Tax Deduction Eligibility

A small business owner claimed tax write-offs of: • $1,800 for haircuts and manicures • $2,569 for gym memberships • $830 for cell phones • $4,615 for clothing • $278 for laundry But the IRS audited them and claimed these are not business expenses. Who was right? The case is Tilman v. United States, 644 F. Supp. 2d 391. Many things were covered in the case but I'm going to focus squarely on the above deductions. Here's what the court had to say about each expense: → $1,800 for haircuts and manicures. "Haircuts are nondeductible personal expenses even when required as a condition of employment. The same is true for manicures, because such expenses are inherently personal in nature and suitable for general occasions." → $2,569 for gym memberships "Participation in a weight loss program can be a deductible expense when it is done for medical reasons, however, taxpayer's membership to a weight loss club is not a deductible expense. It is a personal expense. The cost of an individual's participation in a weight reduction program that is not for the purpose of curing any specific ailment or disease, but for the purpose of improving the individual's appearance, health, and sense of well being, is not deductible as a medical expense." → $830 for cell phones "Taxpayers are not entitled to deduct expenses for cellular phone usage, since they failed to provide sufficient evidence to corroborate their assertion that the cell phone was used for business purposes." → $4,615 for clothing "For clothes to be deductible, they 'must be of a type specifically required as a condition of employment, and they must not be adaptable to general usage as ordinary clothing.' Taxpayer's own description of the outfits she buys suggests that they do not qualify for a deduction. Beautiful gowns and cocktail dresses are a staple in many women's closets, as are earrings, necklaces, bracelets, brooches, rings, and watches. Her belief that she can only wear these items when she attends concerts and not in any other setting is irrelevant. As long as other people would wear such clothing in a variety of settings, the clothes are not deductible." → $278 for laundry "These expenses are not deductible for the same reasons the outfits themselves are not deductible." The next time you see TikTok tax advice saying any of these are deductible, point them back to this post!

𝗧𝗵𝗲 𝗚𝗜𝗖 𝗹𝗮𝗻𝗱𝘀𝗰𝗮𝗽𝗲 𝗶𝘀 𝘀𝗵𝗶𝗳𝘁𝗶𝗻𝗴 In my monthly AccountantsDaily column, I consider the proposed denial of deductions for the general interest charge (GIC) and shortfall interest charge (SIC) which will markedly increase the cost of tax debts. ❝Taxpayers who may already be stretched financially, and who are operating in a challenging economic environment ... may find it even more difficult to bear the increased cost of their tax debts.❞ With the enabling Bill currently before Parliament, and only a handful of sitting days left before the Federal election (in March, April or May?), it remains uncertain whether this measure will be passed before its proposed start date of 1 July 2025. The article explains: ➡️ How GIC/SIC are calculated ➡️ Proposed amendment to deny deductions for GIC/SIC ➡️ Report from recent Senate inquiry (with link to report) ➡️ Recommendations from The Tax Institute’s submission to the inquiry (with link to report) ➡️ What the change will mean for businesses, taxpayers more broadly and the Australian Taxation Office ➡️ Commissioner’s remission discretion ➡️ Existing penal effect of GIC/SIC ➡️ Why clarification is needed to understand the date of application ➡️ Tax considerations when obtaining finance from a bank to pay a tax debt ➡️ Assessability of interest received from the ATO ➡️ Disputed tax debts. Feel free to share your thoughts and comments below 👇 #tax #accountants #thetaxinstitute #tti #robyntax #taxpolicy The Tax Institute Julie Abdalla

