Deductions

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Very Serious Stuff

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When most of us think "taxes," we think of federal taxes — the IRS, Form 1040, and everyone's favorite holiday, April 15. It's true that the IRS is full of Very Serious People collecting Very Serious Taxes. But we can't forget state and local governments either. They collect their fair share of serious taxes — but they impose some pretty silly tax laws, too. Here are some of our favorites:

  • California offers a tax exemption for income you receive to settle claims arising out of the Armenian genocide. If you or your ancestors were persecuted by the Ottoman Turkish Empire between 1915 and 1923, your income from that settlement is tax-exempt. But sadly, if the persecution occurred in 1924 or later, your friends in Sacramento want a share.
  • California also imposes a 33% tax on fresh fruit bought from vending machines. Apparently, the folks in charge of promoting healthy lifestyles would rather see you buy cookies or potato chips!
  • Maryland imposes a $5.00/month "Chesapeake Bay Restoration Fee" on homeowners and businesses to raise funds to improve sewer treatment plants that

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New Issues for Splitting Community Property

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As usual, we would be foolish to expect our laws and regulations to always make sense or to keep up with the times.

Over the years there have been significant technical challenges to all traditionally married couples in community property states that want to file separate income tax returns. What is often overlooked though is that  registered domestic partners and same-sex married couples face those same reporting challenges plus additional crazy hurdles for proper tax reporting.

The IRS requires registered domestic partners and same-sex married couples to split their community income between their tax returns, even though they require you to file as single taxpayers (remember, we can't apply logic or common sense to any of these rules).

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Home Office Deduction Simplified... Sort of

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Every now and then the government does actually simplify something. On Tuesday, January 15, 2013 the IRS released Revenue Procedure 2013-13 which gives you an optional method to calculate the amount of the deduction for expenses for your business use of your residence beginning with the current tax year.

As you read about this new home office deduction option, you may notice that it is very similar to the options you have for deducting business use of your automobile. One method is easy and based on a constant deduction the IRS provides the other method requires that you keep detailed records but the benefit may well be a higher deduction.

New Option Beginning with 2013

Beginning this year, 2013, you can elect to calculate your home office deduction by multiplying the allowable business square footage by $5.00. The allowable square footage is the portion of the house used in a qualified business use, but not to exceed 300 square feet. The maximum you can deduct annually under this new “safe-harbor” calculation method is $1,500. The IRS may update the $5.00 per foot allowance from time to time.

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Tax Strategies for Santa Claus

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As 2012 draws to a close, most of us are preparing to take time off and enjoy friends and family. But there's one famous name who works harder than anyone else this time of year — everyone's favorite fat man in a red suit, Santa Claus.

When you think of Santa, you probably focus on what he gives. But have you ever thought about what he pays? You can be sure the grinches at the IRS do!

Santa is most famous for his holiday gift-giving. His "North Pole Foundation" is set up as a not-for-profit under Internal Revenue Code Section 501(c)(3). But Santa also operates a second, highly profitable business focused on licensing and endorsements. (In that sense, he's like top athletes whose off-the-field income from endorsements

Tax Relief for "Superstorm" Sandy

Hurricane Sandy roared ashore last week, interrupting our regularly scheduled election already in progress. And yes, I'll be addressing election results shortly, especially as we get more guidance on what to expect for your taxes. But I’m impressed, as always, with how a natural disaster brings out the best in Americans, and I’m pleased to see both Democrats and Republicans joining together to help those most affected by the storm.

The IRS gives generous tax deductions to help make our own generous charitable gifts go further. So this week I’m writing to help you make the most of efforts you might make to support storm victims — or any other year-end charitable gifts.

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15, 25, 28, Hut!

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There's no denying that amateur sports, especially college football, are big business. Together, the 15 top-grossing teams score over $1 billion in revenue, with the University of Texas Longhorns alone generating $71.2 million in profit.

Numbers like that would normally make the "receivers" at the IRS smile. But college football is different. The big Division I schools that sponsor the most competitive teams are all tax-exempt. And the IRS loses again on a juicy revenue stream that's unique to college sports -- required donations, sometimes totaling twice the cost of a season ticket, that fans make to the school to secure those seats.

Back in 1986, boosters couldn't deduct the contributions they made specifically to secure sports tickets. But Louisiana Senator Russell Long, who sat on the Finance Committee, met with lobbyists who argued that his home state