What are the differences between deductible and non-deductible expenses?

What are the differences between deductible and non-deductible expenses?

Deductible expenses are costs that can be subtracted from your taxable income, reducing your tax liability. Non-deductible expenses cannot be deducted and do not affect your taxable income.

Can you give me some examples of each?

Sure! Deductible expenses include business-related travel, office supplies, and certain medical expenses. Non-deductible expenses might include personal expenses, fines, and certain types of entertainment.

How do I know if an expense is deductible?

Generally, if the expense is necessary and ordinary for your business or income-generating activity, it may be deductible. It's best to consult IRS guidelines or a tax professional for specifics.

What happens if I mistakenly deduct a non-deductible expense?

If you mistakenly deduct a non-deductible expense, you may face penalties or interest on any additional taxes owed. It's important to correct any errors as soon as possible.