Coffee and meals are deductible if you are meeting with a client, a colleague, or someone within your networking circle. Normally these expenses are deductible at 50% but for the 2021 tax year, they are 100% deductible. You can also deduct this expense if you are traveling for business. If you are away from home for a job or meeting with a client, colleague or networking contact, staying overnight somewhere related to your work, then that is considered a travel expense and you can deduct that. You cannot deduct these expenses if you are simply grabbing a latte on your way to the office, or on your way to a client meeting near your home or office. That is simply a personal expense.
Most business owners who use their personal vehicles for work take the mileage deduction for their cars. The basis of the mileage deduction is that it covers gas, maintenance, car washes, etc. This means you can’t deduct car washes or oil changes, that sort of thing as a separate deduction on your taxes because they are already included in the mileage deduction. Therefore, people who are realtors, loan officers, CPAs, attorneys, people who just drive a little more frequently for business, but the business doesn’t own the vehicle, they can’t deduct things like car wash expenses. That’s considered a personal expense covered by the mileage deduction. To deduct actual expenses such as fuel, vehicle maintenance costs, car washes, etc., the business needs to own the vehicle. The vehicle needs to have been purchased by the business and depreciated through the business.
Business owners often ask if they can deduct their professional clothing expenses. You know, lawyers, realtors, etc. must appear a certain way for their business dealings. Clothing generally is not deductible. The reason clothing isn’t deductible is it can be worn in situations outside of your business. Uniforms however are deductible. If you are in the medical profession, scrubs, lab coats, those types of clothing items would be considered uniforms and therefore deductible. Other types of clothing that are deductible are promotional clothing or clothing meant to advertise your business that contain your business’s brand or logo. Those types of clothing are deductible. One other type of clothing that is deductible is specialty or protective clothing. So, if you’re in construction and you need protective gear such as steel toe boots to meet safety requirements, those items are deductible. Another example would be if you have an athletic business of some sort and you purchase shoes/cleats for your coaching staff to wear, that would be deductible because they’re specialty items for the work being performed.
If you use your personal cell phone to take both business and personal calls, is that deductible? Yes, a portion of it is deductible. It is not 100% deductible because if it’s your personal phone you obviously use it for personal reasons too, but if you use it for business reasons as well then you can deduct a portion. You would need to assign a percentage of the cell phone use as business expense. So, if you use it 80% for business, then 80% of your cell phone expense will be a deductible business expense.
Prior to the Tax Cuts and Jobs Act of 2018 tickets to entertainment/sporting events were deductible at 50% but they are no longer deductible. Anything that is entertainment, or considered entertainment is no longer deductible. Gone are the times you can gift a couple ball game tickets to a client or take a client to a ball game and claim it as a deduction. However, if you take a client or colleague to a game or entertainment event, the food that you purchase while at the event is deductible if the event is for business purposes. If its business related, if you’re having a meeting there, or discussing business, that kind of thing, the food can be deducted, but the actual tickets for admission are not. When you buy private boxes the price of the box often includes the price of food. In this case, the whole thing is not deductible because it is lumped in with the entertainment.
Home office furniture and equipment are fully deductible if the items are specific for your business. With the Covid-19 pandemic and the closure of many business offices over that last year or so, a lot of people were forced to set up home offices, maybe upgrade their desk, chair, monitor, computers, that kind of thing. Those items are all fully deductible if it’s for your business.
What about an espresso machine for your home office? This one came up in a conversation with a colleague recently. Could you deduct an $800 espresso machine that you bought for your home office? I would say no because it’s your home office in your personal home. This would be considered more of a convenience or luxury, not something necessary to run your home office. On the other hand, if you you bought an espresso machine for a physical office location, that would be deductible.