Professional Tax Deductions
The IRS generally taxes net profits, not gross receipts, to encourage people to start businesses. The tax code therefore contains a number of provisions to recognize expenses normally incurred by business owners and professionals --- many of whom are self-employed consultants and function as sole proprietors or owner-operators of their own LLCs or S-Corporations.
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Personal Versus Business Tax Deductions
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It is important to differentiate between expenses incurred in the normal pursuit of your profession and expenses incurred for you, personally. You can generally deduct expenses you incur as part of your business; you cannot generally deduct professional expenses you incur for your own personal convenience, however, with the exception of a deduction for the cost of tax preparation and obtaining tax advice. For example, if you are sued for professional misconduct on the job, you can deduct the cost of retaining an attorney to defend you. If you are sued for getting in a car wreck off the job on a weekend, you cannot deduct related legal fees as a business expense.
Fees, Dues and Subscriptions
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Generally, you can deduct membership fees and dues to any professional or trade organizations to which you belong. Examples include Bar Association fees, American Medical Association fees, the Reserve Officers Association, the Financial Planning Association and many others. You can also deduct the cost of journal subscriptions necessary to keep current in your profession.
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Education
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Many professionals have continuing education requirements to maintain their permits and licenses. You can deduct the cost of any such continuing education required to keep current in your job. You can also generally deduct the cost of any educational expenses required to advance within your current profession. However, if the course of study qualifies you to pursue a new profession, you cannot deduct the cost as a business expense.
Travel and Entertainment
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You can deduct the cost of travel from your ordinary place of business to meet clients, contacts, vendors and prospects or perform services within your profession. You can also deduct the cost of travel related to any job hunting you do within your own profession, but not outside of it. Additionally, you can deduct half the costs you incur for meals and entertainment, as long as those costs aren't extraordinarily lavish or extravagant.
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