The Frugal Duchess: Recovering My Frugal Groove: Uncle Sam’s “Stocking Stuffers:” A Guest Post From a CPA

Thursday, December 20, 2007

Uncle Sam’s “Stocking Stuffers:” A Guest Post From a CPA

Cash gifts to friends? Food bank donations? Those are a few of the year-end tax gift ideas suggested in this guest post prepared by Rosamaria Bravo, partner at Morrison, Brown, Argiz & Farra, one of the largest accounting firms in Florida.

Here's her list of year-end holiday treats with a tax bonus:

"Give to clients (or customers): You can deduct these, but keep in mind that deductions are generally limited to $25 per person.

Give to family and friends: By taking advantage of the Gift Tax Annual Exclusion, you can buy gifts for family members and others (up to $12,000 annually) without any tax implications. Remember to purchase these prior to year end to take advantage of the 2007 exclusion.

Hang on to your receipts: Individuals can deduct either state income taxes or sales taxes incurred from gift buying, under the Sales Tax deduction. Keep receipts of purchases of all the gifts you make to substantiate your claims. In most instances, the actual sales tax paid will exceed the amount calculated using the IRS tables.

Give to your favorite charity: Make charitable contributions before year’s end and you can make the deduction on your 2007 tax return. But remember: the IRS has developed stricter substantiation requirements for charitable deductions. Contributions of $250 or more require a written receipt from the charity, and every cash donation must be supported by a canceled check, credit card receipt or written communication from the charity.

Contribute to your retirement: Consider it a gift to your (future) self! Contributions made to retirement plans are excluded from income, and you can reduce your tax liability by contributing the maximum amounts. 401K (maximum is $15,500) contributions must be made before year’s end, but contributions to other plans can be made after December 31 and still qualify as a 2007 contribution.

Donate to Your Local Food Drive: Not only are you giving to a good cause, but you’re eligible for the Enhanced Charitable Deductions for Contribution of Food Inventory.

Donate Property: Generally, if you donate property with a fair market value lower than your cost basis, you can’t claim a loss. But if you sell the asset and deduct the loss, you can use the proceeds of the sale to then donate as a gift to charity (i.e. Contribution of Property with a Built-in Loss).