Category Archives: D

Deductions

Deductions

Code Sections about Deductions

  • Sec. 67. 2-percent floor on miscellaneous itemized deductions
  • Sec. 68. Overall limitation on itemized deductions
  • Sec. 151. Allowance of deductions for personal exemptions
  • Sec. 161. Allowance of deductions
  • Sec. 211. Allowance of deductions
  • Sec. 241. Allowance of special deductions
  • Sec. 246. Rules applying to deductions for dividends received
  • Sec. 261. General rule for disallowance of deductions
  • Sec. 277. Deductions incurred by certain membership organizations in transactions with members
  • Sec. 464. Limitations on deductions for certain farming
  • Sec. 465. Deductions limited to amount at risk
  • Sec. 470. Limitation on deductions allocable to property used by governments or other tax-exempt entities
  • Sec. 482. Allocation of income and deductions among taxpayers
  • Sec. 642. Special rules for credits and deductions
  • Sec. 671. Trust income, deductions, and credits attributable to grantors and others as substantial owners
  • Sec. 804. Life insurance deductions
  • Sec. 805. General deductions
  • Sec. 809. Reduction in certain deductions of mutual life insurance companies – REPEALED
  • Sec. 873. Deductions
  • Sec. 874. Allowance of deductions and credits
  • Sec. 1358. Allocation of credits, income, and deductions
  • Sec. 2524. Extent of deductions
  • Sec. 3123. Deductions as constructive payments
  • Sec. 3307. Deductions as constructive payments
  • Sec. 6034. Returns by trusts described in section 4947(a)(2) or claiming charitable deductions under section 642(c)
  • Some Content about Deductions

  • Alimony Paid
  • Autos, Computers, Electronic Devices (Listed Property) (IRS FAQ)
  • Bad Debt Deduction
  • Business Entertainment Expenses
  • Business Travel Expenses
  • Business Use of Car
  • Business Use of Home
  • Business Use of Home – Is It Deductible?
  • Car Donations
  • Casualty and Theft Losses
  • Casualty, Disaster, and Theft Losses
  • Clean-Fuel Deduction
  • Contributions
  • Contributions (IRS FAQ)
  • Contributions of Motor Vehicles, Boats, and Airplanes
  • Deductible Taxes
  • Deducting a Sec. 754 Depreciation Adjustment
  • Domestic Production Activities Deduction
  • Education & Work-Related Expenses (IRS FAQ)
  • Educational Expenses
  • Educator Expense Deduction
  • Employee Business Expenses
  • Equitable or Beneficial Ownership
  • Gifts & Charitable Contributions (IRS FAQ)
  • Home Mortgage Points
  • Home Office Expenses of a One-Man Corporation
  • Individual Retirement Arrangements (IRAs)
  • Interest Expense
  • Interest, Investment, Money Transactions (Alimony, Bad Debts, Applicable Federal Interest Rate, Gambling, Legal Fees, Loans, etc.) (IRS FAQ)
  • Meals
  • Medical and Dental Expenses
  • Medical, Nursing Home, Special Care Expenses (IRS FAQ)
  • Miscellaneous Expenses
  • Mortgage Interest Deduction on Sale of Second Home Held for Investment Purposes
  • Moving Expenses
  • Other Deduction Questions (IRS FAQ)
  • Partner Section 179 Expense Deduction
  • Points Paid by Seller
  • Real Estate (Taxes, Mortgage Interest, Points, Other Property Expenses) (IRS FAQ)
  • Sales Tax Deduction – Optional Table Method
  • Should I Itemize?
  • State Deductions (CA – NOL Deductions Suspended then Reinstated and PA – Section 179 Deduction)
  • Student Loan Interest Deduction
  • Tax Shelters
  • Tuition and Fees Deduction
  • Description and Definition of Deductions

    Items that directly reduce taxable income. Deductions such as alimony, capital losses, moving expenses, business losses, and deductible IRA and Keogh contributions can offset gross income even if you don't have enough deductions to itemize. Personal expenses such as medical costs, mortgage interest, state and local taxes, employee business expenses, and charitable contributions are deductible only if you itemize your deductions. All taxpayers may claim a standard deduction. If your qualifying expenses exceed your standard deduction, you may claim the higher amount by itemizing your deductions. Although no records are needed to back up your right to the standard deduction, you must maintain records of qualifying expenditures if you itemize.

    Section 179 Deductions Issue

    You may find information about Section 179 Deductions in this Tax Platform of the American Encyclopedia of Law.

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    Disposition

    Disposition

    Disposition means:
    a transaction, such as a sale, that gives rise to a gain or loss under Former IRC (check if this IRC provision is current here) §1001.

    Disposable Earnings and California Tax

    For more information about taxes in California, click here.

    Description and Definition of Disposition

    The sale, exchange, or other disposition of property that causes a gain or a loss. Dispositions include like-kind exchanges and involuntary conversions.

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    Defined-contribution Plan

    Defined-contribution Plan

    Defined-contribution Plan means:
    a deferred retirement plan that provides a separate account for each person covered by the plan; contrast with the entry with defined-benefit pension plan. Future benefits are based only on amounts contributed to or allocated to each account. Types of defined-contribution plans include profit-sharing plans, and stock bonus plans. For plan years after 1986, the annual addition under a defined-contribution plan is limited to the lesser of $30,000 or 25% of compensation for the year. This limit is tied to the dollar limit for defined-benefit plans, as adjusted by cost-of-living adjustments. The annual addition includes items such as employer contributions and certain employee contributions. Former IRC (check if this IRC provision is current here) §§4l4(i) and 415(c).

