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Old 02-11-2008, 05:18 PM   #1  
Che Guevara
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Exclamation Lets talk deductions

It's that time of year again so lets talk about taxes. I've already heard several people in the crew rooms etc. making the huge mistake of saying "I'm just going to take the standardized deduction because I won't go over that amount". If you're flying 121 and aren't home based then this is already a false statement. I showed them some examples of what you can deduct and they soon realized how much you really can save. I'm not promoting something because I have anything to gain from it but you need to try Ez perdiem. It's very easy to use and takes only a short amount of time.

It's true you can't deduct per diem since you weren't taxed on it to start with however you can deduct the difference. IE: You get $30 of per diem from your company while you overnight in LGA but the government per diem rate for LGA is $64. Now you can deduct the difference.

So $34 you don't pay taxes on. The captain I was flying with on this last trip was one of the ones saying he'd just take the standard deduction. I told him he wasn't maximizing his money back so when we had a 3hr sit we went through some numbers. Within about 45 min we had all of his per diem figured out. He was around $7.5K in govt. per diem yet only received around $4k from the company. That was an instant $3.5k he is able to write off. So within 45min he just saved himself a little over $1k.

I'm no accountant so hopefully others can add to the list but there are other things many seem to overlook when doing their taxes.

1. If you've already paid tax on it once you don't have to pay taxes on it a second time.

--Keep every receipt of everything you buy. I shove them in the top of my suitcase. When I get home I put them in a box until its tax time. You can deduct ALL sales tax on items. Doesn't matter if it's $.50 on a 12 pack of sodas or $2k on a purchased car. Sure that receipt might only show $.25 of sales tax but it only takes a second to punch in the calculator and it does add up VERY fast.

2. Pull your credit card statements, student loans, mortgages, auto loans, etc.***Special conditions apply***

See:http://www.smartmoney.com/debt/advic...tory=debttaxes
How to deduct student loans:
http://www.irs.gov/taxtopics/tc456.html
Deducting Interest Expense:
http://www.irs.gov/taxtopics/tc505.html

Take the time to check and see if meet the criteria to take advantage of these valuable deductions.


3. Get all your bills. If you've already paid taxes, which you have, on your bills then make sure you deduct that amount.

--On my cingular bill I get $10.94 in government fees and taxes. That's $131.38 I deduct or roughly $45.98 I don't have to cough up in taxes. Now take a look at water, electric, gas, cable, etc.

4. Deduct what's required for your job.

--Haircuts, clothes, union dues, bags, headsets etc.

5. Depreciation of your vehicle.

--Take the time to go look at how many miles you have on your vehicle. Use TurboTax to plug these numbers in. It will take into account the vehicle type, age, and mileage.

6. Donated items

--Have an old junk computer laying around? Might be junk to you because its hard drive is small or doesn't have the performance to run the "latest and greatest" software but that doesn't mean it can't be used elsewhere. Most people just use a desktop for a few years then "upgrade" by purchasing a new one. Instead of letting an old PC collect dust take a little time to clean it up and take it to a non-profit group. My college desktop, which was 6yrs old, received a $300 deduction since I donated it to the Boys and Girls club. You can donate just about anything. Moving and don't want to lug everything around? You can take your old beds, dressers, TVs, chairs, couches, appliances, etc. to your local non-profit organization. I didn't want to have to rent a storage room so I took several items to a local non-profit group I had found, community service , that sells the items and uses the money to help animals. The amount I'll save in deductions will probably be higher than had I actually gone through the trouble of selling the items on my own.



That's all I have for now. I'm sure once I start running through my taxes I'll come across all sorts of additional things. I'd also like others to respond with any addons. I want to make sure I do everything I can.

Tax evasion is illegal, tax avoidance isn't Those loopholes exist for a reason.

Few questions I have for someone that might be an actual accountant. I've been looking around but haven't found anything yet.

--When hired by my new company, RAH, we were paid $400 per week during training. The $400 was tax free. Can I find the govt rate for Houston/Indy and deduct the difference?

