The common legal definition of the term gift is different than the tax application of the term gift. Employers sometimes give an employee a gift to reward past performance or as an incentive for future performances. These sorts of gifts are not tax-deductible as the definition applies to gifts given in respect or admiration, charity or similar impulses. A “de minimis” fringe benefit is a gift given to an employee that is not subject to income tax, but is a tax deduction for business purposes. The Internal Revenue Service definition of a “de minimis” fringe benefit is any property or service which has a value so small that it makes accounting for it unreasonable or administratively impractical after taking into account the frequency with which similar fringes are provided by the employer to employees.

There is the ham, turkey, and gift basket rule that provides for the giving of non-cash holiday gifts. In essence, the IRS allows, flowers, gift baskets, turkeys, hams, and any gift of low fair market value to be given without a tax consequence to the employees. The IRS does not set a specific monetary limit to low market value. The “de minimis” fringe benefit also allows employers to deduct the cost of occasional parties and event tickets without a tax liability to the employees attending. This also goes for picnics, birthdays and the like. The Internal Revenue Service also allows for sporting event and theater tickets to be handed out without counting as an employee’s income. The stipulation on gifts of cash is that they must be reported as part of the employees’ income along with any gifts easily exchanged for cash like stock, bonds, Treasury note, etc. Such gifts would require the employer to pay additional payroll taxes and the employee to treat these gifts as income.

The standard deduction provided by the IRS is adjusted each year for inflation. This is not a bad deduction to use if you cannot use any of the information that is provided in the following paragraphs. When you do apply for additional deductions you need to attach the information to Schedule A of Form 1040. This form should not be feared or you should not think that the IRS will be drawn to your tax return to provide additional scrutiny. The bottom line is that the tax laws allow for deductions and if you have the evidence that you incurred these expenses then you should claim these as deductions. It is surprisingly how quickly the deductions can add up over the 12 month period.

Medical expenses can be claimed as a tax deduction if you have spent over 7.5 % of your adjusted gross income. If you have a young family or if you have had a lot of illness these past 12 months, it is more than certain that you have spent more than 7.5% on medical expenses. When you consider that these expenses include doctor’s fees, hospital fees, drug prescriptions and a number of other expenses the bills will really add up over the 12 month period. The interest you pay on your home mortgage is another deduction if this is your first or second home and you use the home as your main residence. If your home has had damage done to it during the year, like a fire, losing the roof during high winds and other similar major damage you can claim anything above 10% of your gross income. This deduction applies as long as the area in which your home is in has not been declared a disaster area by the US Government.

Donations of money or property to a charitable organisation are another tax deduction. When you donate ensure that you get a receipt from the charitable organisation on the value of your donation. State and local taxes may be deductable for taxes that have been applied to you based on the underlying value of your asset. The asset is usually your property or your vehicle. There are also the standard deductibles you should be looking at such as union dues and tax return preparation expenses. The most important action you must do when claiming deductions is to keep all of your receipts. Your receipts are proof of expenditure, and even if the IRS wants to query any deduction you have the proof. This at the end of the day is all the IRS needs.