The holidays are in full swing, which means holiday parties, gift exchanges, and traveling. All of which can provide some extra tax deductions. Business expenses that are deemed ordinary and necessary, are tax deductible. Which means that spreading a little holiday cheer can do more than just boost morale around the office. Here are some holiday tax deductions you should take advantage of this holiday season.
It is pretty standard for most business to give their clients gifts during the holidays. This is a great way to thank your clients for their business, and recognize them and make them feel special all in the holiday spirit. However, it can also be a tax deduction. The IRS allows taxpayers to deduct the cost of client gifts, up to $25- per person per calendar year. While this may not seem like a huge threshold, the more gifts you give out, the more the deduction adds up.
Holiday gifts to employees can also provide holiday tax deductions. Gifts, rewards, and bonuses can all be classified as employee wages, meaning they can be deducted. These items are typically taxable for the employee, unless they fall under the “de minimis” benefit, which states that the gift is of a small value (under $75) and therefore makes the accounting impractical. These types of gifts are also infrequent.
In the spirit of giving, many people elect to give to their favorite causes this time of year. Philanthropy is good for society, good for your soul, and good for your tax bottom line. Donations made to charities in the form of tangible goods and cash are tax deductible. A few stipulations apply:
- You must donate to a qualified tax exempt organizations. This includes churches, not for profit schools, hospitals, and organizations like the salvation army. You can check the status or your favorite organization here.
- Donations must be in the form or property or chase, a promise to pay or pledge does not count
- Donations must not exceed 60% of your AGI.
It is important to keep track of all donations. This includes keeping copies of canceled checks, receipts, and appraisal reports.
In addition to making charitable donations, tickets purchased to attend a charity event can also be tax deductible. And if you put on a charity event, the hard costs of the event can be deducted, ie: the catering, party rentals, and site fee. Keep in mind, you time is not tax deductible, however the costs incurred over the process of production are.
Employee holiday parties are another great holiday tax deduction. In fact, a holiday party for employees, their spouses, and their families is 100% tax deductible. While you can mix a little business with pleasure (just be sure business is being discussed), it is best to keep business separate from your personal expenses. Be sure to keep detailed records of who was in attendance, and of the associated costs of throwing the party.
Personal travel expenses to visit your family isn’t deductible. However, if you are attending a business meeting, then happen to swing by your aunts afterwards, this can be deductible. The costs associated with business travel like airfare, hotel accommodations,tickets to events, car rental, and meals is tax deductible. Nobody said you couldn’t mix a little business with pleasure. If you are attending a business conference in Colorado, it is perfectly acceptable to tie in some family time or even hit the slopes afterwards, so long as some business takes place.
Before taking liberties with your holiday tax deductions, it is best to get the opinion of your tax advisor. Do you have questions about what holiday expenses you can deduct? Contact one of the tax experts at the Tax Hack Accounting Group today. For more information subscribe to our newsletter.
The Answers To The Most Frequently Asked Tax Questions