' meetings of companies in which you own stock but have no other interest, are not a deductible expense. The rule applies also if you are attending the meeting to gather information useful in making further investments.

Tax-Exempt Income Expenses

You cannot deduct expenses to produce tax-exempt income. You cannot deduct interest on a debt incurred or continued to buy or carry tax-exempt securities.
If you have expenses to produce both taxable and tax-exempt income, but you cannot identify the expenses that produce each type of income, you must divide the expenses based on the amount of each type of income to determine the amount that you can deduct.

Example. During the year, you received taxable interest of $4,800 and tax-exempt interest of $1,200. In earning this income, you had total expenses of $500 during the year. You cannot identify the amount of each expense item that is for each income item. Therefore, 80% ($4,800/$6,000) of the expense is for the taxable interest and 20% ($1,200/$6,000) is for the tax-exempt interest. You can deduct, subject to the 2% limit, expenses of $400 (80% of $500).

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Travel Expenses for Another Individual

Travel expenses paid or incurred for a spouse, dependent, or other individual who accompanies you (or your employee) on personal or business travel, are not deductible. Please see Publication 463 for more information on deductible travel expenses.

Voluntary Unemployment Benefit Fund Contributions

You cannot deduct voluntary unemployment benefit fund contributions you make to a union fund or a private fund. However, you can deduct contributions as taxes if state law requires you to make them to a state unemployment fund that covers you for the loss of wages from unemployment caused by business conditions.

Wristwatches

Expenses incurred in the purchase and maintenance of a wristwatch are not deductible, whether required by your current job or not.

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