7 Deadly Tax Sins
When it comes to the IRS, some bad acts are worse than others. We have compiled below the top ones to avoid at all costs. However, if you should find yourself in the middle of one, you should certainly call tax attorneys to get you out of the bad situation (yes, it is a bad situation).
Many taxpayers overlook the long list of deductions that they may take when completing and filing their tax returns. The IRS has estimated that millions of taxpayers overpay their taxes each year mainly because they fail to avail themselves of all of the possible deductions. Here is the seventh part of our multi-part series of blogs on the most overlooked tax deductions:
BUSINESS EXPENSES AS DEDUCTIONS
When it comes to acquiring new equipment for an enterprise, business owners must regularly stay updated on all current, pertinent tax rules and regulations, which constantly change. The tax professionals at the Thorgood Law Firm can help ensure that all taxpayers take advantage of any and all deductions that may apply to them.
Many taxpayers overlook the long list of deductions that they may take when completing and filing their tax returns. The IRS has estimated that millions of taxpayers overpay their taxes each year mainly because they fail to avail themselves of all of the possible deductions. The tax professionals at the Thorgood Law Firm can help ensure that all taxpayers take advantage of any and all deductions that may apply to them. Here is the sixth part of our multi-part series of blogs on the most overlooked tax deductions:
COLLEGE TUITION & LOAN DEDUCTIONS
The American Opportunity Credit
All of us as taxpayers continually think we have a lot of expenses that we can itemize and deduct to help reduce our respective tax bills. But they come, they go, all for naught and no effect. The problem usually arises from the fact that our costs regularly fall just short of the required income thresholds for some categories of deductions. One solution is “bunching expenses,” which is a term used to describe incurring as many expenses as possible in a particular category during a particular tax year. Of course, doing this in one tax year will usually significantly diminish any chance of repeating it the following year.
If a taxpayer converts a home to a rental, when can the taxpayer deduct any losses related thereto?
Related Tax Rules or Regulations
Internal Revenue Code Section 262, which provides that except as otherwise expressly provided, no deduction is allowed for personal, living, or family expenses.
Internal Revenue Code Section 165 permits a deduction for any “loss sustained that is not otherwise compensated for.” In order for an individual to deduct such a loss, the loss must be incurred in a trade or business, be incurred in any transaction entered into for profit, though not connected with a trade or business, or arise from some sort of casualty or theft. If such property purchased or constructed as a primary residence if, before its sale, it is “rented or otherwise appropriated to income-producing purposes and is used for such purposes up to the time of sale.”
Related Tax Rules or Regulations
Internal Revenue Code Section 61
Internal Revenue Code Section 280E
Prior to 1982, an illegal business was able to reduce its revenue by the cost of any product it sold (Cost of Goods Sold, or COGS), as well as other ordinary and necessary general and administrative (G&A) business expenses like rent, packaging, utilities, travel expenses, and even the cost of a small scale used to weigh the controlled substances sold by the taxpayer. In 1982, the IRS enacted Section 280E which dictated that businesses that trafficked in controlled substances, as defined by the Controlled Substance Act, could no longer deduct its expenses.
If you or a loved one like a spouse or child is enrolling in college in the near future, remember that there are tax credits which may reduce your tax bill. Before reviewing these credits, it is important to note that you can claim only one type of education credit per student on your tax return each year. If more than one student qualifies for a credit in the same year, you can claim a different credit for each student.