SALT PHASEOUT - INCREASES THE MARGINAL TAX RATE BY 30% FROM $500,000 TO $600,000 - MUST READ FOR FINANCIAL PLANNERS The Senate bill will increase the SALT deduction from $10,000 currently to $40,000.  However, those with AGI of over $500,000 will be subject to an unpleasant phaseout that will increase one’s effective tax rate by 30%.   Example 1 : Gary and Barbara have taxable income of $500,000 and itemized deductions of $75,000 including a SALT deduction of $40,000.  Their taxable income will be $425,000 under the bill.  (($500,000-$75,000 = $425,000)   The marginal rate at taxable income of $425,000 is 32%.   Example 2: Matt and Erin have taxable income of $600,000 and itemized deductions of $75,000 including a tentative SALT deduction of $40,000.  However, the phase-in kicks in and their SALT deduction will be reduced by $30,000 to $10,000.  The phase-in mandates a reduction of the SALT deduction by 30% of income greater than$500,000.  (($600,000-$500,000=$100,000) and $100,000 * 30% = $30,000)  Their taxable income will be $555,000. ($600,000 - $45,000 = $555,000)   The marginal rate at taxable income of $555,000 is 35%.   In simple terms, their gross income increased by $100,000 but their taxable income increased by $130,000.   If their marginal rate was 35% their effective rate on the increase from $500,000 to $600,000 of income is 45.5%. (35% *130%)   Assume that Matt and Erin reduce their hours and only earn $500,000.   They give up $100,000 of gross income, but the after-tax amount is only 54.5% or $54,500.  If you add state income taxes and/or payroll taxes it is easy to see their marginal rate increase to over 55%.   An economist might argue that there are additional costs of working an extra day.  Perhaps, transportation, meals, wardrobe, and for younger families childcare.   This is where financial and tax planning collide.  A client should understand the incremental benefit of generating $100,000 of additional income.  It is easy to see how a 60 year old medical doctor or dentist could easily decide to reduce their hours to limit their family AGI to $500,000.  It is also easy to see the benefit of an effort to reduce other income to avoid the SALT phaseout and need to understand the danger of Roth conversions, large capital gains or recognizing other income that results in the SALT reduction.    Software will be helpful trying to precisely define the impact.  

Just Read an Amazing ET Wealth Article🏠 Old Tax Regime vs New: Should Your Home Loan Decide the Switch ❓💡Thought to share you. With Budget 2025 raising the tax-free income limit to ₹12 lakh, the New Tax Regime is looking more attractive — but is it really the best for you, especially if you have a home loan? Here’s a quick breakdown: 🔻 Old Tax Regime ✔️ Offers deductions like: ₹2 lakh on home loan interest (Section 24b) ₹1.5 lakh under Section 80C (for PPF, ELSS, etc.) ✔️ Good if you claim high deductions ✔️ Still preferred by many home loan borrowers BUT many of these tax-saving tools are now not useful for everyone — especially those with fewer deductions or simple tax profiles. 🆕 New Tax Regime ✔️ Lower tax rates ✔️ No deductions needed ✔️ Clean, simple, and now more rewarding if your taxable income is up to ₹12.5L ✔️ Works great for salaried individuals with fewer deductions 🔍 Key Insight: If your deductions are: ✅ High → Old regime may still work better ✅ Low or nil → New regime is likely your best bet 📊 For example, if your income is ₹20L, and deductions are under ₹7.5L, new regime might save you more (see chart ➡️) 🏦 Bonus: Interest on home loans is still allowed under certain conditions in the new regime — especially for let-out property. 🎯 Conclusion: It’s not about which regime is “better” — it’s about what suits your tax situation best. If you’re unsure, consult a tax expert or run a quick comparison. 👇 Let me know in the comments: Which one are you opting for in FY25? #TaxPlanning #FinanceSimplified #Budget2025 #HomeLoan #OldVsNewRegime #LinkedInFinance #PersonalFinance #IndiaBudget #TaxTips

You just got a $40,000 tax break and most people haven’t even noticed. The new SALT deduction cap just quietly jumped from $10K to $40K. For anyone earning under $500K, this isn’t small change… For years, high-tax state earners think California, New York, New Jersey have been capped and crushed. But now? That cap just got blown open. Here’s the math: Let’s say you’re married filing jointly, your Adjusted Gross Income (AGI) is $480,000, and you paid $38,000 in state income and property taxes. • Under the old cap ($10,000), you’d only be able to deduct $10,000 of those taxes on your federal return.    • With the new cap ($40,000), you can deduct your full $38,000 paid.    • At a 37% top bracket, this means your federal taxable income drops by an extra $28,000 ($38,000 minus $10,000), leading to $10,360 in tax savings for your household ($28,000 × 0.37).    • If your itemized deductions (with SALT, mortgage, etc.) now exceed the standard deduction ($31,500 for married joint filers), you’ll actually see this benefit.    𝗥𝗲𝘀𝘂𝗹𝘁: A $10,000+ boost in federal tax savings simply by updating your itemized deduction planning. And if your AGI is under $500,000, you qualify for the full cap. Don’t wait for next April. The playbook just changed, and the tax code just handed middle-to-upper income professionals a rare win.

