Out-Of-Pocket Expenses

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DEFINITION of 'Out-Of-Pocket Expenses'

An expense incurred and paid for by an individual for personal use, or relating to one's employment or business. This can also relate to ongoing costs of operating a fixed asset, such as a car or a home.

Some out-of-pocket expenses may be reimbursed by an employer or other group if the expense is incurred directly on their behalf. In addition, some out-of-pocket expense categories can be deducted from one's personal income taxes.

INVESTOPEDIA EXPLAINS 'Out-Of-Pocket Expenses'

Common examples of out-of-pocket expenses include gasoline for a car, taking a business client to lunch and certain medical payments such as prescription costs. Income tax deductions are often available for expenses related to education, healthcare, home upkeep and charitable donations. While tax deductions don't represent a direct reimbursement, there is an ancillary benefit to paying what is typically something that must be paid anyway.

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