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Should I Expense This? Business Expenses vs. Personal Expenses

Even the best-intentioned employees can fall into the trap of mixing business expenses and personal expenses. Business expenses are deductible for federal tax purposes. According to the IRS, a business expense is something ordinary and necessary—expenses that are commonplace in your trade or profession and which are helpful for your business. Employees can deduct reasonable work-related expenses, but cannot deduct personal expenses.

What counts:

Travel expenses?If you are traveling for business for more than a day, your food and lodging is a business expense.
Local transportation that involves travel between workplaces (cabs or public transit between offices)
Dues or subscriptions to professional or business organizations
Union dues
Uniforms or other work clothes that are required for work and are not suitable for other wear
Work-related educational expenses
Tools and any supplies necessary for your work
Home office expenses—only if the office is used exclusively for work
Business use of your car (mileage shouldn’t include personal trips)

Related Article: 6 Misconceptions About Employee Expense Management

Don’t deduct these personal expenses:

Commuting expenses—you have to cover your own expense from home to work.
Fines or penalties—parking tickets are your own responsibility!
Accreditation Fees—Fees used for continuing education are business expenses, but fees required to obtain accreditation, such a bar or licensing exam, are personal expenses.
Business attire—Unless it’s a required uniform, suits must be purchases on your own dime.
Travel expenses for spouse or children—Many employees make the most of their business travel by bringing family along. That’s fine, as long as you aren’t expensing their portion of the trip.

When in doubt about whether something is a personal or business expense, consult the IRS Publication 535, Business Expenses. Make sure you know your company’s expense policy.

For more information on employee expenses, download PEX Card’s free Employee Expense Management Guide.

This article was originally published by PexCard

Published: July 7, 2015
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Toffer Grant

Realizing that banks and card issuers were not serving the development of prepaid debit card services for small and mid-sized companies, Toffer Grant founded PEX Card to help SMBs maximize the efficiency of their financial operations. His career in the prepaid card industry began in 2000 at Clarity Payment Solutions, a leading venture-backed platform company servicing the budding prepaid industry. Toffer focused on customized check to card payment conversions for large brand corporate clients and grew a high value reseller network for the company. Over six years, he initiated 65 prepaid card programs in consumer, corporate and emerging verticals of the prepaid card industry. Toffer saw the company grow from a tech startup to life in a large public company after acquisition by TSYS in 2004. Follow Toffer on LinkedIn and PexCard on Twitter, Facebook, and LinkedIn.