How will the new tax bill affect philanthropy & DAFs? 👀 You’ve probably heard conflicting takeaways for nonprofits after the “OBBB” was signed into law… Some benefits, many downsides - but the opportunity for fundraisers & DAF providers lies in the timing ⏱️ Here are my predictions on how it will impact different donor types, when & effective strategies to deploy 🔮 1️⃣ Mass Market Donors Most positive achievement is the addition of a universal deduction of up to $1,000 ($2k for a married couple) on top of the standard minimum deduction - starting in 2026 💸 In 2025, an estimated 90% of people won’t itemize (they take the standard minimum) which means they see no actual tax benefit for donations 🤷🏻♀️ In 2026, donations for any supporter can have a tax benefit! 🌟 ➡️ Nonprofits: should more overtly emphasize this in their messaging, & take another look at your tax receipts - maybe add something to educate donors about the new provision? 🧾 ➡️ DAFs: educate your fund holders that they can make a bonus $1k gift outside their DAF each year for added tax benefit ✅ 2️⃣ Wealthy Donors Itemized charitable tax deduction will be capped at 35% of income (roughly, details are complex…) & have a floor of 0.5% in 2026 😕 This could reduce giving from the ultra wealthy (who may have been giving large sums above that 35%) & your mid-level donors who might be donating 4 or 5 figure gifts that get them above the standard minimum, but it doesn’t get above that 0.5% floor on their income 🧊 ➡️ Nonprofits: the time to talk transformative gift planning is right now. If your mega donors had contemplated a larger gift in the near future, they should do it in 2025 while they can still get the full tax benefit ⏳ ➡️ DAFs: Similarly, the year for an outsized DAF contribution is right now. Take advantage of the DAF Day campaign to educate fund holders and prospects on the unique window to take advantage before the law goes into effect 🗓️ You can also promote “bunching” more in 2026 if a fund holder’s typical annual contribution isn’t going to get them above that floor, they can make a one time larger gift to prefund future contributions and get the full benefit in one year 💡 3️⃣ Companies New floor on charitable contributions of 1% of taxable income - this is especially brutal for low margin companies like grocery and retail 🛒 ➡️ Nonprofits: You could suggest bigger outlays this year for multi-year commitments, or the same in 2026 to get them over that 1% threshold 💰 ➡️ DAFs: this is a great driver of more DAF usage by companies - especially as an employee benefit ❤️ Can you allocate more comp / benefit budget to match employee DAF contributions that get you over the 1% floor? 🤔 So much creativity to be had here that drives more giving now and over the long term 🤩 As always consult your advisors, taxes are complicated and the specifics vary for each person’s circumstances 👍 #tax #philanthropy #fundraising #nonprofit

Most high-income professionals overpay in taxes not by a little, but by hundreds of thousands of dollars. And the worst part? Most of them don’t even realize it’s happening I recently worked with an executive who was unknowingly missing out on over $500,000 in potential tax savings. Like many high-income professionals, she assumed her CPA was handling everything. But here’s the problem: 🚫 Most CPAs think backwards, not forwards. They file taxes based on what already happened. 🚫 They don’t integrate financial planning, investments, and tax strategy. 🚫 Some of them miss opportunities that can save you money long-term. How We Fixed It & Saved Her Over $500K ✅ 1. The HSA Strategy – $20K+ in Lifetime Tax Savings She had access to an HSA (Health Savings Account) but wasn’t using it. Why does this matter? 👉🏾HSA contributions are tax-deductible. 👉🏾The money grows tax-free. 👉🏾Withdrawals for medical expenses are tax-free. By fully funding it every year, she’ll save $20,000+ in taxes over her lifetime. But here’s the kicker: we also helped her invest it properly so the account grows instead of just sitting in cash. ✅ 2. The Roth Conversion Strategy – $500K+ in Tax-Free Growth She was anticipating losing her job and had multiple old retirement accounts just sitting there. Instead of letting those accounts stagnate, we saw an opportunity: 👉🏾She was having a low-income year, which meant she could convert $100,000 into a Roth IRA at a lower tax rate. 👉🏾That $100K will now grow tax-free—meaning if it reaches $600K or $700K in retirement, she’ll never pay a cent in taxes on that money. ✅ 3. The Bonus Strategy – Tax-Loss Harvesting We also helped her offset investment gains using tax-loss harvesting, a strategy that allows you to sell underperforming investments and use the losses to reduce your tax bill. By combining these strategies, we helped her: 💰 Save $20K+ in taxes on HSA contributions 💰 Unlock $500K+ of future tax-free income through Roth conversions 💰 Offset capital gains and lower her tax bill through tax-loss harvesting And she almost missed out on all of this because she assumed her CPA was handling everything. If you’re making multiple six figures, but you aren’t actively planning your tax strategy, you’re leaving money on the table plain and simple. The best financial strategies aren’t about making more money they’re about keeping more of what you earn. If you want to see where you might be overpaying, shoot me a message. Let’s make sure you’re taking advantage of every opportunity. P.S See the look on my face…don’t make me have to give you that look because you’re paying more than your fair share in taxes. 😂

