Why isn't money spent on necessities deductible from your taxes?
"Law is a mass of special cases, informed by but not driven by some general principles. Tax law likewise. Don't try to make it make sense; you will only confuse yourself.  Not all ""necessities"" are deductable, only those which someone has explicitly passed a law to make deductable." The answer is simple. You can generally claim a deduction for an expense if that expense was used to derive an income. Of course social policy sometimes gets in the way and allows for deductions where they usually wouldn't be allowed. Your rent is not tax deductible because this expense is not used to derive your income. If however you were working from your home, example - you had a home based business, and you dedicated a part of your home for your work, say an office, then part of your rent may then become tax deductible. "You could debate the ""why""s of tax policy endlessly. There are lots of things in tax law that I think are bad ideas, and probably a few here and there that I think are good ideas. I am well aware that there are things that I think are good ideas that others think are bad ideas and vice versa.  To your specific point: I suppose you could say that having a place to live is a necessity. But most people do not live in the absolute minimum necessary to give them a place to sleep and protection from the weather. You could survive with a one-room apartment with a bed on one side and a toilet and some minimal cooking facilities on the other. Most people have considerably more than that. At some point that's luxury and not necessity. And if you want to push it, you COULD live in a cardboard box under a bridge, you don't NEED a house or apartment to survive. Personally I think it's absurd that as a home-owner I get a deduction for my mortgage interest, while if someone were to rent an identical house with a monthly rental equal to exactly the same amount that I am paying on my mortgage, he would receive no deduction. The stated goal of that one was to encourage home ownership. But people who own homes are generally richer than those who rent, so the net result is that the poor are paying higher taxes to help subsidize the homes of the rich. And then the rich congratulate themselves on how they are giving these tax breaks to help make housing more affordable for poor people. To reiterate @keshlam, tax laws only makes sense when understood politically. Yes, some people have fine ideas about what is fair and just. Others simply want tax breaks that benefit their business or people with tough financial situations that just happen by chance to resemble their own. Many of the people with noble ideas have little concept of what the implications of the policies they push are. Many of the ideas that some people view as worthy and noble, others view as frivolous, counter-productive, or even evil. Then you mash all these competing groups and interest together and see what comes out." Another way to look at it is that deductibles are intended as incentives or subsidies to particular industries (in this case the healthcare industry). Guaranteeing a decent standard of living and making sure everybody can meet the costs of “necessities” can be achieved much more easily by a low tax rate on the first XXX$ of income and/or generic welfare benefits rather than any measure focused on making healthcare, food or whatnot cheaper or free under certain conditions. Incidentally, many countries do have different forms of benefits or tax breaks for accommodation-related expenses.
Honestly? Literally anything else. The same way budgets have been done since the dawn of time. If you have a mandatory expense (livable wage because we're prioritizing human life over discretionary spending because ethics) you trim the fat from other areas to make it work. Well, if you were a business, and your food and rent and travel expenses were business expenses, and you paid out less money than you earned, you *would* get a refund.  If you can prove that an expense is tax deductible, then that's just what it is.  For businesses, a net operating loss is tax deductible. If a business tool has a limited lifespan, it's value decreases (depreciates) from year to year. The business can capture that loss of value on some things that it couldn't otherwise write off as expenses. A few tools can be either expenses or depreciated, but only one of those can be chosen for that particular object. This is generally not relevant for individual taxpayers, unless you can show that the item is being used for income-producing purposes. "Suppose that I work from home, but do not qualify for a business use   of home deduction. As I understand it, this means I cannot deduct   trips from home to another work location (e.g., going to a client's   home or office to do work there). I do not think this is true. You cannot deduct trips to your main business location, i.e.: you cannot deduct trips to your office or client's location if this is your main client and you routinely work on-site. However, if you only visit your clients on occasion for specific events while doing your routine work at home - you can definitely deduct those trips. The deduction of the home usage itself has nothing to do with it. However, there's a different reason they refer to pub 587. Your home must qualify as principal place of business (even if it doesn't qualify for deduction). The qualifications of ""principal place of business"" are described in pub 587. ""if for some personal reason you do not go directly from one location to the other, you cannot deduct more than the amount it would have cost you to go directly from the first location to the second."" What is not clear to me is what exactly is deductible if there are   significant time gaps (within a single day) between trips to different   clients. You got it right. What this quote means is that if you have client A and client B, and you drive from A to B - you can only deduct the travel between A and B, nothing else. I.e.: if you have 2 hours to kill and you take a trip to the mall - you cannot deduct the mileage attributable to that trip. You only deduct the actual distance between A and B as it would be had you driven from A to B directly. The example you cite re first client being considered as the place of business is for the case where your home doesn't qualify as principal place of business. In this case you start counting miles from your first client, and only for direct trips from client to client. If you only have 1 client in that day, tough luck, nothing to deduct. Also, it's not clear whether stopoffs between clients would really be   ""personal reasons"", since the appointment times are often set by the   client, so it's not as if the delay between A and