At this time of year, a summer vacation is on many people’s minds. If you travel for business, combining a business trip with a vacation to offset some of the cost with a tax deduction can sound appealing. But tread carefully, or you might not be eligible for the deduction you’re expecting.

General Rules

Business travel expenses are potentially deductible if the travel is within the United States and the expenses are “ordinary and necessary” and directly related to the business. (Foreign travel expenses may also be deductible, but stricter rules apply than are discussed here.)

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A frequent question that arises is whether legal expenses are deductible. The answer to that question can be both yes and no and can be complicated depending upon the nature of the legal expense.

The Internal Revenue Code (IRC), which is the body of tax laws written by the United States (U.S.) Congress and approved by the president in office at the time the law is created, tells us that except as otherwise expressly provided, such as itemized deductions, no deduction shall be allowed for personal, living, or family expenses. The IRC also says that, in the case of an individual, deductions are allowed for all of the ordinary and necessary expenses paid or incurred during the taxable year:

For the production or collection of taxable income; Read More

Now when I think of Halloween, I look forward to seeing all of the different costumes that people wear. Some are very extravagant and I am sure pricey. And for some they would like to know how that can be deductible. Since costumes fall under the category of clothing or uniforms, you need to be aware of what the tax law requires.

The tax law requires the following three elements for clothing useful only in the business environment to be deductible:

1. The clothing is required or essential in the taxpayer’s employment;

2. The clothing is not suitable for general or personal wear; and Read More

What factors determine if your donation is tax deductible or not: For a charitable donation to be tax deductible, one has to keep in mind first and foremost that one has to itemize deductions on the tax return via Schedule A and,

• That the donation is to a qualified organization. A qualified organization is an organization to whom one can make tax deductible donations. Usually, this is an organization registered under Section 501(c)(3) or 501(c)(19).

• These organizations include non-profit groups that are religious, charitable, educational, scientific, or literary in purpose, or that work to prevent cruelty to animals or children. (For an exhaustive list refer Pub 526). Read More

I had a strange experience on my door step with a man selling magazine subscriptions for a Charitable Organization the other day. To confirm his legitimacy he even showed me a check a neighbor had written for $50 and advised my donation to his organization would be tax deductible!

Most of us, through out the year are approached by various charities either personally or on the telephone or through letters. The callers may want you to pledge an amount that instant.

Financial stress has hit hard all round, both charities & donors are strapped for funds. My policy when approached thus in most cases is to ask for more information about the Read More

TaxConnections Tax Blog - Charitible Organizations and taxes“O” is for organizations.  There are many kinds of organizations, but they can be handled in very different ways for tax purposes.  Charitable organizations are tax-exempt and contributions to those organizations are deductible for taxpayers.  How can you tell if an organization qualifies as tax exempt?  Everyone knows the United Way is a qualified charitable organization, but what about the Wayzata Orchestra Boosters?  Many booster clubs are set up as charitable organizations, but others are not.  It turns out the Wayzata Orchestra Boosters is a qualified public charity, meaning contributions to that organization are deductible.  So where can you look that up?

That link is the Internal Revenue Service site where you can search by name and state for a charitable organization.  Before you make any large charitable contributions, it might be worth checking them out to make sure they are legitimate charities.

It is especially important to check the tax-exempt status of political organizations.  Some are organized for the benefit of candidates and a contribution to those organizations is not tax-deductible.  Others may seem political but they are organized and run as a charitable organization on behalf of a specific issue instead of a specific candidate or party.  Some of those organizations could be receiving tax deductible contributions.  The best thing to do is go the IRS site and check them out.  Better safe than sorry when donating to organizations.

Taxes A to Z – still randomly meandering through tax topics, but at least for 26 posts in an alphabetical order.

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