7 𝗠𝗔𝗝𝗢𝗥 changes you must know before filing your income tax returns: The Income Tax Dept have updated the Excel Utility for ITR forms. Now to claim below deductions, taxpayers will have to submit additional proofs: 1. HRA (House Rent Allowance) You now need to enter: ✔️ Actual rent paid ✔️ Whether your city is metro or non-metro ✔️ “Place of Work” (new!) ✔️ Complete salary breakup No more blind deductions — details are a must! 2. Section 80C Deductions Investing in PPF, ELSS, ULIPs or Tax-Saver FDs? You’ll now be asked for: ✔️ Policy / Investment Document Number ✔️ Issuer Name ✔️ Investment Type 3. Section 80D (Health Insurance) ✔️ Name of Insurance Provider ✔️ Policy Number Just the premium amount is not enough anymore! 4. Section 80E (Education Loan) If you claimed interest on education loans: ✔️ Mention the lender's name (bank/NBFC) ✔️ Loan sanction date ✔️ Total loan amount ✔️ Remaining balance & interest paid 5. Section 80EE/80EEA (Home Loan Interest) ✔️ Property address ✔️ Lender name ✔️ Sanction date ✔️ Loan number ✔️ Total amount + outstanding amount 6. Section 80EEB (EV Loan Interest) If you bought an electric vehicle on loan, you need to give: ✔️ Loan sanction date ✔️ Lender details ✔️ EV loan amount + interest 7. Section 80DDB (Specified Disease Treatment) You now need to mention the exact disease for which you're claiming the deduction. 📌 Why this matters? These detailed disclosures will reduce fake claims, but also mean extra documentation is needed. If you're salaried or self-employed and planning to DIY your ITR, double-check your deduction proofs in advance. There are more changes expected from Income tax department in ITR 2 and ITR 3. ****** Follow me (Meenal Goel) for more such content. And tell me in the comments is this good or tedious?

I see this all the time → Business owners running personal expenses through their Limited Company, thinking it’s all fair game. Spoiler: It’s not. HMRC isn’t stupid. If you start putting personal costs through the business, you’re setting yourself up for a tax bill (or worse). Here’s what's not a business expense 👇 🚗 Your personal car Unless it’s owned by the company and used only for business. 🏋️♂️ Your gym membership Keeping fit is great, but HMRC doesn’t care about your gains. 🏡 Your mortgage Even if you work from home, this doesn’t count. 🛒 Your Tesco shop  No, “business lunches” don’t include your weekly food shop. 🍕 Saturday night takeaway Even if you talked about work over dinner. This is what happens if you claim these 👇 1️⃣ Extra tax – HMRC can classify them as “benefits in kind” or director’s loan withdrawals, meaning you’ll pay tax on them personally. 2️⃣ Fines & penalties – If they see a pattern, you could face fines or even an investigation. 3️⃣ Messy accounts – Mixing personal and business spending makes tax planning a nightmare. Here's what you can claim 👇 ✅ Office rent, equipment, and supplies. ✅ Business travel and client meals (with actual business purpose). ✅ Staff salaries and subcontractor costs. ✅ Software, advertising, and professional fees. If in doubt, ask yourself: “Would I be spending this if I didn’t run a business?” If the answer is no, it’s probably not a business expense. Your Limited Company isn’t a magic pot of free money. Keep it clean, stay compliant, and don’t give HMRC a reason to come knocking. Got questions? Drop them below or in my DMs :)

