Related to/relating to

Hi, Cristi,

Please note that "expense" is a singular noun, so "were" should be changed to "was."

The verb "relate" can be intransitive or transitive. If intransitive, you can use (2):

2. The expense claimed related to your income-producing purpose and therefore it was/was therefore tax deductible. (Are you sure you want to use "income producing purpose" —which I'd probably hyphenate— instead of the much more common "source of income"?)

If transitive, you have to use the passive voice:

1a. The expense claimed was related to your income-producing activity and therefore it was/was therefore tax deductible.

As adjectives, both the present participle (relating to) and the past participle (related to) can be used after a noun, but "related to" means "associated with," or "connected with," while "relating to" is more like "concerning (a certain topic)." Therefore, instead of (4) I'd use (5). You might want to eliminate "claimed" to avoid the juxtaposition of two participles:

5. The expense (claimed) related to your income-producing purpose was tax deductible.