The Good Tax Guide » tax deduction

Home Office Tax Deduction

Tax Guide — Wed, 15 Apr 2009 07:41:12 +0000

In order to get home office tax deduction, IRS have provided two methods for an individual. According to the first method the person must show that the principal base of the business is home office. For this necessary documents or proof are required to show that. It should be genuine also. Another way is to show that the home office is the place where the individual meets the clients or customers. For getting the tax deduction one must spent certain number of hours in home office and necessary proof must be given for showing that majority of the business income which are taxable comes through the office. The documents must be presented to the IRS for verification purpose. Deduction will be given only after the verification. The deductible tax includes mortgage interest, utilities, operating expense, depreciation, real estate tax. Only these items are allowed to receive the tax benefits. Things which are not included in this are not eligible for getting the discounts. There is also a limit set by the IRS for giving the deduction. If the amount exceeds that limit, then it will become taxable. The failure to report the items which are taxable will result in penalties.

Tax Deduction on Medical Expenses

Tax Guide — Wed, 25 Mar 2009 07:28:28 +0000

Deductions can be obtained in tax if the medical expenses fall in the category mentioned in the list provided by them. It include expense related to birth control pills prescribed by the doctor, legal abortion, organ donor, food facilities provided by the hospital during the treatment, service fee for the hospital, the expenses related to dogs and other pets, oxygen equipment, prescribed medicines, psychiatric field, nursing wages and other related to the dental issues. Deduction in tax in all these case can be obtained if and only if it is supported by proper valid documents. There are certain other medical and dental expenses for which tax exemptions will not be given. If the medical expenses comes under the category of those which can be deducted then it should not be mentioned in the taxable part. In the taxable part it is necessary to include the medical expenses which do not come under the non taxable part. Social activities, general health improvement program, weight loss programs and many others do not come in the category of non taxable items. So, one must pay the tax for these items. Tax reduction is also given on certain dental expenses. The deduction is also based on the age limit of the person.

Tax Deduction for Legal Fees on Tax Return

Tax Guide — Tue, 24 Feb 2009 06:42:56 +0000

Deduction in tax can be obtained for legal fees if the dispute involves business, property or employment or property. In such case deductions can be made while filing the tax returns. But the legal fees which are used for personal matters will not get any tax discounts while filing the tax returns. Such legal fees should be included in the tax returns as they are taxable. Legal fees related to alimony are tax deductible. But the legal fee concerned with divorce is also not taxable. Legal fees used as the estate planning fees are tax deductible and can be deducted on the tax returns. But in all the cases there will be limit and if the amount goes above that limit then it will become taxable. Other non taxable legal fees include will disputes and wrongful death suites. Will dispute is not taxable as it is an inherited income. It should be reported in the tax returns. All the legal fees which are not taxable should be appropriately mentioned in the tax returns. Otherwise penalties may be charged. Legal fee involved in tile dispute or property dispute is not taxable also. In case of personal injuries, the legal fess depends on the situation.

Are Credit Card Rewards Taxable?

Tax Guide — Thu, 17 Dec 2009 02:39:06 +0000

Nowadays almost every credit card out there gives you cash back, airline miles, or some other form of rewards. For some people, they may only earn a few dollars a year. Meanwhile big spenders may rake up thousands of dollars annually in cash back. Whether you’re getting $10 or $10,000, is this money taxable?

What Does The IRS Say About Credit Card Rewards?
According to Mike Dolen, editor-in-chief at Credit Card Forum, the rewards are generally not considered income by the IRS (in the United States). Because it’s considered to be a rebate on spending, they presently don’t classify them as taxable income (but check with your accountant to be sure). It’s similar to if you bought a $500 camera which came with a $50 mail in rebate. The $50 you are getting back is not income, since it’s dependent on the $500 you spent. It’s merely a rebate on your spending.

Are Credit Card Rewards Donated To Charity Deductible?
Most credit cards offer you the ability to donate your frequent flyer miles or accumulated cash back to charity. Usually, each card issuer has a handful or charities they work with. The cardmember has the option to choose one of them and donate their rewards. However for the same reason they are not taxable, they also are not deductible. So if you choose to give away your cash back to a certain cause, don’t try and deduct it on your tax return.

So if you want the deduction, what you should do is elect for the cash back which you can deposit into your bank account. If you then turn around and write a check to make a donation, it probably will be deductible. However this particular situation may be a slipper slope, so check with your tax advisor to find out for sure.

Will Credit Card Rewards Ever Be Taxable?
So far the IRS has been fairly vague with their stance on this issue, so it’s within the realm of possibility that they may change their position. If they do change their policy, they are most likely to only apply it to cash back (not the rebates which can only be applied to merchandise and services). So if you have a grocery store rebate credit card, you will probably be safe. For example, the Kroger credit card only gives a rebate that can be used at Kroger grocery stores, so it will probably never be taxable.