--Prior to this year I was self employed. I was able to deduct the $.48 per mile(maybe it was $.52). Now since I'm working for RAH I can no longer act as a contractor and deduct my mileage. However, may I deduct the taxes on the fuel I purchase? The Oil companies are not the only ones making record amounts money. The US govt puts an average of $.47 of tax per gallon of gas. Since I obviously paid the tax pulling it out of the pump I figure the same rule applies as on sales tax; you don't have to pay tax on a tax. The government actually makes more on oil than the oil companies do. From 1977-2004 the major oil companies have posted $643 billion in profit. The US govt during that same time period made $1,343.1 billion

Last edited by ToiletDuck; 02-11-2008 at 09:03 PM.
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Old 02-11-2008, 07:40 PM   #2  
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Good post! Lots of good ideas for us young people who have never made enough money to care about taxes until now.
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Old 02-11-2008, 08:22 PM   #3  
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Are you seriously saying that you deduct your haircuts and the interest on your car loan and credit cards?

I'm no accountant, but hmmmmm

Good luck on the audit, dude.
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Old 02-11-2008, 08:28 PM   #4  
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"Student loan interest is partially tax deductible on your tax return and personal interest, which includes interest paid on car loans, credit cards, and personal loans, is not tax deductible at all on your tax return."

From http://www.wwwebtax.com/deductions_i...deductions.htm

Be careful following tax advice from random dudes on internet forums.
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Old 02-11-2008, 08:56 PM   #5  
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Quote:
Originally Posted by TBoneF15 View Post
"Student loan interest is partially tax deductible on your tax return and personal interest, which includes interest paid on car loans, credit cards, and personal loans, is not tax deductible at all on your tax return."

From http://www.wwwebtax.com/deductions_i...deductions.htm

Be careful following tax advice from random dudes on internet forums.
I did some digging and you're right! I asked my accountant and was told I was able to because I had/have my own business and the truck I purchased was for that. I also have an Amex I use for all my business related purchases which is what I deducted any interest off. Thanks for speaking up. As I said I'm not an accountant so I'm sure there are holes. If anyone finds anymore let me know and I'll patch them up.

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Old 02-11-2008, 08:58 PM   #6  
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Quote:
Originally Posted by TBoneF15 View Post
Are you seriously saying that you deduct your haircuts and the interest on your car loan and credit cards?

I'm no accountant, but hmmmmm

Good luck on the audit, dude.
I should note that yes I do deduct haircuts, shoe shines, uniforms, etc. I'm required to look professional for my job and so these apply. It's part of the "2% haircut" ruling. You can deduct these amounts over a certain amount in the "Miscellaneous itemized deductions" column.

Quote:
As the Two-Percent Haircut is a floor threshold for deducting miscellaneous itemized deductions, a taxpayer's deductions must exceed two-percent of the taxpayers adjusted gross income.

For example, suppose a taxpayer in Year One has an adjusted gross income of $100,000. Two percent of the adjusted gross income is $2,000. To be able to deduct miscellaneous itemized deductions in calculating taxable income, the taxpayer's miscellaneous itemized deductions must exceed $2,000. If the taxpayer has miscellaneous itemized deductions of $5,000, the taxpayer may deduct $3,000 ($5,000-$2,000=$3,000). If the taxpayer has miscellaneous itemized deductions of only $1,000, the taxpayer will not be able to deduct anything because their deductions do not exceed the $2,000 (2%) floor.

Last edited by ToiletDuck; 02-11-2008 at 09:12 PM.
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Old 02-11-2008, 09:09 PM   #7  
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"A commercial airline pilot represented himself in Tax Court after the IRS disallowed a deduction for haircuts and shoe shines. He lost the point on the haircuts, but the Court ruled that shoe shines were part of the cost of keeping up a uniform, which is a deductible expense."

From Forbes.
http://www.forbes.com/2001/03/06/0306finance.html

Again, have fun with the audit.
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Old 02-11-2008, 09:21 PM   #8  
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Hey I'm required to get it I'm gonna do it. If I were to let my hair grow to my shoulders the company would make me get it cut. It's part of our written standards and is deductible. I have no problem putting it down, have for years, and if they audit me then I'll challenge it, and if I lose then I'll fork over the money. Till then it stays in my pockets earning interest. Just because some guy 7yrs ago couldn't make the case doesn't mean the court was right. Police officers, military, as well as several other professions where it's stated they must maintain grooming, or any other numerous ways it's worded, can deduct it. If I can get fired for not cutting it then it's deductable. I'll ask the IRS tomorrow to find where they draw the line.