B was just because I   felt like it; there was never the option of going directly from A to   B. That's what is called ""facts and circumstances"". You can argue that you had enough time between meetings to go back to your home office to continue working. The IRS agent auditing you (and you're likely to get audited) will consider that. Maybe will accept it. Maybe not. If I had a gap like that described above, I could save on my taxes by   going to the park or a hamburger stand instead of going home between A   and B But then you wouldn't be at home, so why would it be ""principal place of business"" if you're not there? Boom, lost deduction for the trip to the first client. I suggest you talk to a licensed tax adviser (EA/CPA licensed in your State). You're dealing with deductions that are considered ""red flags"" for the IRS. I.e.: many people believe that these deductions (business use of your home/car) trigger audits. To substantiate business use of your car you need to keep very good track of your travels (literally travel log, they sell them at Staples), and make sure to distinguish between personal travel and business travel, keep proofs that the meetings took place (although keeping a log is a requirement, it can be backdated/faked, so if audited - the IRS will want to see more than your own documentation). A good tax adviser will educate you on all these rules, and also clarify the complexities you were asking about here. I'm not a tax adviser, so don't rely on this answer when you're preparing your tax return or responding to the IRS audit. In your edit you ask this: Specifically, what I'm wondering is whether it is possible for a home   to qualify as a ""principal place of business"" for purposes of   deducting car expenses but not for the home office deduction. The answer is yes. Deductibility is determined by exclusivity of use, among other things. But the fact that you manage your business from your kitchen doesn't make your kitchen any less of a principal place of business. It is non-deductible because you also cook your dinners there, but it is still, nonetheless, your principal place of business. The Pub 587 which I linked to has these qualifications: Your home office will qualify as your principal place of business if   you meet the following requirements. You use it exclusively and regularly for administrative or management activities of your trade or business. You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. As you see, exclusivity of the usage of your home area is not a requirement here. The ""exclusively and regularly"" in the quote refers to your business not using any other location, and managing it from home regularly. I.e.: if you manage your business a day in a year - that's not enough for it to be considered principal. If you manage your business from your office and your home - you cannot consider home as principal." It would be unusual but it is possible that the expenses could be very high compared to your income. The IRS in pub 529 explains the deduction. You can deduct only unreimbursed employee expenses that are: Paid or incurred during your tax year, For carrying on your trade or business of being an employee, and Ordinary and necessary. An expense is ordinary if it is common and accepted in your trade,   business, or profession. An expense is necessary if it is appropriate   and helpful to your business. An expense doesn't have to be required   to be considered necessary. The next part lists examples. I have cut the list down to highlight ones that could be large. You may be able to deduct the following items as unreimbursed employee   expenses. Damages paid to a former employer for breach of an employment contract. Job search expenses in your present occupation. Legal fees related to your job. Licenses and regulatory fees. Malpractice insurance premiums. Research expenses of a college professor. Rural mail carriers' vehicle expenses. Tools and supplies used in your work. Work clothes and uniforms if required and not suitable for everyday use. Work-related education. If the term of employment was only part of the year, one or more of the these could dwarf your income for the year. Before deducting something that large be sure you can document it. I believe the IRS computers would flag the return and I wouldn't be surprised if they ask for additional proof. Keep this rather corny acronym in mind. Business expenses must be CORN: As other posters have already pointed out, certain expenses that are capital items (computers, furniture, etc.) must be depreciated over several years, but you have a certain amount of capital items that you can write off in the current tax year. No. The equipment costs are not necessarily a direct expense. Depending on the time of purchase and type of the expenditure you may need to capitalize it and depreciate it over time. For example, if you buy a computer - you'll have to depreciate it over 5 years. Some expenditures can be expensed under Section 179 rules, but there are certain conditions to be made, including business revenue. So if your business revenue is $3K - your Sec. 179 deduction is limited to $3K even if more purchases can qualify. Not every purchase qualifies for Sec. 179 treatment, and not all the State tax rules conform to the Federal treatment. Get a professional advice from a CPA/EA licensed in your State. During World War II, the United States (US) instituted wage and price controls.  To attract better employees, companies would offer benefits to get around salary limits.  Health insurance was one of the more successful benefits.   At that time, income taxes were newer and there were many ways to evade them.  Companies could generally deduct expenses.  So at that time, health care was deductible because everything was.  And at that time, only wages were taxable compensation from employer to employee.   Since that time, many other benefits have become non-deductible for employers, e.g. housing or the reduced deduction for meals and entertainment.  But health care is generally regarded as different, as a necessity.  While everyone needs to eat, not everyone needs to eat at a $100 a meal restaurant.  People who need expensive health care really need it.  People who eat expensive food just prefer it.   And of course, health care is more intermittent where food is relatively consistent.  You don't need ten thousand calories one day and zero the next.  But some families have no health care expenses in a year while another might have cancer or a pregnancy.  Note that medical care expenses can be deducted for individuals if they are large enough in aggregate and you itemize.   And of course both businesses and workers have incentives to maintain the current system with deductibility.  Health insurance is a common benefit.  