Posted by John Pournaras Agency

What’s Santa Claus’ Secret To Saving Taxes?

What’s Santa Claus’ Secret To Saving Taxes?

Santa Claus exists - of course - you see him everywhere during Christmas Season so he is indeed real. But did you know that even he must pay taxes? 

The Santa Claus you see in shopping malls and at holiday parties are paid and are taxpayers. And, just like the rest of us, can take advantage of some tax benefits that can lower their tax liability and increase their tax refund.

Santa will get a W-2 that contains his income for that holiday season job he had at the mall. The form 1099, on the other hand, is given Santa if he makes a variety of personal appearances at holiday parties and other related events and if he works for a business that manages his appearances. He might also get a check sometimes. Santa’s work is considered done as a freelancer or contractor if he’s given a 1099 or a check. Some of his supplies can even be tax-deductible.

For the purpose of taxes, businesses expenses that are potentially eligible are seen as ordinary and necessary costs of doing business. If these expenses are not reimbursable by the employer, they will be claimed by employees as miscellaneous itemized deductions for the tax year 2017. They are deductible to the point they are higher than 2 [ercent of adjusted gross income. It’s a different story for business owners and taxpayers who are working as freelancers and contractors. They are not limited on how much of these eligible expenses they can deduct.

In order to become real-life Santa, these taxpayers will have to look like Santa (think the wearing of suit and beard) and know how to “ho ho ho!” (or go through a little bit of training). However, expenses can only become potential tax deductions if they passed with some specific rules. That information will also be able to help non-Santas (other people) who purchase things for their jobs. 

To help taxpayers determine if what they purchased for work qualifies as a tax deduction, take a look at the following questions and answers. Santa can deduct the following expenses on his tax return:

  • Santa doesn’t want to be a boring and ordinary Santa, he wants to be better, so he went to a training facility that trains Santas: Yes, the expenses incurred to train for a job is an eligible expense.
  • Santa bought costumes for himself and his elves (his helpers) to wear at work: Yes, materials used for a job are an eligible expense.
  • Santa purchased a belt adorned with jingle bells on it to go along with his new Santa suit: If the belt was ordinary and didn’t have any bells attached to it, it won’t be an eligible expense because it could be used for other purposes not work-related. But since Santa had the bells on his belt, then yes, it is an eligible expense.
  • Santa noticed his hair is going gray so he decided to get his hair silvery-white for the holiday season: No, this is not considered as an eligible expense because the hairstyle is not being solely used for his work as Santa.
  • Santa is having trouble with his car tires so he decided to buy new ones. The car is used to reach his destination where the venue of his Santa jobs are: No, it’s not possible to have the full cost of the tires deducted. In order for the expense to be fully tax-deductible, Santa must use a vehicle only for business purposes only. Although the mileage from one business location to another can be deducted.
  • Santa stopped by a fast-food chain because he got hungry on the home from a party he worked 10 minutes away from his home: No, this cannot be deducted.
  • Santa had a job at four big parties in a city that will take 3 hours to drive from his home: Yes, as long as the main purpose of the trip is for business transportation, meals, and other expenses may be considered as eligible expenses.

To better understand what temporary employment tax deductions and their tax situation are, Santa or any taxpayer can consult a tax professional that can help with filing a correct and complete tax return.

John Pournaras Agency
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