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The notion of taxes can be stressful for anyone, and so can the holiday season. While reading about taxes and finances could destroy the holiday spirit for some, it is a great idea to be cognizant of the various holiday tax deductions to make the season much less stressful. Below is an overview of some common last minuet tax deductions and tax break opportunities that you can take advantage of this holiday season before you close the books on 2013
Tax Deductions for Business Gifts
In many circumstances, it can be quite beneficial for a business to give holiday gifts to their clients, but this can often be a costly endeavor. Fortunately, you may deduct the cost of business gifts that are up to $25 per client, associate, or employee on your income tax return. However, it is important to note that “incidental expenses” (such as wrapping paper, holiday gift cards, insurance, and mailing) are not included in this $25 limit. It is also important to keep in mind that you may not double this limit by including a spouse or business partner when giving to the same recipient.
There are Exceptions to Gift Tax
In a non-business circumstance, just about anything that you give as a gift to another person could be subject to gift tax on the giver’s end. However, it is important to know the exceptions to this. First, know that there is absolutely no gift tax when giving to a spouse, so you may be as extravagantly generous as you want. Also, keep in mind that choosing to pay someone’s tuition and medical expenses this holiday season not only provides a great gift, but also leaves you with no gift tax. Do make sure that if you choose to do this, you pay your money directly to the educational or medical institution (rather than to the recipient).
Tax Benefits for Donating to Charities and Organizations
Sometimes, the best holiday gift is giving money to a charity or organization that you care about. As far as legitimate charities go, you can send as much as you want. There is not only no gift tax, but it is tax deductible. On the other hand, it is very important to note that although there will not be gift tax when you donate to a political organization, this endeavor will not be tax deductible.
Consider Donating Your Family’s Unwanted Holiday Gifts for Tax Breaks
It may seem cold, but it is the truth that we often end up receiving holiday gifts that we do not want. Instead of exchanging them for new items, you could donate them to charity; you will not only be helping those less fortunate than you, but you will also be able to claim additional tax breaks this holiday season. The IRS has a form that helps you to assess the value of what you end up donating, so that you may claim the corresponding tax deductions. Make sure that you obtain a receipt from the charity that you are donating to for your records.
A Happy & Healthy New Year form everyone here at R&G Brenner Income Tax!