| There are three simple questions you can ask to | | | | on. On the other hand, some business purposes can |
| determine whether an expense is tax deductible: The | | | | be murky. One client of Tax Matters Solutions owns a |
| first question is "Is this expense reasonable, ordinary or | | | | heating company. |
| necessary?" For example, it would be reasonable for | | | | This client loves to travel, and bought an $80,000 RV. |
| a doctor to buy medical equipment, and it would be | | | | "Would it be tax deductible?" he wondered. Even |
| ordinary for a realtor to pay for advertising. On the | | | | though he could prove his RV was a reasonable |
| other hand, there are certain expenses that are not | | | | expense, he could not define a bona fide business |
| allowed: life insurance covering a corporate officer, | | | | purpose. As Tax Matters Solutions pointed out, he |
| gold club memberships and breast implants, since they | | | | could deduct the mortgage interest on a schedule A, |
| don't fall into the "ordinary and reasonable" categories. | | | | but he could not deduct the RV as a necessary or |
| Deducting a car because it has a business logo | | | | reasonable business expense. The last question is, |
| painted on it is also stretching the "reasonable" | | | | "Does everyone have this expense?" If everyone has |
| category. The second question is, "Does it have a | | | | this expense, such as food, medical insurance and |
| bona fide business purpose?" Examples of items that | | | | clothing, then chances are you cannot deduct it from |
| have a clear business purpose include an office | | | | your taxes. |
| telephone line and electricity to keep the office lights | | | | |