Tuesday, May 31, 2016


While working on the Schedule C for a GD extension yesterday I was reminded of a major issue concerning a certain business deduction.

According to IRS Publication 463 - Travel, Entertainment, Gift, and Car Expenses (highlight is mine) -

You can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year.

Incidental costs, such as engraving on jewelry, or packaging, insuring, and mailing, are generally not included in determining the cost of a gift for purposes of the $25 limit.”

It seems to me that this $25.00 limit has been around as long as I have been preparing 1040s (and I began in 1972)!

Years ago the IRS began to “index for inflation” tax credits, deductions, exclusions, and phase-outs – but this indexing is selective and not universal.  All credits, deductions, exclusions, and phase-outs are not indexed annually for inflation.  Many deductions have remained the same for decades – for example, in addition to the $25.00 for business gifts, the $3,000 annual maximum capital loss deduction.

To be fair the selectivity of inflation indexing is not the fault of the IRS – but, as with most problems with the mucking fess that is the US Tax Code it is the fault of the idiots in Congress, as the selective indexing for inflation is for the most part statutory.

If any tax returns items are going to be indexed for inflation then ALL tax return items should be indexed for inflation!

So what do you think?


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