Getting a tax deduction for an allowed expense on your taxes is great. Making the mistake of claiming a deduction that is not allowed by the IRS can you get into trouble and a possible audit. For example, you can deduct the expense of a dinner with clients up to 50% of the bill only. If you claim more than the 50% allowed or you do not properly record the business purpose of the meeting, the deduction could be thrown out.
Travel is similar to entertainment were only the part of the travel that is business related can be deducted. If you take your family or your spouse with you and do things on your trip purely for pleasure, those parts of the trip cannot be deducted on your return.
Commuting costs are only allowed from one business location to another business location. The commute from your home to the office is not something you can deduct on your taxes.
Make sure your charity giving is to IRS recognized organization or the donation will not be deductible. And if you get something, like a night at the opera, in exchange for you donation, you need to subtract the fair market value of the benefit you receive from the donation that you claim.
And the IRS has made giving to charities without a proper record not something you can deduct. You could previously deduct small amounts of cash that you gave to charities. But now it is required that you have proof of the donation to get the deduction. So write a check instead of giving cash.
Individuals that pay alimony (also known as “spousal support” or “spousal maintenance”) to a former spouse can deduct these payments on their personal federal income tax returns. In turn, the alimony recipient is required to claim the payments as income.
Before a payor takes an alimony deduction they should make sure that their payments meet the IRS qualifications for alimony. Ideally, this was addressed and discussed in detail with their divorce attorney to ensure that the alimony was structured in a way that would allow a deduction. If you are not sure whether your payments are deductible you should consult with a family law or tax attorney. Here are some tips regarding what does and does not meet the general requirements for payments to qualify as alimony under the Internal Revenue Code.
Alimony is Formally Mandated
According to the IRS, alimony payments must be mandated by a legal settlement agreement or court order to qualify for the tax deduction. This means that there must be a legally binding agreement, such as a temporary support order, separation agreement or divorce decree, that describes and mandates the support provided by one spouse to the other. The IRS does not consider voluntary, informal payments of money to a spouse or former spouse to be alimony.
Child Support Is Not Alimony
Child support is not alimony and those who pay child support cannot deduct these payments from their income. Under federal tax laws, child support is not tax deductible by the parent who pays it, and does notneed to be reported as taxable income by the parent who receives the payments.
Cash Payments Only
Non-cash property transfers don’t count as alimony and cannot be deducted from one’s taxable income. Alimony must be paid in cash, or by check or money order, in order to satisfy the statutory requirements.
Third Party Payments
In some cases, court-ordered payments to third parties can be considered alimony and are therefore tax deductible. Examples of this include rent or medical expense payments. In addition, payments made on taxes, mortgages or insurance may also be entirely or partially tax deductible if treated as alimony under a divorce or separation agreement.
Complications Can Arise if You Still Live With Your Ex-Spouse
According to the IRS, a person who is legally separated from his or her spouse, yet still lives in the same home with him or her cannot normally claim a tax deduction on alimony payments. An exception to this rule exists when one spouse leaves the home within one month after receiving an alimony payment. In those states that recognize legal separation, those who are still living with their former spouse and have a legally binding support agreement but are not legally separated, should talk to their attorney or tax adviser to find out whether their payments qualify for a deduction.
About the Author
Scott Morgan is a board certified Austin divorce lawyer who regularly blogs on the subject of divorce and family law. You can read his blog at AustinDivorceSpecialist.com.
Just like any group of freelancers or workers who run their own businesses, one of the advantages of being an internet marketer is that there are quite a number of expenses and deductions that you can claim when it comes to filling in your tax return. There are of course a number of items specific to your particular business that you will be able to claim and these should be discussed with your accountant. But there are certain areas that every one who works freelance and online will equally be able to claim as a legitimate part of their business expense and some of the more common areas will be outlined here in this article.
The first and most important thing to note is that no matter what it is you are going to claim for you will need to keep records of each and every transaction and keep hold of all your receipts. If it is for a piece of online software or a hosting account, print it off and file it for later. This will save you a massive effort and printing session when it comes time to do your taxes!
Secondly, no matter if your entire business is online, the first place to look for expenses is the physical space of your home or office. If you work from home, add up what percentage of your home is dedicated to conducting your business. You will then be able to claim this back as a percentage of your rental or mortgage payments. In addition, any expense related to the running of that premises for the purposes of business will also be deductible This includes the cost of utilities such as electricity and phone, as well as anything to do with the maintenance of the property for business purposes. Your computer is essential business equipment so this should be deducted too. This also applies to the furniture surrounding that computer, so keep receipts for the desk, chair, monitors and printers and anything else you use in the office.
Once you have taken care of the physical space of your business, you should look at deductions for the virtual space. Obviously, just like electricity and phone, you can claim for your broadband service. Your website (or for most internet marketers your multiple websites) are also rented space so you can claim for their domain name purchase, their hosting accounts and any maintenance or site add-on’s you might get from your hosting provider. Any support calls will also be deductible. After that, think about any plugins or scripts, software or ebooks you might have purchased for the business – most of them will be deductible. Most importantly, think about any outsourcing you might have done, from backlinks to paid articles, design work to a virtual assistant. All of these expenses can be reclaimed.
Lastly, think about your advertising. Did you spend any money on adwords or Facebook ads, or even put an advert in a trade publication or website? All of these can be fully reclaimed.
Remember, there’s no point in not claiming. Through use of a good accountant and a bit of discipline each time you make a payment through the year, you could find that when it comes time to pay your taxes, you have significantly reduced your arrears.
Alex Simmonds is a journalist and blogger. He currently writes a blog about the contracting sector covering everything from contractor mortgages to payday loans.