Your Money: Is your business security deductible?
August 28, 2012
While I am generally in the business of giving concrete answers, this column is more of a speculation than an offering of specific advice. Given the recent tragedies in Aurora, Wisconsin and New York, I’m sure I’m not the only one who wonders if they could protect themselves in a dangerous situation. As a tax geek, I naturally jumped to the next question, are the costs deductible? In the spirit of research, I started asking around and looking at precedents in IRS case law. I spoke with a local security consultant, Phil McFall of High Caliber Consulting, and he said he has seen an increase in people who feel they are responsible for their own safety and security, including a growing number of women. With that in mind, I set about looking for a consistent way to apply tax law to security expenses to determine if they were deductible, but the answers I found were widespread and very subjective.I recently published an article with CNNMoney regarding deducting a security dog. My opinion in the article was that the IRS allows deductions for the cost of certified guard dogs if they are placed in service to protect business assets. Of course, I got an earful that it’s cruel to put animals to work, but from a tax standpoint, if you take the time to clearly document expenses and the business need, the IRS will generally accept this deduction. While you need to depreciate the purchase price of the dog over the dog’s lifespan, you may be able to deduct the annual food and medical costs for the dogs each year that the guard dog is in service.A portion of your home security systems is also deductible if you have a home office, whether that home office is used in relation to your employment or if you are self-employed. While the security system is not deductible as either a direct business expense or a direct unreimbursed employee expense, if you are eligible for a home office deduction, then you can factor your security system costs into that deduction. You may be challenged to make a case that you have assets to protect, but in the age of identity theft, most businesses have their customer’s personal information in their possession that needs protection.Other security costs such as firearms and bodyguards have left accountant’s speculating for years. In 1981, an insurance agent was denied a deduction for a firearm he purchased for times when he went to unsafe job sites, but if you read further into the case, it says that he purchased twelve firearms over a few years, and therefore he wasn’t responding to a specific threat, he was truly just a collector. A case in 1983 denied bodyguards for a diplomat because they also served as a housekeeper and butler for the individual, and did not carry firearms. If you think you have a case for deducting a security expense, you should consult your CPA. They will most likely recommend that you take the time to document the specific security risk that you believe is being presented to your business, and that you only deduct the expenses you can directly tie to your security needs. Michele Knight, owner of Knight Accounting & Technology, is a CPA and QuickBooks ProAdvisor based in Dillon. For more info and to contact her, visit http://www.cpamichele.com.
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