Individuals
Charitable Deductions
Summertime means cleaning out those often neglected spaces such as the garage, basement, and attic for many of us. Whether clothing, furniture, bikes, or gardening tools, you can write off the cost of items in good condition donated to a qualified charity. The deduction is based on the property's fair market value. Guides to help you determine this amount are available from many nonprofit charitable organizations.
Charitable Travel
Do you plan to travel while doing charity work this summer? Some travel expenses may help lower your taxes if you itemize deductions when you file next year:
- You must volunteer to work for a qualified organization. Ask the charity about its tax-exempt status.
- You may be able to deduct unreimbursed travel expenses you pay while serving as a volunteer. You can’t deduct the value of your time or services.
- The deduction qualifies only if there is no significant element of personal pleasure, recreation or vacation in the travel. However, the deduction will qualify even if you enjoy the trip.
- You can deduct your travel expenses if your work is real and substantial throughout the trip. You can’t deduct expenses if you only have nominal duties or do not have any duties for significant parts of the trip.
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Deductible travel expenses may include:
- Air, rail and bus transportation
- Car expenses
- Lodging costs
- The cost of meals
- Taxi fares or other transportation costs between the airport or station and your hotel
Renting Your Vacation Home
A vacation home can be a house, apartment, condominium, mobile home or boat. If you rent out a vacation home, you can generally use expenses to offset taxable income from the rental. However, you can't claim a loss from the activity if your personal use of the home exceeds the greater of fourteen days or 10% of the time the home is rented out. Watch out for this limit if taking an end-of summer vacation at your vacation home.
Businesses
Traveling for Business
When you travel away from home, you may deduct your travel expenses – including airfare, train, bus, taxi, meals (generally limited to 50%), lodging – as long as the primary purpose of the trip is business-related. You might have some downtime relaxing, but spending more time on business activities is critical. Note that the cost of personal pursuits is not deductible.
Entertaining Clients
If you treat a client to a round of golf at the local club or course, you may deduct qualified expenses – such as green fees, club rentals, and 50% of your meals and drinks at the nineteenth hole – as long as you hold a "substantial business meeting" with the client before or after the golf outing. The discussion could take place a day before or after the entertainment if the client is from out of state. For information on what does and does not qualify, please contact us.
Using Your Home Office
Home office expenses are generally deductible if part of a business owner's personal residence is used regularly and exclusively as either the principal place of business or as a place to meet with patients, customers or clients. The IRS provides an optional safe-harbor method that makes it easier to determine the amount of deductible home office expenses. These rules allow you to deduct $5 per square foot of home office space (up to 300 square feet). In addition, deductions such as interest and property taxes allocable to the home office are still permitted as an itemized deduction for taxpayers using the safe harbor.
