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Thread: Determining what is tax deductible

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    Default Determining what is tax deductible

    Ages ago I went to a self employment seminar (I'm based in the UK) and we were basically told that if something is also used for personal use it is NOT a tax deductible expense.

    I find that a lot of items used for camming/modelling/stripping etc fall into a 'debatable' category.

    For example, high heels. I genuinely would not wear six inch heels unless I was modelling or camming for a client who wanted heels. But it is very hard to prove that I wouldn't wear them except for work. A lot of items used for camming could very well be seen as the kind of stuff women would buy anyway: lingerie, toys, makeup etc etc... but it is more likely that a cam girl will need MORE OF these items.

    This could be applied to other self employed jobs: a painter will obviously claim tax relief on paint brushes, but that doesn't mean they will be 'working' every time they paint; there might be times when they are painting for fun, and still using the same materials

    My way of dealing with this is sending my books to my accountant with as many receipts as I can find (I'm the first to admit that I'm crap at looking after them), plus my bank statement for the tax year. I do a spreadsheet for each month with a list of earnings and expenses, and if there's an expense, I write down what it is, and let my accountant decide if it's valid, or if there's a percentage of it I can claim for. In fact, this is the main reason I pay for an accountant: it gives me that peace of mind, especially with things like my heating bill, as I wouldn't want to risk providing the HMRC with an unreasonable estimation.

    How do other ladies deal with this? Give your accountant your books, and let them decide? Or do you phone the tax man and inquire if you're unsure?

    Heidi

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    Default Re: Determining what is tax deductible

    In the USA, the practical test for 'business expense tax deductions' is the so-called 'housewife test' ... meaning that any deduction taken for an expense item that would also be purchased by 'housewives', who have absolutely no business reason for doing so, is likely to be questioned during a tax audit.

    Also, in the USA, 'phoning' the tax man with a question will most probably provide more than one answer to any given question that isn't spelled out in 'black and white' in the tax laws. Ultimately, such matters fall to the decisions of the individual tax auditor who will be looking at those business expense tax deductions.

    Involving an accountant does provide an extra layer of 'insulation' ... but at a price, of course.

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