How Millennial Professionals Can Differentiate Business Expenses From Personal Expenses

The matter of differentiating between business and personal expenses has been a contentious one for years, both in the public and the private sector. We constantly find reports of executives and politicians taking advantage of this benefit by claiming certain personal expenses and masking them as business-related.

See Also: How to Audit Your Business Expenses

A recent example of this is the case of the Canadian senators. Right now, the Great White North is going through a Senate Expense Scandal; presumably dozens of senators charged taxpayers for personal expenses. For instance, Senator Nancy Ruth declined an airline’s complimentary meal because she didn’t want to eat "ice cold camembert and broken crackers."

Indeed, there are plenty of expenses that you can charge to the company or to taxpayers. From reasonable travel expenses to the business use of your car, nobody would second-guess these claims. However, if you’re charging the company or the taxpayers $16 for a glass of orange juice or $5,500 for a trip to Jamaica, then you’re abusing the system.

For millennial professionals, the issue can be very difficult to ascertain. Millennials who aren’t exactly known for fiscal discipline and monetary restraint could take one of two routes: start taking advantage of the expense system or be responsible professionals and only expense business-related purchases.

The Lemonade Stand Example

Use the lemonade stand as an example on how to differentiate between business expenses and personal expenses. What do you need for a lemonade stand? Lemons, water, ice, cups, and a stand – any purchase for these items is a business expense.

Let’s go one step further: you used your personal vehicle to pick these items up – that is also a business expense. You also acquired a chair to sit while selling lemonade, which is another business expense. Let’s take another step: you purchased a new computer to start a website, launch a marketing campaign and establish a presence on social media. These are all business expenses.

Here is where it gets tricky: you decided to go to Spain to look at the nation’s best lemons for your lemonade stand. This is fine because you want to sell the greatest lemonade in the world.

To get there, you purchased four first-class plane tickets (you, your wife and two kids), rented a vehicle and stayed at a five-star luxury hotel. Only one of those is a business expense: the rented vehicle (as long as it’s visiting businesses and farms), but even that can come into question because you took your family along for the ride.

You didn’t need a first-class plane ticket, nor did you have to stay at a five-star luxury hotel. You also didn’t have to take your wife and kids to Madrid for business.

Charts to Differentiate Between the Two

Are you a millennial and unsure how to differentiate between business expenses from personal expenses? Here’s how to find out what are some reasonable expenses:

Business Expenses

Personal Expenses

Travel (bus, plane or train tickets; modest lodgings; food)

Workday commute (public transportation, parking or taxicab)

Automobile (gasoline, car rentals and other business use of your vehicle)

Business clothing (suits, pants, shirts, shoes and skirts – unless it’s a uniformed office)

Office (desk, chair, lamp, organizers and computer for your home or business office)

Travel for family (Bringing spouse and children on a business trip)

Mobile (smartphone or tablet, data plan, long distance business use only)

“Sin” goodies (alcohol, cigarettes, strip clubs, and drugs)

Food (anytime you’re on a business-related venture, you can reasonably spend on food – not $50 steaks)

Extravagance (big screen TVs, $100 champagne, new comforter, and extra computers)

Many companies have a charge account for certain employees. This allows lucrative companies to treat employees in high positions by charging the company for trips to high-end restaurants, chauffeur-driven cars, and golf lessons. However, these are different from business expenses. Whenever you’re in doubt, inquire with an accountant or your boss and find out all the answers. At times, it’s best to use your better judgment.

The Globe and Mail