𝗪𝗵𝗲𝗻 𝗳𝗶𝗹𝗶𝗻𝗴 𝗙𝗼𝗿𝗺 𝟲𝟳𝟲𝟱, 𝘄𝗵𝗶𝗰𝗵 𝗶𝘀 𝘂𝘀𝗲𝗱 𝘁𝗼 𝗰𝗹𝗮𝗶𝗺 𝘁𝗵𝗲 𝗖𝗿𝗲𝗱𝗶𝘁 𝗳𝗼𝗿 𝗜𝗻𝗰𝗿𝗲𝗮𝘀𝗶𝗻𝗴 𝗥𝗲𝘀𝗲𝗮𝗿𝗰𝗵 𝗔𝗰𝘁𝗶𝘃𝗶𝘁𝗶𝗲𝘀, 𝘁𝗵𝗲𝗿𝗲 𝗮𝗿𝗲 𝘀𝗲𝘃𝗲𝗿𝗮𝗹 𝗶𝗺𝗽𝗼𝗿𝘁𝗮𝗻𝘁 𝗰𝗼𝗻𝘀𝗶𝗱𝗲𝗿𝗮𝘁𝗶𝗼𝗻𝘀 𝘁𝗼 𝗸𝗲𝗲𝗽 𝗶𝗻 𝗺𝗶𝗻𝗱: 𝗖𝗵𝗼𝗼𝘀𝗲 𝘁𝗵𝗲 𝗥𝗶𝗴𝗵𝘁 𝗖𝗿𝗲𝗱𝗶𝘁 𝗖𝗮𝗹𝗰𝘂𝗹𝗮𝘁𝗶𝗼𝗻 𝗠𝗲𝘁𝗵𝗼𝗱: - Regular Credit Method: This method involves calculating 20% of the qualified research expenses (QREs) that exceed a base amount. This base amount can be complex to determine, especially for established businesses. - Alternative Simplified Credit (ASC) Method: This method calculates the credit as 14% of the QREs that exceed 50% of the average QREs for the previous three tax years. It’s often simpler and may be more advantageous for some businesses. 𝗜𝗱𝗲𝗻𝘁𝗶𝗳𝘆 𝗤𝘂𝗮𝗹𝗶𝗳𝗶𝗲𝗱 𝗥𝗲𝘀𝗲𝗮𝗿𝗰𝗵 𝗘𝘅𝗽𝗲𝗻𝘀𝗲𝘀 (𝗤𝗥𝗘𝘀): - Ensure that the expenses meet the criteria for qualified research under Section 41 of the Internal Revenue Code. This includes wages for employees involved in research, supplies used in research, and contract research expenses. 𝗗𝗼𝗰𝘂𝗺𝗲𝗻𝘁𝗮𝘁𝗶𝗼𝗻: - Maintain thorough documentation to support your claims. This includes detailed records of research activities, expenses, and how they meet the IRS requirements. 𝗣𝗮𝘆𝗿𝗼𝗹𝗹 𝗧𝗮𝘅 𝗖𝗿𝗲𝗱𝗶𝘁 𝗘𝗹𝗲𝗰𝘁𝗶𝗼𝗻: - If you are a qualified small business, you can elect to apply a portion of the credit against payroll taxes. This can be particularly beneficial for startups. 𝗔𝗺𝗲𝗻𝗱𝗲𝗱 𝗥𝗲𝘁𝘂𝗿𝗻𝘀: - If you are claiming the credit on an amended return, ensure you provide all required information to validate your claim. 𝗙𝗼𝗿𝗺𝘀: - Need to file Form 6765 to claim the credit. For credit carryover, file form 3800. 𝗖𝗼𝗻𝘀𝘂𝗹𝘁 𝗮 𝗣𝗿𝗼𝗳𝗲𝘀𝘀𝗶𝗼𝗻𝗮𝗹: - Given the complexity of the form and the calculations involved, it may be beneficial to consult with a tax professional or a firm specializing in R&D tax credits. 𝗪𝗼𝘂𝗹𝗱 𝘆𝗼𝘂 𝗹𝗶𝗸𝗲 𝗺𝗼𝗿𝗲 𝗱𝗲𝘁𝗮𝗶𝗹𝗲𝗱 𝗶𝗻𝗳𝗼𝗿𝗺𝗮𝘁𝗶𝗼𝗻 𝗼𝗻 𝗮𝗻𝘆 𝗼𝗳 𝘁𝗵𝗲𝘀𝗲 𝗽𝗼𝗶𝗻𝘁𝘀? For more such content, follow CA. Saahil Mehta