Unique Expense Issues

• Posted on April 25, 2008
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Long Island CPA Firm Offering Tax and Financial Advice

During the year, we encounter a variety of questions regarding what expenses are legitimate for business purposes. Below are three questions that we are frequently asked, along with the answers.

Q1 – If a company sponsors an amateur sports team by purchasing the uniforms and the uniforms include the logo of the company, can the company deduct the cost of the uniforms as a business expense?

A1 – Marketing that is intended to portray your business positively can be deducted. Such marketing creates a long-term potential for business and falls within the ordinary and normal requirements of the tax code. Examples of such marketing include sponsoring local youth sports teams, distributing samples of your business product, and costs associated with prizes offered by your business in a contest. As long as your marketing expenses can be reasonably related to the promotion of your business, they can be deducted.

Q2 – If an individual gets traffic citations and parking tickets while traveling on business, can those costs be deducted as a business expense?

A2 – The tax code specifically precludes a deduction for fines or penalties paid to a government including local, state, or federal, and whether or not it is a foreign or domestic government entity. Even though many of these costs are incurred during business trips, they are not considered deductible.

Q3 – Can the cost of subscriptions for business magazines and publications be deducted?

A3 - Yes, the cost of subscribing to certain trade publications related to your business is deductible. However, be careful when taking the deduction. If a check is written out for a three-year subscription today, you are allowed to deduct one-third of the cost this year, one-third the next year, and the final third the year after that.

If you have questions regarding the deductibility of specific items, please call for additional information.