Deductible Expenses

Definition: Expenditures for business items that have no future life (such as
rent, utilities or wages) and are incurred in conducting normal business
activities which a business owner may deduct from gross earned income for
federal tax purposes .
What makes the U.S. tax code so complex isn't the taxes themselves--it's the
allowed deductions. There's a wide variety of deductions you can use to
reduce the taxes you'll pay as your business grows. You'd be foolish not to
take advantage of as many of them as you legally can. Here are some of the
more important tax deductions your growing business may quality for:
Equipment purchases. If you buy equipment for your business, you can
deduct a portion of the cost of that equipment in the year you placed the
equipment in service. Under current law, the deduction can't exceed the
taxable income derived from your business. There is also an absolute limit to
the deduction for equipment purchase. Check with your tax professional to
find out the limit for the current year.
Business expenses. Common expenses for running a business for which
you can take a deduction include advertising, employee benefits, insurance,
legal and professional services, telephone and utilities, rent, office supplies,
wages, dues to professional associations, and subscriptions to business
publications.
Auto expenses. For a car you own and use in your business, the IRS allows
you to either deduct your actual business-related expenses or claim the
standard mileage rate, which is a specified amount of money you can deduct
for each business mile you drive. The IRS generally adjusts the rate each
year. To calculate your deduction, multiply your business miles by the
standard mileage rate for the year. For tax purposes, be sure to keep a log of
your business miles, as well as the costs of business-related parking fees and
tolls because you can deduct these expenses, too.
With the actual cost method of tracking expenses, the IRS allows you to
deduct various other auto expenses, including depreciation, gas, insurance,
cleaning, leasing fees, routine maintenance, tires and personal property
taxes. If you use this method, keep records of your car's costs during the
year and multiply those expenses by the percentage of total car mileage
driven for business purposes.
While using the standard mileage rate is easier for record-keeping, you may
receive a larger deduction using the actual cost method. If you qualify to use
both methods, the IRS recommends figuring your deduction both ways to see
which gives you a larger deduction. Just make sure you have kept detailed
records to substantiate the actual cost method.
Meal and entertainment expenses. To deduct business meals and
entertainment costs, you must discuss business during, immediately before
or immediately after the event. Your deduction is limited to 50 percent of the
cost of qualified expenses, and you must have receipts for any cost of $75 or
more. If you have an individual entertainment expense of less than $75, you
can record the necessary information in an expense account book and not
worry about keeping receipts. Record the reason for the expense, amount
spent, dates, locations, and people entertained.

Travel expenses. You can deduct ordinary and necessary travel expenses
you incur while traveling on business. Your records should show the amount
of each expense for items such as transportation, meals and lodging. Be sure
to record the date of departure and return for each trip, the number of days
you spent on business, the name of the city, and the business reason for the
travel or the business benefits you expect to achieve. Keep track of your
cleaning and laundry expenses while traveling because these are also
deuctible.

INCOME TAX ACT 1967 (ACT 53)

PART III - ASCERTAINMENT OF CHARGEABLE INCOME
Chapter 4- Adjusted income and adjusted loss

Section 39. Deductions not allowed.

(1) Subject to any express provision of this Act, in ascertaining the adjusted income of any person from
any source for the basis period for a year of assessment no deduction from the gross income from that
source for that period shall be allowed in respect of(a) domestic or private expenses;
(b) any disbursements or expenses not being money wholly and exclusively laid out or expended for the
purpose of producing the gross income;
(c) any capital withdrawn or any sum employed or intended to be employed as capital;
(d) any amount in respect of any payment to any pension, provident savings, widows and orphans or
other similar fund or society which is not an approved scheme;
(e) any expenditure incurred in relation to a business, being expenditure which is(i) qualifying mining expenditure for the purposes of Schedule 2;
(ii) qualifying expenditure, qualifying agriculture expenditure or qualifying forest expenditure for the
purposes of Schedule 3;
[Ins. Act 364:s.5]
(iii) qualifying prospecting expenditure for the purposes of Schedule 4; or
[Ins. Act 364:s.5]
(iv) qualifying farm expenditure for the purposes of Schedule 4A,
[Ins. Act 364:s.5]
and which but for this paragraph would be deductible in ascertaining the adjusted income from the
business;
(f) interest or royalty derived from Malaysia from which tax is deductible under section 109, if tax has not
been deducted thereform and paid to the Director General in accordance with subsection (1) of that
section:
[Am Act 241:s.10]

