Since tax laws constantly change, it is difficult to know if certain expense might qualify as a tax deduction or not. If you are unsure and deduct an expense on your tax return that does not qualify, you might be faced with a tax audit or other notice. Fortunately, there are many deductible tax expenses that exist, so you may be surprised that your tax expense of choice qualifies for a tax deduction.
This page covers expenses that are currently nondeductible on a federal and/or state income tax return.
Tax Deductions You Can Not Claim
Tax deductions work by reducing your taxable income by a certain amount; they are not tax credits which reduce your total tax dollar-for-dollar. When you have $50,000 of taxable income, but deduct $15,000 in itemized deductions, you are then only taxed on $35,000 instead of your full income of $50,000 ($50,000 - $15,000 = $35,000). When you itemize your deductions by writing off your mortgage interest points, healthcare expenses, and other deductions, this means you cannot claim the standard deduction. You can also claim adjustments to income or above-the-line deductions.
KEY TAKEAWAYS
- Tax deductions lower the amount of your income that is taxable, while tax credits directly reduce the amount of tax you owe. Understanding this difference helps in planning your taxes effectively.
- Claiming an expense as a deduction without confirming its eligibility can result in IRS audits or penalties. Always ensure expenses are deductible before including them on your tax return.
- Certain expenses like federal income taxes, commuting costs (traveling to work), and personal insurance premiums cannot be subtracted from your taxable income when calculating taxes owed.
As the tax code changes, different expenses and deductions are added or removed. When you prepare your return on eFile.com, you will only be prompted to enter current tax information so you do not have to keep up with the many changes year-to-year.
For upcoming tax returns, there are many expenses that are not tax deductible - know the facts on what you can and can not deduct on your return. Here is a list of expenses that the IRS generally considers nondeductible:
- Adoption expenses (see if you might qualify for the Adoption Tax Credit)
- Alimony payments if started in 2019 or later
- Broker's commissions for IRA or other investment property
- Burial, funeral, and cemetery expenses
- Campaign expenses
- Capital expenses (but you can depreciate business property)
- Check-writing fees (non-business)
- Child support payments
- Childcare or babysitting payments, though there is a tax credit for dependent care
- Club dues
- Commuting expenses (but you could get these from your employer as tax free income)
- Credit card fees (non-business)
- Donations to non-qualified charities, including personal GoFundMe or Kickstarter campaigns
- Expenses of earning or collecting nontaxable income
- Fees and licenses
- Federal income taxes
- Federal estate taxes
- Fines and penalties
- Gift taxes
- Gym membership fees
- Health spa expenses
- Hobby losses
- Homeowner's or renter's insurance
- Home repairs or improvements - see the linked page for more details
- Home security system (unless you have a home office)
- Illegal bribes and kickbacks
- Investment seminar and convention expenses
- Legal fees and expenses (non-business)
- Licenses (marriage, driver's, etc.)
- Life insurance premiums (unless part of an alimony payment
- Lobbying expenses (and charitable contributions used for lobbying expenses)
- Losses from the sale of your home, furniture, car, or other personal property
- Lost or misplaced cash or property
- Lost vacation time
- Lunches with co-workers
- Meals while working late (unless they are business entertainment expenses)
- Medical expenses claimed as business expenses (except for medical exams required by your employer)
- Membership dues (not including professional societies)
- Moving expenses (except for a military-related moved)
- Personal disability insurance premiums
- Personal, living, and family expenses
- Pet expenses (veterinarian bills, tags, and registration fees)
- Political contributions
- Professional certification, accreditation, and licensing fees
- Professional reputation improvement expenses
- Relief fund contributions
- Rent payments
- Residential telephone service
- Stockholders' meeting attendance expenses
- Tax penalty payments
- Travel expenses for another person
- Unreimbursed employee expenses
- Voluntary unemployment benefit fund contributions
- Wages never received
- Wristwatches (even if related to a job requirement).
Now that you aware of expenses that do not qualify as tax deductions, check out our list of tax expenses that might qualify as tax deductions.
Use eFile.com to help claim only deductions you qualify for and reduce your taxable income. Answer simple questions and eFile will generate the IRS and state tax forms for you - filing your taxes online has never been simpler. Also, when you file with eFile.com, we will help you select only applicable deductions that you do in fact qualify for.
What If I Claim Something that Is Nondeductible?
If you try to find a loophole in the tax code or try to write off something that is nondeductible, the IRS will eventually catch this. If the IRS finds a deduction that you should not have claimed and/or audits your return, then you will likely owe past-due taxes which would include penalties and interest.
When you use tax software like eFile.com, you will only be prompted to enter current and valid tax deductions as the eFile Tax App is updated each year to reflect the current tax code. See various ways to save on taxes and learn how the eFile application works. We help you keep more of your money while making the tax preparation process simple and straightforward. Contact us here if you have questions about what deductions qualify or any other tax related question.
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