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Old 02-11-2008, 09:53 PM   #9  
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Nice Wikipedia quote, but the 2% haircut ruling does NOT LITERALLY MEAN YOU CAN DEDUCT HAIRCUTS. Nor does the 50% haircut ruling. Read up on it. It has nothing to do with actual haircuts. Read your own quote above. It just has to do with levels of deductions. Why they named it that, I have no idea. I'm a pilot, not an accountant or a lawmaker.

I'm not trying to get into a p*ssing contest with you dude. Deduct whatever you want. I just don't want any other dudes getting into tax trouble off your advice, all over trying to save 20 bucks in taxes for the year. Sorry man.

Not getting audited.
T-Bone

Straight from the Justice Department
"According to the complaint, Moser falsely advises military customers that they can claim tax deductions for non-deductible personal expenses such as haircuts, cell-phone and Internet services, and other personal items and services."
From:http://www.usdoj.gov/opa/pr/2005/April/05_tax_191.htm

From the Army, where I'm nearly sure they REQUIRE you to get haircuts:
"If you itemize, you usually cannot deduct the expenses for...upkeep, such as haircuts"
From: http://www.usma.edu/PublicAffairs/PV/020118/MLaw.htm

From an accountant: "Several clients include the cost of suits, haircuts and shoe shines on their list of employee business expenses ("my boss requires me to wear a suit to work each day" or "if it weren't for my job I would let my hair grow"). Of course I totally ignore these items."
From: http://www.helium.com/tm/486978/thos...entshl-mencken

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Old 02-11-2008, 10:13 PM   #10  
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Duck, I would temper the enthusiasm a bit, although I know you sometimes find that difficult to do. Going to Tax Court is almost as painful as going to Superior Court. You’ll have to take time off from work and likely have to hire a tax attorney to help you. This is not traffic court.

You are not incorrect in many of your deductible items. Regarding deducting sales tax on gasoline, however, the IRS is clear that it is not deductible. Under the section of Taxes You Paid, it lists the following taxes as ones you cannot deduct: federal income and excise taxes; social security, Medicare, federal unemployment and railroad retirement taxes; customs duties; Federal estate and gift taxes; certain state and local taxes, including: tax on gasoline, car inspection fees, assessments for sidewalks, or other improvements to your property, tax you paid for someone else, and license fees (marriage, driver’s, dog, etc).

Regarding job related expenses, the IRS gives guidance as to what is deductible on Line 21 of Schedule A: safety equipment, small tools, and supplies needed for your job; uniforms required by your employer that are not suitable for ordinary wear; protective clothing required in your work such as hard hats, safety shoes and glasses; physical examinations required by your employer; dues to professional organizations and chambers of commerce; subscriptions to professional journals; fees to employment agencies and other costs to look for a new job in your present occupation, even if you not get a new job; certain business use of part of your home; and certain educational expenses. I would caution your haircut deduction.

For educational expenses, they can be listed on Form 1040, line 34 or go through the gyrations of the Hope Credit and /or Lifetime Learning Credit on Form 8863. Note that the Hope Credit is only for the first two years of schooling in an institution of higher learning. I doubt Johnny’s Flying Club to get your PPL falls under this criteria.

You yourself brought up the 2% rule. Depending on your AGI, it may or may not be difficult to overcome this rule. Everyone has to run the numbers themselves. Usually, what allows you to use the itemized deduction rather than the standard deduction is owning a home where you can deduct mortgage interest, points, and now mortgage insurance interest, as well as real estate taxes. Most of the other deductions are pretty much “chump change.”

Again, just so everyone knows – I am not a tax attorney, only an old legal aid lawyer who has gone to court (not tax court) with many members of the working poor who try to be a little too creative sometimes. Some things in life are worth doing, but many are not. Trying to game the system is one of the nots.
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