Provided that this paragraph shall not apply if the payer has paid the amount referred to in subsection (2)
of that section.
[Ins. Act 557:s.9]
(g) any sum, by whatever name called, payable (otherwise than to a State Government or with the
approval of the Minister, a statutory authority, or other body the capital or fund of which is wholly or
substantially owned by a State Government or a statutory authority) for the use of a licence or permit to
extract timber from a forest in Malaysia;
[Am. Act 241:s.10]
(h) (repealed by Act 619:s.5)
[Ins. Act 578:s.10]
(i) any contract payment from which tax is deductible under section 107A, if tax has not been deducted
therefrom and paid to the Director General in accordance with subsection (1) of that section:
Provided that this paragraph shall not apply if the payer has paid the amount referred to in subsection (2)
of that section;

[Ins. Act 557:s.9]

(j) any payments from which tax is deductible under section 109B, if tax has not been deducted therefrom
and paid to the Director General in accordance with subsection (1) of that section;
Provided that this paragraph shall not apply if the payer has paid the amount referred to in subsection (2)
of that section.
[Ins. Act 557:s.9]
(k) any sum paid by way of rentals in respect of a motor vehicle, other than a motor vehicle licensed by
the appropriate authority for commercial transportation of goods or passengers, in excess of fifty
thousand ringgit:
Provided that if the motor vehicle has not been used by any person for any purpose prior to the rental and
the total cost of the motor vehicle does not exceed one hundred and fifty thousand ringgit, any sum paid
by way of rental in excess of one hundred thousand ringgit:
Provided further that the maximum amount of deduction in respect of the rentals of such motor vehicle in
the year of assessment and subsequent years of assessment shall not in the aggregate exceed fifty
thousand ringgit or one hundred thousand ringgit, as the case may be, in respect of that motor vehicle;
[Subs. Act 619:s.5]
(l) any expenses incurred in the provision of entertainment including any sums paid to an employee of
that person for the purpose of defraying expenses incurred by that employee in the provision of
entertainment:
Provided that this paragraph shall not apply to the following expenses:
(i) the provision of entertainment to his employees except where such provision is incidental to the
provision of entertainment for others;
(ii) the provision of entertainment by a person who carries on a business which consists of or includes the
provision for payment of entertainment to clients or customers of that business and that entertainment is
provided for payment by the clients or customers in the ordinary course of that business;
(iii) the provision of promotional gifts at trade fairs or trade or industrial exhibitions held outside Malaysia
for the promotion of exports from Malaysia;
(iv) the provision of promotional samples of products of the business of that person;
(v) the provision of entertainment for cultural or sporting events open to members of the public, wholly to
promote the business of that person; or
(vi) the provision of promotional gifts within Malaysia consisting of articles incorporating a conspicuous
advertisement or logo of the business; or
[Ins. Act 531:s.7]
(m) notwithstanding subparagraph (l)(i), any expenditure incurred in the provision of a benefit or amenity
to an employee consisting of a leave passage within or outside Malaysia.
[Ins. Act 364:s.5]

(2) It is hereby declared that section 33, except in so far as it relates to expenses of the kind specified in
Related reading:
[Act 309:s.10; Act 531:s.7; Act 451:s.5; Act 557:s.9; Act 608:s.7; Act 619:s.5]
paragraph (1) (a) to (d) thereof, is not an express provision of this Act within the meaning of this section.