Tuesday, June 14, 2016
A TAX POTPOURRI
(1) One of the reasons I am called the “Wandering” Tax Pro is because once the tax filing season ends I enjoy travel via all methods – car, bus, plane, ship and train (not necessarily in that order).
Over the past 30+ years my annual travel itinerary has often included several totally tax-deductible domestic vacations to attend tax-related conferences, conventions, and other CPE offerings.
You can deduct expenses that are “ordinary and necessary” for your business. An “ordinary” expense is one that is common and accepted in your specific trade or profession and a “necessary” expense is one that is helpful and appropriate.
One “ordinary and necessary” business expense for which you can claim a tax deduction is the cost of education that is (1) expressly required by an employer, by law, or by government regulation, or (2) maintains or improves skills required in your current trade or business. If a conference or convention falls under this category the associated registration and travel expenses are deductible.
I have written a special report - POSITIVELY TAXES: A TAX DEDUCTIBLE VACATION - that explains in detail how to make your next vacation tax deductible by attending a job or business related conference or convention, and includes worksheets to help you keep track of your deductible expenses.
(2) It has always been important for frequent gamblers to keep detailed “contemporaneous” records of gambling activity to minimize the tax cost of winnings, but recent developments have made this even more vital.
Gross gambling winnings must be reported as “other income” on Line 21 of your Form 1040. Gambling losses, to the extent of reported winnings, are allowed as a “Miscellaneous” Itemized Deduction. If you report gambling winnings of $10,000 on Line 21 of your Form 1040 the most you can deduct as gambling losses on Schedule A is $10,000. Allowable gambling losses are deducted in full, and are not subject to the 2% of AGI exclusion.
Losses from any type of wagering transaction can be deducted against your reported gross gambling winnings. If you win in the slots your deduction is not limited to losses from slot machines. You can deduct losses from the lottery, 50-50s, bingo, table games such as poker and blackjack, charity raffles, horse racing, keno, etc., up to the amount of your total winnings.
I have also written a special report – POSITIVELY TAXES: MINIMIZING REPORTED GAMBLING WINNINGS - that explains the basics of how gambling activity is taxed describes in detail how recent Tax Court case decisions allow you to reduce the amount of gambling winnings you must report, and reduce the tax cost of your gambling activity to a minimum, via proper documentation of your casino visit wins and losses. It also contains valuable worksheets.
(3) For years now I have been telling clients and readers that it is your “Adjusted Gross Income”, or AGI, and not your net taxable income that is the most important number on your tax return.
Why is AGI so important? Many tax deductions and credits are reduced, phased-out, or altogether eliminated based on your AGI, or in some cases a “Modified” AGI, and several items of income are increased, and some deductible losses are reduced, as this number grows.
There are “above the line” deductions and “below the line” deductions. Above the line deductions reduce your Adjusted Gross Income and your Net Taxable Income. Below the line deductions, which include the Standard Deduction, Personal Exemptions, and itemized deductions, reduce Taxable Income, but not Adjusted Gross Income.
A below the line deduction of $1,000 will reduce your tax liability by the amount of your marginal tax rate. For a taxpayer in the 25% a below the line deduction of $1,000 will reduce the tax liability by $250. But an above the line deduction of $1,000 can reduce the tax liability by substantially more than $250. It is actually possible for a reduction of only $5 in AGI to reduce your tax liability by $500 or more!
Guess what? I have written a special report – POSITIVELY TAXES: REDUCING ADJUSTED GROSS INCOME – that discusses how to reduce your 2016 AGI during the year and when preparing your Form 1040 and minimize your tax liability. In it I explain how a reduction of $5 in AGI can reduce your tax liability by $500 or more.
The above referenced special reports are the first 3 items in MY NEW DOLLAR STORE (a work in process) - and are available to you, as you might expect, for only $1.00 each sent as a pdf email attachment, or $2.00 each for a print edition sent via postal mail.
If you enjoy reading THE WANDERING TAX PRO and have found it helpful to you over the years one way you can say “thank you” is by purchasing one of the above POSITIVELY TAXES reports.
To order send your check or money order, payable to TAXES AND ACCOUNTING, INC, for $1.00 or $2.00 for each report you want and your email or postal address to –
MY NEW DOLLAR STORE
TAXES AND ACCOUNTING, INC
POST OFFICE BOX A
HAWLEY PA 18428
BTW – I also have more extensive and detailed TAX DEDUCTION GUIDES available for $2.00 or $4.00 each. Click here for more information.