Ask Santa to slip a tax deductible gift under the tree and you might not have to fork as much over to Uncle Sam come tax season
Looking for more ways to save on taxes during the holiday season? Why not slip a tax deductible gift under the tree?
You could save a few tax dollars by giving yourself a tax deductible gift for Christmas or Hanukkah – or having your spouse gift it to you. Think a tax deductible gift would be boring? Think again!
Many of the most desirable tech gadgets out there might qualify as tax deductible including, computers, tablets, smartphones, Kindles, cameras, video cameras, and GPS’s, as long as you use them for business.
You can also deduct the cost of self-education, so long as it maintains or improves the skills demanded by your current job, including books, subscriptions to relevant publications, and tuition for a course.
Do you work from home? Give yourself the gift of a plush new office chair or a beautiful desk and you pay be able to deduct some of the cost. Even if you don’t take the home office deduction, you may still be able to deduct home office furniture.
And how does a new car with a big red bow around it parked in the driveway sound? If you need a car for your business, you may be able to deduct that as well.
Deductions like this are most valuable for contractors, consultants, freelancers, and sole proprietors. You can also take some of these deductions if you are an employee, but only if your employer does not cover or reimburse the expenses. Plus, employees can only deduct expenses that exceed 2% of their adjusted gross income (AGI).
Remember – you can only deduct your gift if it’s a legitimate business expense, which means that it has to be “ordinary or necessary” for your trade or profession and have a legitimate business purpose.
For more details about which things qualify and which don’t, refer to IRS Publication 535 [Business Expenses].
What you definitely can’t do is try to pass off a purely personal expense as a business expense. This will serve as a massive red flag begging the IRS to audit you.
You can, however, deduct something that is both a personal and business expense, as a new computer very well might be. Just be sure you only deduct the portion of the expense that is exclusively for business.
You have to keep track of your expenses if you want to deduct them – so be sure to save those receipts.
Buy yourself a tax deductible gift and not only will you have a new toy to enjoy for the month of December, but you’ll also have a little more money left in your pocket next spring after filing 2012 taxes.
Tags: iPadThis entry was posted on Thursday, November 15th, 2012 at 4:38 pm and is filed under Tax Tips: Credits & Deductions.