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The Tax Benefits of Claiming Your Sweetheart on Your Tax Return – Part 2 (Final)



Valentine’s Day is all about that special someone in your life, but have you ever wondered if your date across the dinner table might actually be able to save you money on your tax return or if the two of you now decide to get married, whether you can deduct any portion of the wedding and thereafter pay less in taxes?

In Part 1 of this blog, I discussed what you need to know about who qualifies as a dependent and what you need to know on deducting gifts to your staff.

Can you get a Tax Write-Off for your wedding?

Tax write-offs are usually the last thing a bride and groom think about when planning a wedding. To the surprise of many, however, wedding purchases and/or rentals can actually save money when it’s time to pay taxes at the end of the year. While there are rules and stipulations to each of these tax write-offs, many newlyweds take advantage of them every year.

The Attire. Brides often wear their wedding dress only once. And while some opt to keep them for whatever reason, others have no idea how to discard them. For a tax write-off, consider donating the wedding gown to a nonprofit organization like Goodwill, MakingMemories.org or CinderellaProject.net. These organizations will take your dress and issue you a donation receipt for your good efforts. While you’re at it, consider donating the bridesmaids dresses, flower girl dress, ring bearer’s outfit and any nonperishable decorations.

The Venue. Believe it or not, some wedding venues are tax deductible. Choose a ceremony or reception venue located at a museum, public-owned park or even a historic house or building of some sort. These places are usually owned by nonprofit organizations who use the money they receive for upkeep purposes only. Speak with the head of the venue sight to make sure that it is a nonprofit organization and what portion of the cost you pay is in excess of the deemed value of the rental of the space (only the excess amount could be deductible as a charitable contribution).

Wedding Favors and Gifts. Charity donations can make thoughtful wedding gifts and favors. They also save you money during tax season. So instead of purchasing a trinket that your guests or attendants may discard later, opt for a donation to your favorite charity on behalf of all those who are a part of your wedding.

Flowers and Foods. You can also get a tax write-off for items that have a short life, such as leftover food and all those floral centerpieces. After the wedding is over, ask a friend or family member to bring the items to a local nursing home, homeless shelter or somewhere similar. You will get a tax deduction for the cost of the remaining food and flowers and you’ll put a few smiles on faces.

Documenting. Whether you have your taxes done by a professional accountant or take care of them yourself, it’s important to document each of these wedding tax write-offs. Keep all your receipts for any purchases you make and request a donation sheet (signed by the organization) that states how much you donated, what you donated and when. Save all your contracts for any wedding venues and, if possible, request that the venue organizer provide you with receipts for each of your payments.

Reporting Charitable Contributions. To claim charitable deductions, you must itemize them on Schedule A of Form 1040. The IRS will need any and all receipts and statements that support the fees, expenses and donations that you claim. If your total noncash contributions exceed $500, you must also fill out Form 8283, Noncash Charitable Contributions, and attach it to your tax return. If you donate a single item worth more than $5,000, you must add Form 8283, Section B, and obtain an appraisal.

Is an Engagement Ring Tax Deductible?

An engagement ring signifies a commitment between two partners and marks their intention to marry at a later date. Because engagement rings are typically made from precious metals and stones, the price can range from several hundred dollars to several thousand dollars. Whether you may claim an engagement ring as a tax deduction depends on individual circumstances.

Purchasing a Ring. If you plan to propose and purchase an engagement ring to seal the deal, you may not deduct the cost of the ring from your taxes. An engagement ring is considered a capital gains item rather than a household item, making it ineligible for deduction purposes.

Donating a Ring. You may donate an engagement ring to a charitable entity if, for instance, your engagement ended without marriage or if you divorced and no longer want to keep the ring. In most cases, the donation represents a charitable contribution that you can deduct from your tax liabilities for the year in which you donate the ring. However, to claim the ring as a tax deduction, the charitable organization must be able to use or sell the ring. Contributions that a charitable entity cannot use are not tax deductible.

Appraisal. The amount you can deduct from your tax liability depends partially on the value of the ring. Obtaining a certified appraisal of the ring might help you maximize your tax deduction if the ring has increased in value since purchase. The cost of the appraisal is not included in the charitable contribution deduction; however, you may deduct the cost of the appraisal as a miscellaneous deduction.

Considerations. The Internal Revenue Service only allows you to claim the appraised value of a donated engagement ring if you have had possession of the ring for more than one year. Otherwise, you may only deduct the purchase price of the ring after donating it to a charitable entity. Also, if the value of the ring exceeds 50% of your adjusted gross income for the year, you may only deduct the portion of the value that is equal to 50% of your adjusted gross income, minus the value of any other charitable contributions claimed for the same tax year.

Is There A Marriage Tax Penalty?

Federal income taxes can be particularly difficult to fully grasp. The marriage penalty is the term used to describe the difference in the amount of taxes paid by a married couple versus what they would have paid if they had remained single. For some couples, this difference results in higher taxes; for others, the resultant tax liability is lower. While the marriage penalty used to stem from many inequities in the U.S. tax code, a great many of those were eliminated by legislation. The two lowest tax brackets for “married filing jointly” are exactly double that of the same tax brackets for those filing “individually,” which results in no penalty at all for those brackets. Additionally, the standard tax deduction for married filing joint is exactly double the standard deduction for single filers.

Because the marriage penalty no longer stems from simple imbalances in the standard deduction and all tax brackets, the only realistic way to calculate it is to use a standard tax calculator and compare the results by running it three times. After running the tax calculator once as married filing jointly and once for each person as a single filer, add the results from the two single calculations and compare them to the results from the joint calculation. The amount paid via annual taxes is not the whole story. Differences in the taxable nature of capital gains, home sales and other large tax events can significantly change the total amount of taxes a couple pays over multiple years.

It’s Risky Business To Claim Your Sweetheart on Your Tax Return or Deduct Gifts To Your Sweetheart or Take A Tax Write-Off For Your Wedding.

Writing off wedding costs reduces your tax liability for the year in question and may increase your tax refund but consider whether you are willing to endure an audit for your attempted deductions. Quirky write-offs are red flags for the IRS. So if you are writing off your honeymoon as a business trip, keep a log of activities like appointments and what business was transacted. A paper trail of receipts will back up your case. It costs a lot to support our children and sometimes even our friends who have been living on the couch for the past year but taking advantage of these tax tips may provide you with some relief and well-deserved tax savings this Valentine’s Day.

We are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. Let’s Meet on TaxConnections.

Original Post By:  Jeffrey Kahn