Taxpayer asks:
Hello,
I am an independent contractor and work with teachers. If I purchase gift cards to award those that completed required assessments by the deadline given. Can I deduct the cost of these gift cards?
I would appreciate any information you can provide.
Many thanks,
Taxgirl says:
I love this question because it’s an example of how the specific facts really shape the answer!
In your case, I say yes. And I also believe that it’s not taxable to the teachers. Here’s why:
If an employer gives a gift or award to an employee, the IRS generally considers it compensation and not a gift. There’s an exception for de minimis gifts – you know, gift baskets, boxes of chocolate, those inexplicable little inspirational crystal trophies… Those are considered to have such little value that they are not taxable to the recipient as compensation and the value of the items is generally deductible to the employer as part of the cost of doing business.
There is a specific exception to the exception (don’t you just love tax law!) for gift cards. Gift cards are easy to value and are treated just like cash for tax purposes. They are never considered de minimis which means they are taxable to the employee.
Head spinning yet?
But wait. You’re not the employer here. And they’re not your employees. You have an independent contractor relationship, right? This means that the cards should not be taxable to the recipients as income and they are deductible to you as part of the cost of doing business. Unless, of course, you’re giving the gift cards with the expectation of future services – but that doesn’t sound like the case here.
Whew. Got that?
For specific information on holiday gifts and bonuses, see my prior post on the subject.
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
Have a question? Ask the taxgirl! – Now on Facebook!
Traditionally, taxpayers who owned homes could only deduct state and local real estate taxes if they opted to itemize their deductions. However, for the tax years 2008 and 2009, taxpayers who opt for the standard deduction are getting a break: there is an additional standard deduction for those who pay state or local real estate taxes.
To qualify for the deduction, you must file a form 1040 or form 1040A. You’ll take the deduction by checking line 39c of form 1040 or line 23 of form 1040A.
You can claim an amount up to the smaller of the actual real estate taxes paid or $500 for individual taxpayers ($1,000 for married taxpayers). Only taxes based on assessed value for the property are deductible; you can’t deduct additional local taxes such as assessments for sidewalks or sewers. Additionally, the property must be US residential property: foreign properties and business properties don’t count.
While this break won’t apply to everyone (since those who have mortgages will likely itemize their taxes), it could be appealing to homeowners who have paid off their mortgage – or are nearly finished paying off their mortgage. Lucky you!
Taxpayer asks:
Taxgirl, where do you deduct expenses for fixing your home? My neighbor said that I can take off the cost of fixing my roof on my taxes but I don’t know where to put it.
Taxgirl says:
Hmm. I’m not sure that you should be getting your tax advice from your neighbor.
Generally, repairs to your primary residence are not tax deductible. There are some exceptions to this rule, depending upon your personal circumstances, such as:
1, If you claim a home office deduction, you may be able to take a pro rated deduction for home repairs.
2, If you rent out part of your home, you may be able to take home repair expenses related to the rental.
3, If you are making a repair subject to the casualty/loss rules, there may be an adjustment (though technically speaking, the cost of repairing damaged property is not part of a casualty loss – but you may be able use the cost of cleaning up or of making repairs after a casualty as a measure of the decrease in FMV).
Repairs to your home may affect your basis for purposes of calculating a gain or a loss at sale, but your run of the mill home repair expense – even if significant – is not deductible on your federal income tax return.
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
Have a question? Ask the taxgirl! – Now on Facebook!
