Deductible expenses are subject to the principle of causality. However, there are still businesses and individuals who have doubts about the expenses that can be deducted from their taxes. In this situation, there are companies like RSM that can take care of the accounting of companies so that they can clearly identify the expenses to be deducted, thus avoiding penalties and reducing the taxes to be paid each year. Entertainment fees cover a very broad category, which includes any activity that usually offers a moment of pleasure or leisure. Examples include hosting guests in social, athletic or sports clubs, theatre excursions, yacht rides, hunting and fishing, holidays and other similar types of entertainment. Starting in taxation years after 2017, hospitality expenses are generally no longer deductible. Example: You negotiate the purchase of the concession of a territory with exclusivity for pool cleaning for $ 22,500. You pay $2,500 in professional services from a lawyer to draft a non-compete agreement with the seller and hire an accountant to conduct due diligence on the books. For tax purposes, the base cost of the land grant is $25,000 ($22,500 + $2,500). Tax regulations allow to deduct (deduct) the expenses necessary to earn and receive the income for which taxes must be paid, in this way it is paid only for profit or profit. However, the rules also state that expenses are not deductible. The fees you pay to professionals such as lawyers and accountants are deductible if they are related to your business. When you acquire assets for business purposes, fees paid for professional services are not deducted, but added to your company`s tax base (or costs).
In this context, we have the personal expenses, both of the taxpayer and his relatives or third parties. For example, it is not a deductible expense, the purchase of food for the home or expenses for family meals, clothing, training or personal entertainment, among others. Every year, we have to pay taxes, either as individuals or as businesses. However, there are expenses that we make as such that may or may not be deductible when paying taxes. If you decide to deduct actual expenses, you will need to keep detailed accounts of your trips: note the date, miles traveled and the purpose of each trip. Try to track your travels as you take them, at this point it`s easier to keep track of the details. Costs evidenced by proof of payment issued by the taxpayer at the time of issuance of the voucher: Continuing the preparation of the tax clearance, which is getting closer and closer to its expiry, we consider that it is appropriate to address two points that complement the previous week`s delivery: non-deductible expenses and the concept of exemptions in the tax base. The right to compensation for losses from previous periods, usually under Law 9635, an aspect previously limited to agricultural and industrial activities, also constitutes an exemption from the tax base.
Rents are generally deductible in the year in which they are paid. The personal and living expenses of the taxpayer and his dependants. Many states and counties also levy local taxes on social benefits for real estate improvements, such as road, sidewalk, and sewer assessments. You cannot deduct these taxes. However, you can increase the base cost of your property by the estimated amount. For more information, see Publication 551, Asset Base. Local performance taxes are only deductible if they are intended for maintenance or repair, or if they involve interest costs related to these services. See “Local Services Taxes” in Chapter 11 of Publication 17. When calculating expenses, you can choose to take the standard mileage rate (which usually changes every six months to a year) or deduct your actual expenses such as gas, oil changes, tires, repairs, preventative maintenance, insurance, and vehicle registration. The legal limit will reach a 20% deduction in the next five years if the ordinance does not change. This is a decreasing percentage of deductibility of two percentage points for each tax period. As a small business owner, you can deduct car expenses to visit clients or go to work meetings outside of your usual workplace.
If you use the house for commercial purposes, the journey from your home to a supplier and the return trip are a 100% deductible business expense. Travel expenses include ordinary travel expenses and costs necessary for commercial purposes. You must meet two conditions to take the deduction for travel expenses: if we see the thread of causal logic to generate taxable income with income tax on profits, we see how this link is broken, since it is not necessary to have losses to generate income, especially in the period when they are deductible. This suggests that we are facing an additional exemption from the tax base. Expenses incurred mainly for the benefit of shareholders, for example in the context of the organisation of general meetings of shareholders, the costs incurred by these acts, the so-called “investment patrols” acts and the costs incurred by the parent companies to ensure the quality of their investments, are expenses that do not generate any direct benefit for the controlled company. A valuable question could even be raised in the light of the constitutional principle of equality. The Income Tax Act states that they are not deductible to determine taxable income in the third category, including: Among the deductible expenses, there are some that sow doubt when they are declared as such, such as: Travel expenses and in this case, they are only valid if, For example, they are provided with the reason for the trip and that it is related to the business activity. Of course, you pay taxes on the profits of your business. But there is also good news. You may be able to significantly reduce your taxable income by covering all your business expenses. Certain deductible expenses are the rental of property, the remuneration costs of partners, the costs of vehicles used for management or sales activities and transportation; expenses for premiums and premiums; expenditure granted as an incentive to employees; Transport and mobility costs, among others.