I’d argue the necessary upkeep to remain alive and functional as an employee should be included as a cost of earning your income. Where I am you definitely can’t deduct housing, food or transportation costs. Limited deductions for child related stuff.
Normal commuting expenses are not deductible. You can only deduct transportation expenses to work locations other than your usual workplace, and then only that part of your expenses that exceeds your normal commute.
You can itemize other “costs of earning [your] income”, but for most people, the standard deduction is substantially greater.
This is the case in most jurisdictions but the line between expenses that are incurred in the course of earning your income and those which are not will vary to some extent.
For example, the cost of driving to and from work is generally not deductable, but if you need to travel to some third location then that is generally deductable.
It doesn’t really matter exactly where the line between deductable and non-deductable is, because the same rules are applied to everyone in the jurisdiction. For example, if you decide that everyone can claim the cost of driving to work, then the tax rates need to be higher to ensure sufficient tax revenue for the government.
That said, you’re correct that the difference between a corporation and a person is the extent to which their activities are income producing. Everything a company does is in the pursuit of profit, so all expenses are deductable against income. In fact tax law prohibits company’s spending money for other purposes.
Hmm… Sounds like we should do some tax magic to file our cost of living as operating expense in some way, we can’t earn those income if we are not alive after all.
You can’t deduct personal expenses, but you absolutely should be operating a side business with its own deductible expenses. That side hustle will probably be operating at a loss, and that loss will offset your W2 employment income.
I don’t know about you guys and your local tax laws, but I can deduct the costs of earning my income from my taxable income.
Transportation to the job, further education for the job, (if I had any) the costs of having my kids looked after while I work, that sort of thing.
Fundamentally very similar to how the business deducts operating cost from revenue, before paying taxes on profit.
Uh, this sounds like a “not in America” thing. Can you confirm that and/or link to the rules that let you deduct childcare expenses?
Ive got family members who would love to hear about that if it is a thing.
Yes, this is how it is under the cantonal tax law of Canton Zürich in Switzerland.
He’s on a German server but I’m in the US you can deduct some childcare expenses. I use the Child and Dependent Care Credit
It’s very little. You can easily pay thousands out of pocket for child care to get a fraction of it removed from taxes / “back”
It is very little and qualified. The place one of my younger kids go qualifies but not where one of the older one’s is.
Good catch on the German server bit. Def escaped my notice.
I’d argue the necessary upkeep to remain alive and functional as an employee should be included as a cost of earning your income. Where I am you definitely can’t deduct housing, food or transportation costs. Limited deductions for child related stuff.
Normal commuting expenses are not deductible. You can only deduct transportation expenses to work locations other than your usual workplace, and then only that part of your expenses that exceeds your normal commute.
You can itemize other “costs of earning [your] income”, but for most people, the standard deduction is substantially greater.
Not true for me. I did say I didn’t know about your locals laws, seems the inverse is just as true
This is the case in most jurisdictions but the line between expenses that are incurred in the course of earning your income and those which are not will vary to some extent.
For example, the cost of driving to and from work is generally not deductable, but if you need to travel to some third location then that is generally deductable.
It doesn’t really matter exactly where the line between deductable and non-deductable is, because the same rules are applied to everyone in the jurisdiction. For example, if you decide that everyone can claim the cost of driving to work, then the tax rates need to be higher to ensure sufficient tax revenue for the government.
That said, you’re correct that the difference between a corporation and a person is the extent to which their activities are income producing. Everything a company does is in the pursuit of profit, so all expenses are deductable against income. In fact tax law prohibits company’s spending money for other purposes.
Hmm… Sounds like we should do some tax magic to file our cost of living as operating expense in some way, we can’t earn those income if we are not alive after all.
You can’t deduct personal expenses, but you absolutely should be operating a side business with its own deductible expenses. That side hustle will probably be operating at a loss, and that loss will offset your W2 employment income.