Housing is not (although it's worth noting that travel housing and meals are deductible).  So there have been few people impacted by making housing taxable while many people would be impacted by taxable health insurance.   You can deduct health insurance costs if self-employed.  It's also not true that health insurance is the only benefit with preferential tax treatment.  Retirement and child care are also deductible.  Even meals and housing can be deducted in certain circumstances.  The complex rules about what and how much is deductible.   There have been rumbles about normalizing the tax treatment of health insurance and medical care, but there is a lot of opposition.  Insurance companies oppose making all healthcare expenses deductible, as that reduces their effective benefit.  They would prefer only insurance premiums be deductible.  Traditionally employed individuals oppose making health insurance taxable, as that would increase their taxes.  So the situation persists.  There isn't quite enough support to move in either direction, although the current compromise is economically silly. I agree that the surface explanation is that expenses used to generate income are deducted, however there clearly is a double standard in how is applied.  For example I cannot deduct my car even though I use it primarily for commuting to work (I would consider that income generation), yet companies are allowed to deduct corporate jets. I can't deduct meals when I ate out with professional acquainted where much of the conversations are related to my profession and so directly relevant to my income, yet businesses can claim sending their executives to a country club because business was discussed or it was a team building excise. Etc etc. "According to this discussion, there was a Tax Court ruling that likened deductibility for charitable giving by credit card to business expenses incurred by businesses operating under cash-basis accounting.  (The point is made by Larry Hess on that site.) Short answer: According to this argument, you can claim the deduction when the charge is incurred.  You don't have to wait until you pay it back.  (Again this is for cash basis.) Publication 538 states that ""under the cash method of accounting, you generally deduct business expenses in the tax year you pay them.""  I think the ruling above was meant to clarify when the expense is ""paid"".  In my totally unofficial opinion, I suppose this makes sense.  If I go to Office Depot to buy a box of envelopes, I walk out with the envelopes at the same time regardless of whether I paid cash or swiped a credit card.  I wouldn't walk out thinking: ""HA!  I haven't actually paid for these yet.""  If the shoplifting alarm went off at the door and I was asked if I had bought those, I'd say yes, right? If this doesn't convince you, you can always get professional tax advice." I'm a CPA and former IRS agent and manager. Whether you are a cash or accrual basis taxpayer, you get to deduct the expense when your card is charged. Think of it this way: You are borrowing from the credit card company or bank that issued the credit card. You take that money to make a purchase of a product or service. You now have an expense and a liability to a third party. When you pay off the liability, you do not get to take a deduction. Your deduction is when you pay for the expense. Depending on what you purchased, you may have to capitalize it. This will always be the case unless the tax relief is more than the expenditure, which it never is. There are some ways in which this can become worth it: if the thing you are spending the money on would actually be useful, of it you might be able to sell it for more than four dollars later - or if you can claim a government grant or similar for more than four dollars. And at the level of corporate finance it can get more complicated. But otherwise, No. "Depending on what your other deductions are and the amount you are wanting to donate, you can save some money by ""batching"" deductions into every other year. For example, if you are single in 2015, the standard deduction is $6,300. This means the first $6,300 in deductions you have basically don't ""matter"" because the standard deduction is larger. You only ""count"" itemized deductions greater than $6,300. Let's imagine you are donating $10k in 2015 and 2016 and have no other itemized deductions. If you donate in both years, you basically get a net deduction of ($10,000 - $6,300) * 2 = $7,400 over the standard deduction. However, if you donate $10k in 2015 and the next $10k on Dec31, 2015, then you now have donated $20k in 2015 and $0k in 2016. This affects your taxes because you now get ($20,000 - $6,300) = $13,700 in ""bonus"" deductions. You still get the full $6,300 standard deduction in 2016 as well. This can be a significant impact on your taxes (especially if you are married as the married deduction is double the single or have minimal other itemizable deductions).." "Can she claim deductions for her driving to and from work? Considering most people use their cars mostly to commute to/from work, there must be limits to what you can consider ""claimable"" and what you can't, otherwise everyone would claim back 80% of their mileage. No, she can't. But if she's driving from one work site to another, that's deductible whether or not either of the work sites is her home office. Can she claim deductions for her home office? There's a specific set of IRS tests you have to meet. If she meets them, she can. If you're self-employed, reasonably need an office, and have a place in your house dedicated to that purpose, you will likely meet all the tests. Can I claim deductions for my home office, even though I have an official work place that is not in my home? It's very hard to do so. The use of your home office has to benefit your employer, not just you. Can we claim deductions for our home internet service? If the business or home office uses them, they should be a deductible home office expense in some percentage. Usually for generic utilities that benefit the whole house, you deduct at the same percentage as the home office is of the entire house. But you can use other fractions if more appropriate. For example, if you have lots of computers in the home office, you can deduct more of the electricity if you can justify the ratio you use. Run through the rules at the IRS web page." For simplicity, I would subtract the expense from the gross income before accounting for taxes. Using your example, if g is gross income, r is your tax rate, and e is your deductible expense: You got the same answer because of the distributive property of multiplication, but I believe conceptually it makes more sense to deduct the expense before accounting for taxes.