Key takeaways
- Commuting between home and your regular workplace is never deductible (IRS Publication 463).
- Fines and penalties for breaking the law, including traffic and parking tickets, and political contributions aren’t deductible (IRS Publication 529).
- Entertainment such as concert or game tickets for clients is generally not deductible, even when business is discussed.
- Some costs are partly deductible: the business share of a phone, or 50% of most business meals.
What is a non-deductible expense?
A deductible expense is an ordinary and necessary cost of running your business. A non-deductible expense is everything else: costs that are personal, that the law specifically blocks, or that must be capitalized instead of deducted right away.
Paying from a business account doesn’t change the answer. A family dinner charged to the business card is still a personal expense. And the reverse holds too: a legitimate business cost paid from your personal card can still be deductible.
Keep personal and non-deductible spend apart from business costs with the Manage Receipt app.
Common non-deductible expenses
These are the ones freelancers and small business owners most often get wrong.
| Expense | Deductible? | Why |
|---|---|---|
| Commuting from home to your regular office or workplace | No | Personal travel, no matter how far or whether you work on the way |
| Traffic tickets, parking fines, late-filing penalties | No | Fines and penalties paid to a government are blocked by law |
| Everyday clothes, even if worn only to work | No | Suitable for everyday wear; only required uniforms or protective gear qualify |
| Concert, sports or show tickets for clients | No | Entertainment has been non-deductible since 2018 |
| Political contributions | No | Donations to candidates, campaigns and parties are never deductible |
| Country club, gym or social club dues | No | Clubs for business, pleasure or social purposes are excluded |
| Personal meals, groceries and haircuts | No | Personal and living expenses |
| Business meal with a client | 50% | Most business meals are half deductible |
| Cell phone used for work and personal calls | Partly | Only the business-use share counts |
| Federal income tax you pay | No | Not a business expense, though half of SE tax is an adjustment to income |
Notice the pattern. Most mistakes happen when a cost feels work-related: you only wear the suit to client meetings, you only got the parking ticket because of a client visit, you only bought the game tickets to keep a client happy. The test isn’t how you feel about it. It’s whether the tax rules treat it as an ordinary and necessary business expense.
Two edge cases: driving from your home office to a client, or between job sites, is usually business travel rather than commuting. And a meal with a client at a ballgame can be deductible at 50% if the food is bought and billed separately from the tickets.
Why they’re not deductible
The tax code taxes your income before personal living costs. Commuting, clothes and groceries fall here.
Allowing a deduction for fines, bribes or political donations would let taxpayers subsidize them.
Some deductions were removed outright, such as entertainment and most unreimbursed employee expenses.
A fourth group isn’t blocked, just delayed. Big purchases like equipment or improvements to property are capital expenses, deducted over time through depreciation or in year one under expensing rules. They aren’t non-deductible, but they don’t go on the return as a simple current expense either.
How to record non-deductible expenses
- Keep the receipt anywayIt proves the spending and keeps your records complete.
- Tag it clearlyMark it personal or non-deductible in its own expense category.
- Split mixed costsRecord the business and personal shares separately.
- Exclude at tax timeLeave it out of Schedule C totals and your expense reports.
Why record them at all? Your books still need to match your bank and card statements. If the business account paid a personal cost, it’s usually recorded as an owner’s draw so the money is accounted for. Clean tags also stop non-deductible items from slipping into your write-offs, which is exactly the kind of error an auditor looks for.
Employers often reimburse costs that aren’t deductible, such as client entertainment. Reimbursement rules and tax rules are separate. Your expense policy decides what the company pays back; the tax code decides what the company can deduct.
Tag personal spending before it reaches your tax report
When you scan a receipt in Manage Receipt, it’s categorized automatically and you can tag it as business or personal. Personal and non-deductible items stay out of your AI tax report, so the deductions you hand your preparer are only the ones that hold up.
Explore AI Tax ReportsFrequently asked questions
Are traffic fines deductible?
No. Traffic tickets, parking fines and other penalties paid to a government for breaking the law aren’t deductible, even if you got the ticket while driving for business. The parking fee itself is deductible for business trips; the fine for overstaying the meter isn’t.
Is commuting deductible?
No. Travel between your home and your main or regular place of work is commuting and is never deductible, no matter the distance. Trips from a qualifying home office to a client, or between job sites during the day, are usually business travel and can be deductible.
Are client entertainment expenses deductible?
Generally no. Since 2018, entertainment such as sporting events, concerts, golf and shows isn’t deductible, even with a client and a business discussion. Food and drink bought separately during the event can still be 50% deductible if it’s a business meal.
Should I keep receipts for non-deductible expenses?
Yes, if the business paid. Receipts let you show the expense was correctly treated as personal or non-deductible, keep your books matching your statements and support owner draw records. Tag them so they never end up in your deduction totals.
Are work clothes deductible?
Only if they’re required for your work and not suitable for everyday wear, such as safety boots, protective gear or a branded uniform. Clothes you could wear outside work, like a suit or business casual outfit, aren’t deductible even if you only wear them to meetings.