Basically, deductibility of these items depends on what your
business is, and how common these expenses are in that business.
To be deductible, a business expense has to be both ordinary
and necessary. An ordinary expense is defined as one
that’s common and accepted in your industry. A
necessary expense is one that’s considered helpful and appropriate in your
trade or business.
So, for example, if you’re a ballet dancer, then, yes, gym
membership and recital expenses would appear to be deductible. But if you’re a flower arranger? It would be about impossible to justify.
That said – and this is a quote from IRS Publication 535, Business
Expenses: “An expense does not have to be indispensable to
be considered necessary. Even though an
expense may be ordinary and necessary, you may not be allowed to deduct the
expense in the year you paid or incurred it. In some cases, you may not be allowed to
deduct the expense at all.” Use the link
above for more information (note that the link is for the 2016 tax year
publication; the 2017 version hasn’t been published yet, but the concept won’t
change.)
Use common sense and be reasonable, and consider what the
IRS would reasonably allow in the event that you’re audited. And be aware that the audit rate for
taxpayers with small businesses reported on Schedule C is about double the rate
of returns with no schedules attached.
