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The Holidays are Coming and so is the Gift Tax!

gift tax 2018

You may have to file a gift tax return for presents on the expensive side…

We all know that we can’t write off a designer bag or a watch that we’ve bought for ourselves. On the other hand, let’s say you want to surprise someone with a brand new first car for the holidays. If you didn’t know, the IRS establishes an limited amount until you have to file a tax return, just for the gift you’re planning on giving!

Here’s what you need to look out for when you’re going all out for the holidays.

First off, what is the federal gift tax?

The federal gift tax applies to the transfer of money or property to an individual while receiving less than the full value in return or nothing at all. There is a gift tax exclusion (subject to inflation per tax year) which sets a limit of how much in value they can gift per person before having file Form 709 to the IRS.

Here are the gift tax exclusion amounts from tax years 2002 to 2018. Continue reading “The Holidays are Coming and so is the Gift Tax!”

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A Tax Savings Guide to the Holidays: Charitable Contributions

Get into the holiday spirit with gifts to charities and you could be gifting yourself a tax deduction

These days the holidays tend to involve lots of buying stuff, partying, and hectic travel. Don’t get me wrong, these activities can all net you some pretty valuable tax deductions as long as they’re done according to IRS rules.

But you can also get a tax deduction by getting into the more traditional spirit of the season, the spirit of giving.

Not only does giving to charity fit in well with the spirit of the holidays, but December also conveniently falls at the end of the year. That means that you can pretty accurately look ahead to tax season and plan your charitable giving (and by extension your deductions) so that you get the biggest possible tax benefit. You may even be able to give enough to charity so that you get bumped to a lower tax bracket.

But in order to get a deduction you have to make your donations to a group recognized by the IRS as a charitable organization. These groups must be nonprofits of a religious, charitable, educational, scientific, or literary nature or they must be involved in preventing cruelty to animals or children. Continue reading “A Tax Savings Guide to the Holidays: Charitable Contributions”

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A Different Sort of Tax Holiday

Six tips to lower your tax bill during the holiday season

December’s no time to forget about taxes! Follow these tips to maximize your tax savings while you celebrate.

  • Plan tax deductible travel

Dreading that expensive trip to Grandma’s? Schedule a meeting with a client or vendor on the way and the travel there and back is tax deductible. Family visits are so much better when part of the trip’s on the IRS.

  • Treat yourself (to a tax deductible gift)

The holidays aren’t just a great time to give to others, they’re also a great time to buy yourself that something you’ve been craving all year. And if that present is tax deductible, you save money on your taxes too!

Most tempting are tech toys such as iPads and smartphones. You can deduct electronic purchases if you are self-employed, have a hobby that generates income, or work for an employer that won’t cover business expenses.

The IRS is pretty strict with equipment purchases, so it’s important you be able to demonstrate that you use the equipment at least 50% of the time for business, and that it’s a usual and necessary expense, given your line of work.

Note that if you are an employee of a business that doesn’t cover equipment purchases, you can only deduct expenses that exceed 2% of your household’s AGI. Continue reading “A Different Sort of Tax Holiday”