Almost Every Tax question has this answer
March 6, 2015
Especially as we approach the end of the financial year, I am often asked by clients, friends and cocktail party guests "can I deduct X, Y or Z?" My answer to the question is always "it depends."
Actually the answer to almost every tax question, except for "should I cheat?" is "it depends." Whether or not you can deduct something depends on the specific facts and circumstances of your situation. Can I deduct my cat or dog? The obvious answer is no. But what about the owner of the cat that plays in the Whiskas TV commercials or the dog who played "Eddie" on the sitcom "Fraiser"? These animals are what generates the income of their owners.
You can deduct as a business expense the costs of feeding and caring for a guard dog that protects your business and inventory. A deduction has also been allowed overseas for cat food purchased by a scrap yard owner who used the food to attract wild cats who would chase away mice and snakes from the yard.
Can I deduct the cost of a wig? You can if you’re an actor. Early in my career, we had a client who we called the “wig lady.” She was an undercover store detective who posed as a shopper to catch shoplifters, and often wore disguises in the course of her work – including wigs. For her, the wigs were an “employee business expense.”
In general, in order to deduct something the expenditure must be incurred in deriving your assessable income or be incurred in the course of carrying on a business for the purpose of earning income.
So – can I deduct my dry cleaning costs? It depends!
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