Question

Alison is an interior designer with her own business. She does not have an office as she thinks it would just be a waste of money as her clients do not come to her, but she goes to the clients. It is crucial to her business that she be able to visit her client’s premises to view their homes before providing her services. Alison has set aside one room in her home as her office and uses it exclusively for her interior designing work. During the year, Alison incurred expenses in travelling to meet her clients at their home and sustained increased expenditure on electricity, gas, and cleaning in relation to her office. Alison owns her home and pays interest on her mortgage monthly. Last month, Alison was late in paying her monthly interest charge and had to pay a penalty of $150.

Advise Alison as to the deductibility of the abovementioned expenses.

Need case studies and Rulings and sections to prove the solutions

Answer 1

Explanation:
The costs Alison incurred for travel to meet her clients at their homes and the additional money she spent on energy, gas, and cleaning compared to her office are also deductible business expenses. She cannot deduct the $150 fine for paying her monthly interest charge late.

Explanation
Alison is qualified for a tax deduction for her business expenses, which include the cash she spent on petrol to go to clients' houses and the extra cash she spent to upgrade the power, gas, and cleaning capabilities of her office. The Internal Revenue Service (IRS) allows taxpayers to deduct specific business expenses from the portion of their income that is regarded as taxable. A company expense must first satisfy the prerequisites of being both common and important in order to qualify for tax deductions.

If an expense is routine and widely accepted in the field in which you work, it is regarded as usual. If an expense is necessary for the functioning of your trade or business and is both advantageous and appropriate, it is termed necessary.

The data presented suggests that Alison's expenses for traveling to visit clients at their homes, as well as the increased costs for energy, gas, and cleaning related to her workplace, are regular and necessary charges she incurred while operating her interior design firm. As a result, these expenses can be written off. She was unable to pay the monthly interest fee on time, and as a result, was assessed a $150 late payment penalty.

Penalties for late payments are often excluded from the list of allowable company expenses. This is because, despite being incurred during the course of business, they are not seen as routine or important corporate expenses. Instead, it is important to remember that these are personal costs. As a result, the $150 fee cannot be subtracted.

As a result, the $150 fee cannot be subtracted.