J.K. Lasser's Small Business Taxes 2013: Your Complete Guide to a Better Bottom Line

Nondeductible Taxes

You may not deduct federal income taxes, even the amount paid with respect to your business income. These are nondeductible taxes.

Other nondeductible taxes include:

• Assessments on real property for local benefits that tend to add to the value of the property. Such assessments may be made, for example, to build sidewalks, streets, sewers, or parks. These assessments are added to the basis of the property. But assessments for maintenance purposes (such as for repairs to sidewalks, streets, and sewers) are deductible. Water bills, sewage, and other service charges are not treated as taxes. They are, however, deductible as business expenses.
• Employee contributions to private or voluntary disability plans.
• Fines imposed by a governmental authority. These are not deductible as a tax even if incurred in a trade or business. For example, if while traveling away from home on business you receive a fine for a speeding ticket, the fine is not deductible.
• Penalties imposed by the federal government on taxes or for failing to file returns. These are not deductible even though they may be computed with regard to the length of time the taxpayer has failed to comply with a tax law requirement.
• Occupational taxes.