In the United States, an engagement ring indicates an engagement between two partners and indicates one's intention to marry later. Because engagement rings are often made of metals and gemstones, the price can range from a few hundred to thousands of dollars to millions of dollars. The possibility of claiming an engagement ring as a tax deduction depends on individual circumstances.
Unfortunately, we have not-so-good news. The engagement ring cost cannot be deducted as a waiver of personal income tax.
When you buy an engagement ring, it is not only a very personal choice, but it is also a personal expense. Although these personal expenses can be expensive, they are not deductible on your tax return. Your personal expenses are those incurred daily that are not related to a business or property that you own.
While it can be much more expensive, in the eyes of the IRS, an engagement ring is no different than a weekly trip to the grocery store or an evening spent in the cinemas. These are discretionary expenses that you incur on a daily basis and for which you cannot claim a tax deduction.
But don't let that stop you from getting that ring. The resulting marriage can significantly reduce your tax exposure. Of course, there are many other emotional benefits, but we can only advise you on IRS issues, not heart issues.
Married Couples Reap Several Tax Benefits
Couples enjoy many tax advantages. These benefits include a change in taxation if you and your spouse have variable income, higher standard exemptions and deductions, higher exclusions on the sale of a home, and the ability to qualify for a purchase if you and your spouse have "insurance" provided by your employers.
While you can incur a huge expense to purchase that beautiful engagement ring this Christmas or on Valentine's Day, Birthday, or any other special day, and the ring itself won't offer any tax benefits, your wedding will likely do the trick. Again, while the cost of your engagement ring isn't a tax deduction, consider the life-changing implications of your taxes.
Buying a ring
If you intend to offer and buy an engagement ring to close the deal, you cannot deduct the cost of the ring from taxes. An engagement ring is considered a capital gain item rather than a household item, so it is not eligible for a deduction.
Donating a ring
You can donate an engagement ring to charity if, for example, your engagement ended without marriage or if you are divorced and no longer wish to keep the ring. In most cases, the donation is a charitable contribution that you can deduct from your tax obligations for the year you donated the ring. However, to claim the donated ring as a tax deduction, the charity must use or sell the ring. Contributions that a charity cannot use are not tax-deductible.
Evaluation
The amount you can deduct from the tax payable depends in part on the value of the ring. Obtaining a certified ring evaluation can help you maximize your tax deduction if the value of the ring has increased since your purchase. The cost of the evaluation is not included in the charitable donation deduction; however, you can deduct the appraisal cost as a miscellaneous deduction.
Conclusion
The IRS allows you to claim the appraisal value of a given engagement ring only if you have owned the ring for more than a year. Otherwise, you can only deduct the purchase price of the ring after you donate it to charity. In addition, if the value of the ring exceeds 50% of your adjusted gross income for the year, you can only deduct the part of the value that is equal to 50% of the adjusted gross income, less the value of any other charitable contribution claimed for the same year.
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Tiffany Gaskin