13 Non-deductible Expenses and Other FAQs for Tax Time

Separating deductible and non deductible expenses can be tough. You may find yourself asking: Does this expense go on the personal card or the business card? 

For all the lists of valid business expenses, sometimes it’s easier to know what is deductible by knowing what’s non-deductible

This article will help you avoid commingling funds and maintain the personal asset protection of your LLC by guiding you away from potential non-deductible pitfalls.

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What Are the IRS Rules for Non deductible Business Expenses?

There are many ways businesses can lower their tax liability. We’ve written a comprehensive guide on business expenses and tax deductions, as well as small businesses tax deductions, the home office deduction, and best practices for keeping track of business expenses.

Now, let’s look at things from the opposite perspective: non deductible business expenses, which do not lower tax liability. 

The IRS defines deductible business expenses as ordinary, necessary, and for business purposes.

So, to be nondeductible, it must be at least one of the following:

  • Unordinary: not commonly accepted in your trade or business
  • Unnecessary: not helpful or appropriate for your trade or business
  • For Personal Use: business money cannot be spent on personal expenses

Don’t Even Try Deducting These 13 Non-Deductible Business Expenses

It’s easy enough to make a mistake and put a personal expense on a business account. However, you’ll notice a common theme throughout this list. Personal expenses are not deductible. Keep that in mind, and parsing what is and isn’t deductible will be a breeze.

1. Automobile Expenses Attributed to Personal Vehicle Use

Many people have vehicles that double for both work and personal use. Whether using the standard mileage deduction of $0.65 per mile or the real expense method, only work-related travel counts. 

When deducting for gas, repairs, or lease payments, expenses attributable to personal use are non-deductible. 

2. Personal Clothing (Excluding Uniforms or Specialized Gear)

This applies to everyday wear and anything you might wear outside of work. Unless the clothing item was purchased for work, and you plan to wear it mostly at work and not elsewhere, it’s non-deductible. 

3. Club and Membership Dues (Even if Used for Legitimate Business Purposes)

While your golf club membership may be a great way to network, and your hotel club membership might come with some great travel rewards for sales roadshows, the cost of joining and maintaining these memberships is a non deductible business expense.

4. Volunteer Hours

Giving back is a great way to help your community and boost employee morale, but unfortunately, you cannot deduct the hourly time spent. That said, you can deduct charitable contributions of cash or physical goods—just not time spent volunteering. 

 5. Political Contributions (Including Lobbying and Campaign Expenses)

Money given to political groups or candidates running for public office is not deductible, even though they seem charitable in nature. The same goes for donations made to groups that lobby for public policy.

 6. Federal Taxes

This may seem obvious, but you can’t deduct your federal tax payments as business expenses.

However, you can deduct state and local taxes to the extent they’re attributable to your business.

As part of the Home Office Deduction, for instance, a portion of real estate taxes can be deducted. For another example, property taxes on your business’s office space are deductible.

7. Fines and Penalties From a Governmental Agency

No, you cannot write off parking fees or tickets. Nor can you write off late fees paid on federal or state taxes owed with your tax return

 8. Losses From Selling Personal Property

This is one area of business and personal life where the line is clear—you cannot deduct the value of any lost earnings from selling anything you own personally for less than it is worth in your possession. This includes the sale of your home, furniture, or car. 

9. Groceries

Meals for your team at the office, business lunches with clients, or travel meals are certainly deductible. But even if you work from a home office, the IRS doesn’t allow you to deduct groceries. This applies to drinks, meals, or snacks you might buy while working from a coffee shop or restaurant as well.

10. Life or Disability Insurance

Premiums from a life insurance or disability policy in the name of the business or business owner, even if you’re self-employed, are not deductible.

If you cover premiums on behalf of employees, however, those expenses are deductible. The key is that the business cannot be a beneficiary. 

Notably, health insurance premiums are deductible for self-employed business owners.

11. Residential Landline Telephones

This one is becoming less relevant, but monthly residential landline fees aren’t business expense deductible, even if you qualify for the home office deduction. However, long-distance phone charges or a second landline exclusively for business are deductible. 

12. Travel Expenses for Accompanying Guests

If you take a business trip, travel or lodging expenses are fully deductible and a portion of meal costs, according to specific rules.

However, you cannot deduct the travel expenses for any personal companions you bring. This includes spouses, children, acquaintances, or friends.

13. Nondeductible Entertainment Expenses 

You may wonder if you can write off entertaining clients as a business expense. Unfortunately, these are nondeductible entertainment expenses. 

This goes for concert tickets, sporting events, or other forms of entertainment for clients.

However, it is considered deductible if this is for employee team building.

non deductible expenses

Frequently Asked Tax Deduction Questions

Filing taxes isn’t fun. You want to save every dollar that is rightfully yours, but on the other hand, there’s always the looming question of “What if I get audited?” 

So, we compiled a list of the most frequently asked unusual tax deduction questions. We hope it will put your mind at ease to know, with certainty, whether or not these are tax deductible.


When it comes to nondeductible expenses, knowing is only half the battle. Daily, you must use your best judgment and common sense to decide if an expense is deductible and, thus, which account to charge it to. 

Professional accountants can help unravel past transactions and organize your record-keeping procedures to make future tax seasons a breeze. 

Our team has a wealth of knowledge and is always looking for ways to help business owners’ lives easier. In addition to providing virtual bookkeeping services for small businesses, we put together The Entrepreneur’s Business Tax Pack to help DIYers maximize their deductions.

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