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Imagine I have a personal assistant, ie, an employee or independent contractor who helps me with my personal tasks, eg, booking personal travel, running personal errands, purchasing personal products & services, etc.

Could I deduct (from my taxable personal income) the wages that I pay him?

I live in the United States in Connecticut. I'm self-employed, working on an app, but I don't make any money doing that, and I don't pay myself. I make money from my personal assets. Ie, I earn dividends, capital gains (from selling stocks, bonds, cryptocurrencies, etc), and interest (from savings accounts & loans).

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No. The key is "personal." When my daughter was an infant, we had a nanny, and basically paid out a wage, above the table, including our half of her social security, unemployment insurance, etc. We were able to use an employer sponsored DCA (dependent care account) to make $5000 of it pretax, but that was it. Even if we were self employed, using business funds for personal expenses is frowned upon. On reflection, it's similar to what put Leona Helmsley in jail.

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    I worry for Elon as it relates to commingling funds and such between the various companies he's involved with.
    – quid
    Feb 5, 2019 at 2:32
  • As far as I know Elon isn't commingling funds between companies. He usually just throws money at them, he doesn't usually get money out (Tesla being one exception).
    – xyious
    Feb 5, 2019 at 19:04
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This is a little fuzzy. Wages paid to someone are not deductible on personal taxes. If you are running a business and paid wages to an employee of that business while earning no money, then your business is operating at a loss, and self-employment business losses can be deducted from personal income. However, I wouldn't be so sure that the IRS would classify your app as a business rather than a hobby, especially if you haven't made money from it yet.

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    It used to be, and perhaps still is, the law that a self-employed person had to make money at least three years out of five, or else the IRS could re-classify all the losses reported on Schedule C as hobby losses and thus not deductible at all, leading to a lot of extra taxes and possibly interest and penalties.
    – Dilip Sarwate
    Feb 5, 2019 at 1:57

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