Category Archives: Personal Tax Deductions

Articles and tips related to personal tax deductions by James E. George, CPA

The IRS does not care what your Divorce Decree says!

The IRS does not care what your Divorce Decree says!

Every year at tax time, we encounter a variety of situations relating to divorced spouses claiming their children. In prior years, there were various ways used to justify who claimed which child. Sometimes the spouses agreed who claimed who and sometimes they didn’t. For years, the state court systems would approve divorce agreements that specified which spouse claimed which children in which years. This led to the popular odd year/even year approach. Over the years, other ways were used to decide which spouse claimed which children. This led to much confusion and litigation. The Treasury department has come under increasing pressure in recent years to develop standard rules that apply in all cases in determining the criteria for divorcing spouses claiming their mutual offspring.

Finally, about three years ago the Treasury department issued guidelines that are mandatory, and the IRS is taking a hard stance on enforcing these rules. It boils down to this: The custodial parent claims the children by default. If the divorce decree or separation agreement specifies both spouses have joint custody, the spouse with whom the children sleepover the most gets to claim the children. Taxpayers who assert the children stay with both spouses equally are philosophically incorrect. There are an odd number of days in a year, one spouse or another will have a majority, even if it is by one day.

A state-sanctioned divorce decree or separation agreement is a state document. Since federal law overrules state law, the Treasury regulations take precedent over any state court divorce documents. The IRS is also not bound by its provisions in any way. Your attorneys can write anything they want into the divorce agreement, but the Treasury regulations override it!

If a spouse who does not have custody gets granted the right to claim a child as a dependent in a divorce document, the custodial spouse must waive their right to claim that child in writing. This is done by executing a form 8332 and attaching it to your income tax return when it is filed. The custodial spouse may waive their right to claim a child forever, or for one year at a time. The rules for claiming dependent children are a little clearer now. It doesn’t matter what your divorce lawyer writes into your documents. The IRS doesn’t have to abide by it.

Casual gamblers may lose big under new tax code

Casual gamblers may lose big under new tax code

The new tax law will cause many casual gamblers to incur bigger losses than before! Prior to 2018 you could deduct your losses up to the amount of your winnings. You did this by claiming your losses as itemized deductions. The new tax law for 2018 doubles the standard deduction. This will cause many taxpayers… Continue Reading

New Tax Laws and your Home Equity Loan or Credit Line

New Tax Laws and your Home Equity Loan or Credit Line

The 2018 Tax Cuts and Jobs Act limits the deduction for home equity loans and home equity credit lines. The media has done a poor job of informing the public about this issue. Many of the newspaper and radio accounts have indicated there is no provision for deducting interest paid on equity loans and credit… Continue Reading

Employees’ Business Expenses Must be Documented

Employees’ Business Expenses Must be Documented

A deduction is available for money an employee spends to perform their duties in the course of their employment if they are unreimbursed by their employer. This includes mileage, licenses, union dues, education and out of pocket expenses. The expenses must be incurred as a condition of employment or utilized in the performance of the… Continue Reading

Claiming Dependents

QUESTION: Dear Taxman – My Daughter graduated from college in May of this year. She started working in September and expects to make about eleven thousand dollars this year. Can we still claim her as a dependent for this year? ANSWER: Dear Reader: To claim her as a dependent in any year, she must have been a… Continue Reading

Donations to Non-Profits

QUESTION: Dear Taxman – I donate money to different non-profit organizations. Every year my Tax Preparer deducts some but not all of them. I thought donations to all non-profit groups were tax deducible. ANSWER: Dear Reader – Non-profit groups don’t pay income taxes on money you give them. That does not mean you get a… Continue Reading

Charitable Deductions

QUESTION: Dear Taxman – Every week I place cash in the collection plate at church. I recently heard I cannot deduct it since I have no banking record. Is that true? ANSWER: Dear Reader – As of August 16, 2006 a receipt from the donee organization or a bank record such as a cancelled check… Continue Reading