Edward A. Lyon, JD
TaxTuneup.com, Inc.
3416 Shaw Ave #5
Cincinnati OH 45208
513.321.2821
elyon@taxtuneup.com
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Uniforms and Work Clothes
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Uniforms and work clothes you buy for your
trade or business are deductible as a
Business Expense on
Schedule
C,
Form 1065, or your corporate return if they're not suitable for street wear.
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Uniforms and work clothes you buy on behalf
of your employer are deductible as an
Employee Business Expense,
subject to the 2% floor on
Miscellaneous
Itemized Deductions, if they are
not suitable for street wear.
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Clothing you buy and wear for
Volunteer
activities (Boy Scout uniforms, etc.), is a deductible
Charitable
Gift.
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Laundry and dry-cleaning expenses for any
deductible clothing are also deductible.
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Laundry and dry-cleaning costs you
pay
for clothing you wear on business travel are a deductible as a
Business Expense or
Employee Business Expense depending on whether you travel for your own
trade or business or for an employer.
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Uniforms you provide for an athletic team
your business sponsors are deductible as an
Advertising expense on
Schedule C, Form 1065, or your corporate return.
The IRS or Tax Court have specifically
approved deductions for airline pilots, baseball players, bus drivers,
firefighters, letter carriers, and nurses. However, the IRS disallowed
deductions for a tennis pro and house painter because both uniforms were
suitable for ordinary street wear.
Union Dues (See
Dues)
Unit Investment Trusts
Unit investment trusts, or UITs, are unmanaged mutual funds. The sponsor packages a portfolio of
securities, then sells pieces to investors. There is no active management;
instead, the UIT expires on a certain date, liquidates, and distributes the
proceeds to the investors. Traditionally, most UITs consisted of municipal
bonds. However, sponsors have recently begun packaging equity UITs,
including technology stocks and the
Dogs of the Dow. And several
sponsors offer UITs that trade like stocks on an established exchange called
Exchange-Traded Funds.
UITs can be a tax-efficient alternative to
open-end mutual funds. Since the manager doesn't buy or sell securities,
there are no ongoing management fees. There also won't be annual capital
gains distributions. If you your units for more than 12 months, your capital
gains will be taxed at lower long-term rates. However, UITs carry loads and
fees than you would pay to buy and hold individual securities. This makes
traditional UITs best suited for smaller investors without enough capital to
economically diversify. You might also consider
Basket Portfolios and
Index Funds.
U.S. Savings Bonds
U.S savings bonds aren't the
world's sexiest investments. But they offer two attractive tax breaks.
First, you can choose to report your interest
income every year or when you redeem the bond. And second, savings bond interest
used to pay for college costs may be tax free depending on your income.
Savings bonds are issued at half of their
face value. The bond's redemption value grows monthly or semiannually
according to tables published by the Treasury. (New bonds issued after April
30, 1997, earn 90% of the average market yield on five-year Treasuries for
the preceding six months.) You can include the annual gain on your tax
return if you choose. Or, you can include your accumulated gain the year you
redeem the bond.
You can change from annual reporting to
deferral, and vice versa. To change from annual reporting to deferral, file
Form 3115 the year you stop reporting annual gain. You have to continue
deferring at least five years following the year of the change. To change
from deferral to annual reporting, simply report the accumulated gain that
year and future gains as they accrue in future years. Savings bond interest
is free from state and local taxes.
If you buy a bond in a child's name and
report the interest annually, the gain in the bond's value may be subject to
the Kiddie Tax. If your kids are reporting interest
annually, and the income grows to the point where they face the tax,
consider changing to deferral reporting until they reach age 19 or 24 and the
Kiddie Tax no longer applies.
Interest on Series EE Savings Bonds issued
after 1989 to an individual who has reached age 24 and redeemed to pay for
college may be partially or fully tax-free. You have to buy the bonds in
your own name, or jointly with your child, and you have to use the proceeds
the year you redeem them for college or vocational tuition and fees. Here's
how it works:
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Reduce your total educational costs by any
tax-free scholarships, benefits from qualified state tuition plans, and
expenses for which you claim the
Hope Scholarship and
Lifetime
Learning tax credits.
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If the redemption amount exceeds the
eligible educational expenses, the tax-free amount equals the percentage
of educational expenses divided by the redemption amount.
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The interest exclusion phases out for
single filers and heads of households with "modified adjusted gross
income" between $67,100 and $82,100 and joint filers with "modified
adjusted gross income" between $100,650 and $130,650 (2008).
Married couples filing separately don't qualify. Modified adjusted gross
income generally equals regular adjusted gross income plus the interest on
the redeemed Savings Bonds and any foreign income excluded from your
income.
Example:
You're a
single mom with a $45,000 income. In 2008 you redeem $8,000 of bonds to
pay for your daughter's college tuition. $3,000 of the redemption is
interest. Your daughter's eligible tuition totals $6,000. $6,000 of
tuition divided by $8,000 of redemption gives you a 75% excludable
percentage. Seventy-five percent of the $3,000 interest is $2,250, so
$2,250 is excludable.
Figure the exclusion on
Form 8815.
United Way
Contributions
Deductible
Charitable Gift.
Unreimbursed Employee Business Expenses
(See Employee Business Expenses)
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