Parking tickets are not a business expense, even when you got the ticket while driving for work. The Internal Revenue Code blocks the deduction outright: Section 162(f) disallows any amount paid to a government “in relation to the violation of any law,” which covers everything from an expired meter to a serious civil penalty.1Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses The implementing regulation confirms the ban reaches civil penalties, criminal fines, and settlements of potential penalty liability.2eCFR. 26 CFR 1.162-21 – Denial of Deduction for Certain Fines, Penalties, and Other Amounts A parking fine is a penalty, not a cost of doing business, so it fails the “ordinary and necessary” test the tax code requires of any deductible expense.
Parking Costs You Can Deduct
The routine parking you pay for while working is a different story. Meters near a client’s office, garage fees on a business trip, valet at a business lunch — those are fees for a service, and they qualify as ordinary and necessary business expenses.
You can deduct business parking fees and tolls even if you use the standard mileage rate for your vehicle. They come out separately, on top of the mileage deduction.3Internal Revenue Service. Publication 463 – Travel, Gift, and Car Expenses One boundary: parking at your regular workplace is a commuting cost, not a business cost, so daily garage fees at your own office building don’t qualify.
Sole proprietors report deductible parking on Schedule C. It generally goes on line 9 with car and truck expenses if you’re deducting actual vehicle costs, or on line 27 as an other expense if you’re using the standard mileage rate and adding parking on top.4Internal Revenue Service. Schedule C (Form 1040) – Profit or Loss From Business Keep receipts or a dated log. A credit card statement showing a garage charge is fine; a note that reads “parking — $12” with no date or location will not survive an audit.
Towing and Impound Fees After a Ticket
When your car gets towed for a parking violation, the bill usually stacks the fine, the tow charge, and daily storage. The fine is clearly out. The IRS position is that the associated tow and impound fees are also non-deductible, because they arise directly from the underlying violation. You wouldn’t have paid them if you hadn’t broken the rule.
The analysis flips if a private property owner has your car towed off their lot. That’s a contractual dispute, not a government penalty, so the cost can be a deductible business expense if the trip was for business. The question to ask is whether a government entity imposed the charge in connection with a legal violation. If yes, Section 162(f) blocks it.1Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses
Reimbursing an Employee’s Parking Ticket
If you pay an employee back for a parking ticket they got on the job, that payment isn’t a qualified parking fringe benefit and it isn’t a deductible fine. It’s additional compensation. You’d add the amount to the employee’s wages, withhold on it, and pay the employer side of payroll taxes. You get a deduction for the wages, and the employee owes income tax on the money. Reimbursing the legitimate meter or garage fee the employee should have paid in the first place is cheaper, cleaner, and actually deductible as a business expense.5Internal Revenue Service. Travel and Entertainment Expenses Frequently Asked Questions
What Happens If You Deduct a Ticket Anyway
Burying a ticket in “miscellaneous” or “other expenses” is a bet with real downside. If the IRS disallows the deduction on audit, you owe the tax plus a 20% accuracy-related penalty on the underpayment.6Office of the Law Revision Counsel. 26 USC 6662 – Imposition of Accuracy-Related Penalty on Underpayments On one ticket, the penalty is small. Across years, multiple vehicles, or a fleet of employees, the accumulated tax and penalty add up, and a clearly improper deduction invites a closer look at the rest of the return.
The cleaner approach is to book the ticket as a non-deductible expense. Most accounting software lets you flag an expense category that way, so the cash outflow reduces your bank balance in the books without touching taxable income on the return.