And what about parking tickets?
There is no good news for parking and driving offenders. The rules state that fines and penalties are not tax deductible.
On The Way To Work
So, you’re a wedding photographer. The bride has left her home and you need to get to the church before she does. you take a short cut and plant your foot on the accelerator, only to see a road side speed trap flash as you pass by.
Bugger! That will reduce the profitability on the job, especially if you’ve only charged a low fee for a shoot and burn!
The speeding fine arrives and it is duly paid, but when you show it to your accountant at the end of the year, you’re told it is not a tax deduction.
Although expenses incurred while working are generally allowable as tax deductions, there are special rules which deny tax deductibility for fines and penalties. The argument seems to be that the government doesn’t want to encourage misdemeanours by making them tax deductible!
Providing Good Service
Now you’re a commercial photographer. you’re shooting a series of corporate portraits, including the board of directors. You’ve allowed an hour and paid for two hours on the parking meter. During the job, the client asks you to take a few extra portraits and you arrive back at your car five minutes late. +
However, the parking inspector wasn’t late and you have a $100 fine - who pays for it?
Well, your client won’t want to – you should have put more money in the meter. And the tax office won’t give you a deduction that’s for sure – it doesn’t want to encourage you to break the law either!
Not Only Road Offenses
Of course, the $3 you put in the parking meter is deductible, and the cost of running your car for business purposes is also deductible. It’s just that fines and penalites are not and this principle flows through into most areas of life.
One area where a penalty or interest for late payment isn’t a problem is your banking. If a credit card or cheque account charges you penalties for late payment or a bounced cheque, or charges you interest for being overdrawn, these are not treated in the same way. rather, they are simply a cost of financing your business and, assuming the underlying transactions were business in nature, the interest and penalties would be tax deductible.
As always, check with your accountant.
This is general information only. We do not know your specific financial or legal situation and we are not providing you with advice. As such, this article should not be relied upon as legal, financial or accounting advice. Please use this article as a conversation starter with your own adviser.