'What if' questions on deductions
Q. What's the rule in these tax situations?
As an accountant, you charge clients $75 an hour. To help your church's meals-for-the-elderly program, you devote two hours a week to managing its finances. An alternative bookkeeper could be hired for $50 an hour. How much can you deduct as a charitable donation?
A. Zilch. You can't deduct the value of your time as a donation.
Q. You have supported your wife's disabled brother as a family dependent. But now you plan to divorce. If you maintain the support, can you still claim your ex's brother as a dependent?
A. Once an in-law, always an in-law. As long as you continue the support, he can still be your dependent as a family member.
Q. For the first three months of the year, you participated in a 401(k) at your former employer. Your income bars you from contributing to both a 401(k) and a tax-deductible IRA, but your new employer doesn't have a 401(k). How much of 2009's maximum IRA deposit of $5,000 (or $6,000 if 50 or older) can you make to a deductible IRA the rest of the year?
A. Nothing. Being eligible for an employer retirement plan for part of the year can disqualify you from a deductible IRA later in the year. You might, though, qualify for a nondeductible Roth IRA if, for example, your income is below $120,000 on a single return or $176,000 on a joint one.
Q. When taking a new job out of state, you move first into a temporary apartment and have your family follow later after the kids have finished their school term. Your wife comes out twice beforehand to house hunt. Are the trips deductible?
A. The travel costs of the move, if not reimbursed by your new boss, are deductible even if you and your family move at different times - but not meals along the way. House hunting trips are not deductible.
Q. Your ailing uncle says marijuana helps ease his medical condition and has moved to California, one of the states that allow prescriptions for medically used marijuana. If he qualifies to deduct medical expenses, can he include the marijuana?
A. The Feds don't go along with "legal" marijuana, so it's not deductible.
Q. You legitimately deduct your car as a business expense, but when a meeting you drove to ran longer than expected, you got a $30 parking ticket. Since you honestly didn't expect the meeting to last so long and it would have been embarrassing to step away, can you deduct the ticket?
A. Sorry. Tickets and traffic fines are not deductible despite extenuating circumstances.
