Source: Forbes

Forbes, in an article by Kelly Phillips Erb, delves into the emerging tax implications of using artificial intelligence in a home office setting. As AI tools become increasingly integrated into daily work, questions arise about their deductibility as business expenses. The article clarifies that, similar to software, subscriptions to AI services or the cost of AI-powered tools used exclusively for business purposes can generally be claimed as a tax deduction. This is particularly relevant for freelancers, gig workers, and small business owners who rely on these technologies for productivity, content creation, and data analysis.

The discussion also extends to the evolving role of the IRS, which is itself adopting AI to enhance its auditing capabilities. This means that while taxpayers can deduct AI-related expenses, the IRS is simultaneously using sophisticated algorithms to scrutinize returns for inaccuracies and potential fraud. The article advises taxpayers to maintain meticulous records of their AI-related business expenses, including invoices and usage logs, to substantiate their claims in the event of an "AI-powered" audit. The piece underscores the dual nature of AI in the tax world: a tool for both the taxpayer and the tax authority.