Why are business expenses deductible from income, but someone’s basic living expenses aren’t deductible from personal income?
In: Economics
Because you are taxed on profit and profit is income minus expenses.
You can deduct work related costs because they are an expense you incur when making your money but your living expenses aren’t a part of that, they’re why you make money not how you make money.
If you sell sandwiches to make money you can deduct the cost of bread. If you just enjoy eating sandwiches you can’t deduct the cost of bread.
Why? Because if you had to pay taxes on costs and not just profits low profit margins couldn’t exist. If your profit margin is 3% and you’re paying 4% overall in taxes on your revenue you’d be losing money overall. Instead you only pay taxes on that 3% and you do so by deductions all the other costs.
Latest Answers