When it comes to small business taxes, it’s easy to know that a new laptop for your business is a write-off. But what about that coffee you bought during a client meeting? Or the dog crate you use during Zoom calls to minimize distractions?

Welcome to the gray area of tax deductions — the murky middle between clearly deductible and clearly personal. If you’re trying to maximize your write-offs without drawing red flags from the IRS, this is your roadmap.

What Is a “Gray Area” Deduction?

Gray area deductions are expenses that might qualify as business-related, but they aren’t black-and-white. Whether you can write them off depends on intent, usage, documentation, and how confidently you can justify the expense in the event of an audit.

Write-Offs That Often Qualify — If You Play It Smart

1. Home Office Expenses

If you use a portion of your home exclusively and regularly for business, it can be deductible. This includes:

• A percentage of rent or mortgage
• Utilities
• Internet
• Repairs to your office area

Gray area tip: A laptop used on the couch doesn’t qualify. A defined workspace does.

How Pettay Consulting Helps: We work with clients on figuring out the percentage of the various items that equal to a monthly Home Office Expense.

2. Meals & Entertainment

Yes, meals can be deductible—but only in the right context:

• 50% deduction if it’s with a client or business purpose
• Must be documented (who, when, what purpose)

Entertainment can also be deducted – but it depends on what it’s for, who it’s with, and the relation to your business.

Gray area tip: Lunch alone while working isn’t deductible, but lunch during a networking meeting? Yes.

How Pettay Consulting Helps: With the software program, we are able to flag the various Meal & Entertainment purchases. From there, we can go over these with you. Sometimes, a meal may fall under travel – this is why a second set of eyes truly helps!

3. Vehicle Use

Driving to meet clients or pick up supplies? That’s business mileage. Driving to your office? Not so much.

Two methods:

• Standard mileage rate (easiest)
• Actual expenses (gas, maintenance, insurance)

Gray area tip: Commuting is never deductible—but errand-running during business hours might be.

How Pettay Consulting Helps: We will work with you on how to track, apps you can use, and what the IRS reimbursement rate is for that year.

4. Phone & Internet

These are essential tools, but if they’re mixed use, only a business-use percentage can be claimed.

Gray area tip: Keep records showing business vs. personal use, especially for cell phones.

How Pettay Consulting Helps: Accurate record keeping is Pettay Consulting’s area of expertise.

5. Pet-Related Items

Believe it or not, some pet-related expenses might be partially deductible. Example: A dog crate used during virtual meetings to reduce distractions if you’re working from home.

Gray area tip: Be conservative and document everything. Use percentages based on actual business use time.

How Pettay Consulting Helps: We show you how to track and find the related expense amount. The owner, Amanda, has had to do this for her dog. We research how and what the IRS wants to see, and can help you with the deductions.

Write-Offs to Avoid (Unless You Have an Ironclad Case)

• Clothing (unless it’s branded with your logo or a required uniform)
• Personal grooming (haircuts, makeup, etc.)
• Gym memberships (even if it helps your mental clarity)
• Family vacations (even if you “thought about business” while on the beach)

These are some of the most commonly over-claimed deductions—and the ones that can trigger an audit if misused.

The Key: Justify & Document

If you want to safely deduct gray-area expenses, treat your documentation like a receipt diary:

• Keep detailed notes on the business purpose
• Use a separate bank account or card for business
• Log mileage, meetings, and context in real-time

Final Thoughts: It’s Not About Being Aggressive—It’s About Being Accurate

You don’t need to play small with your deductions—but you do need to play smart. There’s nothing wrong with claiming what’s legally yours—as long as it’s documented, justified, and aligned with IRS rules. Believe it or not, these rules change, and frequently.

How Pettay Consulting Helps: We research and verify the rules for each case & client. We do the heavy lifting, and give you the accurate publications that follow.

Ready to clean up your deductions or audit your current expense strategy? Schedule a free consultation today.

Let’s make sure your business finances are working for you—not against you at tax time.