    Description and Definition of Defined Contribution Plan

    A retirement plan of which the contributions are based upon a specific amount or formula. Contributions are generally based on a percentage of salary or earned income.

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    Dependent

    Dependent

    Dependent means:
    any person with respect to whom a taxpayer can claim a dependency exemption; defined by the Internal Revenue Code as any individual supported by the taxpayer who is related to the taxpayer in specified ways or who makes his principal abode in the taxpayer’s household. A qualifying child or qualifying relative, other than the taxpayer or spouse, who entitles the taxpayer to claim a dependency exemption. Six tests must be met:

    • support
    • relationship or household membership the entire year
    • gross income
    • joint return
    • citizenship or residency
    • legal relationship.

    The amount of the dependency exemption is indexed for inflation each year (e.g., in 1994 the amount was $2,450). Former IRC (check if this IRC provision is current here) §152. For Dependent Agent, see Agency.

    In other words, someone the taxpayer support and can claim a dependency exemption on his or her tax return. For each dependent the taxpayer claim the taxpayer subtract an exemption amount from his or her taxable income.

    Dependent Tax Issues

    Adopting a Child

    Learn about the Adopting a Child issue in this American Tax Encyclopedia.

    Adoption Taxpayer Identification Number (ATIN)

    Learn about the Adoption Taxpayer Identification Number (ATIN) issue in this American Tax Encyclopedia.

    Adoption Tax Credit

    Learn about the Adoption Tax Credit issue in this American Tax Encyclopedia.

    American Opportunity Tax Credit

    Learn about the American Opportunity Tax Credit issue in this American Tax Encyclopedia.

    Child and Dependant Care Tax Credit

    Learn about the Child and Dependant Care Tax Credit issue in this American Tax Encyclopedia.

    Child Tax Credit

    Learn about the Child Tax Credit issue in this American Tax Encyclopedia.

    Children’s Tax Returns and “Kiddie Tax”

    Learn about the Children’s Tax Returns and “Kiddie Tax” issue in this American Tax Encyclopedia.

    Child Support Payment Tax Deductions

    Learn about the Child Support Payment Tax Deductions issue in this American Tax Encyclopedia.

    Earned Income Tax Credit

    Learn about the Earned Income Tax Credit issue in this American Tax Encyclopedia.

    Education IRAs

    Learn about the Education IRAs issue in this American Tax Encyclopedia.

    Lifetime Learning Tax Credit

    Learn about the Lifetime Learning Tax Credit issue in this American Tax Encyclopedia.

    Qualified Tuition Programs

    Learn about the Qualified Tuition Programs issue in this American Tax Encyclopedia.

    Student Loan Interest Tax Deductions

    Learn about the Student Loan Interest Tax Deductions issue in this American Tax Encyclopedia.

    Student Tax Returns

    Learn about the Student Tax Returns issue in this American Tax Encyclopedia.

    US Savings Bond Tuition Plans

    Learn about the US Savings Bond Tuition Plans issue in this American Tax Encyclopedia.

    Description and Definition of Dependent

    A person who relies on someone else for financial support. You can claim a dependency exemption on your tax return for each dependent who qualifies. To qualify the dependent must meet all five of the following tests:

    Relationship or member of household test

    Citizenship test

    Joint return test

    Gross income test

    Support test

    Each dependent under age 17 also qualifies his or her parent for a $500 tax credit.

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    Direct Transfer

    Direct Transfer

    Description and Definition of Direct Transfer

    A method of moving funds directly from one retirement plan to another. With a direct transfer, you order one sponsor to transfer the funds directly to the other sponsor – you do not take possession of the funds. There is no limit on the number of times you can move your money via direct transfer. The direct transfer method must be used to move funds from a company retirement plan to an IRA, otherwise 20% of the money withdrawn from the company plan will be withheld and paid to the IRS, even if no taxes are due.

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    Dual-status Taxpayer

    Dual-status Taxpayer

    Dual-status Taxpayer means:
    an alien who is both a nonresident alien and a resident alien during the same tax year.

    Description and Definition of Dual-Status Taxpayer

    An alien who is a resident part of the tax year and a non-resident the other part of the tax year.

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    Depletion

    Depletion

    Depletion means:
    the process whereby the cost or other basis of a natural resource (such as a coal interest) is recovered upon the extraction and sale of the deposit. Method used to recover the cost of assets that diminish over time, such as oil, gas, and other natural resources. There are two ways of determining the depletion allowance: (1) cost and (2) percentage. Under the cost approach, the cost or other basis is divided by the total units expected to be recovered. Under the percentage approach, the tax law provides a special percentage factor for different types of natural resources. The applicable percentage is multiplied by the gross income from the mineral interest to arrive at the percentage allowance. Only certain oil and gas small producers (e.g., independent producers) may use percentage depletion, and percentage depletion may not exceed 50% of the taxable income from the property before the allowance for depletion. See also percentage depletion method. Former IRC (check if this IRC provision is current here) §§6l 1-617.

    Description and Definition of Depletion

    A deduction claimed for the use of timber or mineral resources, including oil and gas, because the resources are being depleted over time.

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    Deferred Compensation

    Deferred Compensation

    Deferred Compensation means:
    a plan under whose terms an employee defers payment of a portion of salary in return for the employer's promise to pay the employee the salary at some time in the future. Deferred compensation is common in the sports and entertainment industries. Former IRC (check if this IRC provision is current here) §401.See rabbi trust; secular trust.

    Description and Definition of Deferred Compensation

    A portion of earnings withheld by an employer or put into a retirement plan for distribution to the employee at a later date. If certain legal requirements are met, you do not pay tax on qualified deferred compensation until you receive the distributions.

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