Yo what's going on everybody? My name is Ryan, I'm a CPA, and today I'm going to be
talking about what is really deductible in your business. And I'm going to just go over some
things that are frequently asked of me. And I might be doing, making this into a series
because there's probably new things that come up with the new tax law changes and stuff that you
all might have questions about. So I'm just going through like some of the basic things
that people have asked me a lot throughout the years and hopefully it could help answer
some questions for you. But before I do that I'd really appreciate if you smash the like button,
and if you're new here please consider subscribing to my channel, and also
hit me up in the comment section below if you have any questions or concerns or anything like that.
All right so the first thing I get asked a lot is if you can deduct coffee or meals that you
purchase you know, when you're driving, or when you're like on your way to a client,
or maybe on the way to your office something like that. And again, this is for business owners. And
the answer is no, you can't deduct coffee or meals that you purchase when you're by yourself okay.
Especially when you're around town. So let's say you're leaving home, and you're getting ready to
meet your clients at their location, and you want to stop off at your local coffee house and get
just a latte or something for yourself then you, that's not allowed. You can't deduct that because
that's just like a personal, a personal meal, so to speak. Now if you're traveling away from your
hometown, if you're staying overnight somewhere, traveling away, then that's considered a travel
expense and you can deduct that. But when you're in town, by your home, or by you know, your local
area that's not allowed. And you can deduct coffees and meals if you're meeting a client
you know, at the coffee shop, or if you are meeting a colleague or someone in your networking
circle you know, that's all allowed as a business expense. And that's usually 50% deductible however
for 2021 that is currently 100% deductible due to some of the tax changes that were passed earlier.
The next question I get asked a lot is about car washes. And these are mostly asked from
like realtors, people who drive a lot. They want to know if they can deduct their car washing
because they think that you know keeping the car maintained
gives them a good image to their clients, and thus you know, being more successful,
and more well put together. And while that all makes sense, these people cannot deduct their
car washes. And I'm talking about people who take the mileage deduction for their, for their cars.
So you know, people who are like realtors, or maybe like loan officers, you know CPAs,
attorneys, people who just drive a little more frequently for business, but the business doesn't
own the vehicle, they can't be deducting car wash expenses. That's a personal expense okay. Because
the basis of the mileage deduction is that it covers gas, maintenance, stuff like car washes,
so you can't take both, you can only do one or the other. Mileage or actual expenses, and so in order
to deduct car washes, the business needs to own the vehicle. It needs to be the one that purchased
the vehicle and gets to be the one depreciating the vehicle through the business and all that.
And I have another video on that, on whether or not the business should purchase a vehicle.
Usually it's not a good idea unless it's truly a business vehicle, like a work van or something
like that. But don't be one of those people that tries to get your business to buy your personal
vehicle. That's not cool. That's not, that's not so simple. It's not as simple as you might think.
Another item I get asked a lot about is clothing. Is clothing deductible? You know,
like you're you're a lawyer, you need to buy a suit for yourself in order to appear in court. Or
you're, you know, you're a realtor, you have to buy nice clothes so you can appear
like you know, you give up the image that you are well put together and successful
for your clients. And you know, like the, like the car wash thing, it kind of makes sense.
But clothing generally is not deductible. There's only a few kind that are okay. So if
you just own like a regular, like a business like an attorney, real estate, restaurant,
dental office, your regular clothes that you can wear in other situations are not deductible.
But uniforms are deductible. Uniforms usually contain things like your company's logo,
or maybe if you are in, if you own a doctor practice, it's like you know the scrubs,
your lab coat looking things, those would be deductible because you wouldn't really wear scrubs
or lab coats to like the club or something like that. Maybe you will but it's not meant for that.
Other things, other types of clothing that are deductible are like promotional or advertising
type of clothing. You know obviously, your brand, your logo, your business's brand and logo on it,
that's all deductible. But normal clothing that you can get off of Nordstrom, Target,
you know those places, they're not deductible. One other type of clothing that's deductible are
like specialty or protective clothing you know, like if you're a construction worker you need
protective hats or protective gear to to meet safety requirements, those are deductible okay. Or
if you are you know, in an industry that requires really special like shoes or something. Like maybe
you run a a basketball or a soccer coaching business and you want to provide shoes for your
coaches you know, something that, that would all be a deductible because they're specialty.
What about cell phone, your personal cell phone? You own your business, you don't
really have a business line, you use a personal phone to take personal calls and business calls.
Is that deductible? Well actually yeah, you know some of it is deductible. It's not 100%
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,
you can assign a percentage of what is deductible you know. So like if you say you use it like 80%
for business then 80% of it is deductible for the business. Is the IRS going to question that? They
might, I have not seen it happen because it's such a, usually such a low expense
they don't really care about it, but yeah that's something that would be deductible.
What about tickets to a basketball game or hockey game or whatever, you know, that you want to give
to a client, or you want to bring a client to a game, is that deductible? Before the tax cuts and
jobs act of 2018 that would be deductible 50% but now it's not. Okay? Anything that's entertainment,
considered entertainment is no longer deductible. So you know, gone are the times at least for now,
are the times where you can gift you know, a couple ball game tickets to a client. Or gone
are the times where you can bring a client to a ball game and have it be deductible. You know
a lot of bigger companies might buy like private suites or private boxes, bring a bunch of clients
and colleagues over, and you know expense the whole thing. That's no longer deductible. However,
the food that you buy at the ball game you know, if you're bringing a client or a colleague,
that's still deductible as long as it's for business purposes. You know, maybe you're having
a meeting there, or discussing business, that kind of thing. As long as it's business related,
the food can still be deductible but the actual tickets and admission are not. Sometimes when
you buy private boxes the the ticket includes the price of food as well, it's all lumped together.
In that case the whole thing is not deductible because it is lumped in with the entertainment,
so in that case the food and the entertainment are not deductible because they're lumped together.
All right, home office furniture and equipment, that's a good one.
So you know, especially with the pandemic going on, a lot of people were forced to set
up their home office. Maybe upgrade their desks, their chair, their monitors, their computer,
that kind of thing. Those things are all fully deductible as long as it's for your business.
So yeah, home office furniture is, if it's specific for your business, is deductible.
And the last thing I'm going to go over are home office espresso machines. And this one
was actually brought up to me by a friend, so that was an interesting, just an interesting
little question. Could you deduct an $800 espresso machine that you bought for your home office? And
the answer I would say is no because it's your home office, it's your personal home,
it's not necessary for your business. It's more like a convenience thing, maybe a luxury thing for
yourself at your home. So that is not deductible. If you, now if you have an office location
you know, that's for your business, and you bought an espresso machine for that location, that is
deductible. But if it's for your home I would say it's not deductible and not allowable all right.
So that's all I've got for today. Thanks for watching. Again I'm going to be doing a series
of these moving forward here and there to kind of keep you all updated on you know, the frequent
questions I have on what's deductible and what's not. And hopefully it will clear some things up.
So if you found this video helpful, please give it a like, and share with anybody you think that
might find it helpful also, and also if you're new here again, please consider subscribing to
the channel. I'd really appreciate it, and check out my other videos on you know, whether or not
your business should buy a car, the depreciation on the car, and any other tax related videos that
you might find helpful all right. So that's all I've got. Thanks for joining me and I'll see
you next time.