Talk:Tax deduction

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[edit] Primary residence

What does it take to have a home be a primary residence

In the US, you have to own and use the house, living there a majority of the time. If there is doubt, the IRS apparently has some rules; if you get your mail there, have your car registered there, vote there, and you bank there and hang out there, then it's your primary residence. An article at [1] talks about a couple who were ruled to have no primary residence at all, in the IRS's opinion. —Preceding unsigned comment added by Tempshill (talk • contribs) on 19 February 2005.

[edit] Depletion allowance

The red link for "oil depletion allowance" should probably be changed since royalties also are subject to depletion allowances; hence we can knockout two birds with one stone by starting the articcle to cover both. Depletion allowance is already listed as a missing article.[2] On royalty depletions, see http://www.irs.gov/publications/p535/ch10.html Have Gun, Will Travel 20:38, 7 February 2007 (UTC)

Dear Have Gun, Will Travel: Yes, at least in the United States the term "depletion allowance" refers to a deduction allowable against certain kinds of royalty income or income from the production of natural resources, especially oil and gas royalties (also other stuff like uranium, sulphur, etc.). At least with respect to the term "depletion allowance" as used in U.S. Federal income tax law, if you decide to begin an article on the subject you may want to distinguish the two kinds: cost depletion and percentage depletion. The basic statutes are 26 U.S.C. § 611 (covering basic provisions); 26 U.S.C. § 612 (cost depletion); 26 U.S.C. § 613 (percentage depletion); and 26 U.S.C. § 613A (percentage depletion on oil & gas production, etc.), all the way through to about 26 U.S.C. § 617.
Depletion allowance deductions on individual income tax returns are perhaps relatively more common where you have independent production of oil and gas, as in Oklahoma, Louisiana and Texas (where I am), than in places where no mining of natural resources takes place. Yours, Famspear 20:56, 7 February 2007 (UTC)
Thanks. The starting point is probably Royalties to make a clear distinction between copyright, patent, and resource royalties. May need help with that. Have Gun, Will Travel 22:57, 7 February 2007 (UTC)
Found it. Tax depletion. Have Gun, Will Travel 03:35, 8 February 2007 (UTC)

[edit] Needs work

I've made a few changes regarding U.S. Federal income taxation. I've realized that I have never really read this article carefully all the way through. Some of the statements were incorrect, and others somewhat misleading.

The subject of tax deductions for U.S. Federal income taxation purposes is highly complex. Blanket statements tend to be problematic. Famspear 22:11, 9 September 2007 (UTC)

[edit] Example question

Quick question... I'm a little confused on this example, which contradicts the first example. I'm not sure if it is the difference with U.S. law or if it is just incorrect. Here is the example given:

As an example, if a person's highest portion of taxable income is taxed at 25% (progressive scale from 10 to 35 percent), then a $1,000 charitable contribution will result in a reduced tax bill of $250 (25% of the contribution). E.g., if a taxpayer would otherwise have owed the federal government $3,250 in income taxes; the new tax bill would be $3,000. As a second example, if a person was charged an early withdrawal penalty of $1000 for breaking a banking certificate of deposit (CD) before maturity, and that person's highest taxable income was in the 35% bracket, then the deduction would reduce the overall tax bill by $350.

Taking the first part of this example, it is applying the 25% rate to the post-tax donation of $1,000 for a return of $250. However, $1,330 was earned to make a $1000 donation ($1000 being a 25% rate applied to $1,330). So should the return actually be $330 and not $250? Is it the income required to make a $1000 donation (pre-tax) or post-tax deduction from income? In the first example using a flat rate of 33%, $600 was equal to an untaxed $900 (a 33% rate applied to $900), and not equal to $798 (a 33% rate applied to $600 post-tax). Morphh (talk) 14:28, 29 October 2007 (UTC)

I think the $1,000 is the pre-tax donation. The donor gets the tax benefit so the net amount he spends on the gift is $750.--Patrick 15:23, 29 October 2007 (UTC)

[edit] Invalid USC reference

The reference for the third bullet point under Tax deduction#United States:

“ Qualified mortgage insurance premiums that are treated as qualified residence interest expense, for certain home loans, for mortgage insurance contracts issued on or after January 1, 2007 ”

References 26 U.S.C. § 163(h)(3)(E)(i) doesn't exist. Cburnett (talk) 04:07, 15 February 2008 (UTC)

Dear editor Cburnett: Well, section 163(h)(3)(E)(i) does exist - it's just that the Cornell Law School website version of the US code has not yet been updated to reflect the latest changes in section 163. Here is the exact text, from title 26, USC section 163, subsection (h), paragraph (3), subparagraph (E) (reproduced here only in part):
(E) MORTGAGE INSURANCE PREMIUMS TREATED AS INTEREST. --
(i) IN GENERAL. --Premiums paid or accrued for qualified mortgage insurance by a taxpayer during the taxable year in connection with acquisition indebtedness with respect to a qualified residence of the taxpayer shall be treated for purposes of this section as interest which is qualified residence interest.
The above is from the online CCH Internet Tax Research website. Unfortunately, to get the very latest version of a statute like this online without going to a law library, you may have to have an expensive subscription to an online service like CCH, Lexis, Westlaw, or RIA Thomson. The Cornell web site is good if you don't need the very latest version, or you don't need to see all the earlier versions. For example, CCH online shows essentially every change in every section of the Internal Revenue Code since August of 1954 -- a massive amount of verbiage.
What I have been doing when I run across this problem in tax-related Wikipedia articles is to add a notation to the effect that the Cornell web site has not yet been updated for this particular provision. I'll add a notation in the article. Yours, Famspear (talk) 15:16, 15 February 2008 (UTC)
OK, I have added the explanation to the footnote. The other option is simply to remove the link, wait for Cornell to update its web site, then re-add the link. I'm not sure which option is better. Famspear (talk) 15:20, 15 February 2008 (UTC)

[edit] Canada

Tax deductions are listed for US, UK and Australia, I was wondering if anyone familiar with Canadian tax laws and appropriate conditions might detail its distinct features and differences from the others for those who are interested. Tyciol (talk) 07:50, 2 March 2008 (UTC)

You may want to post this request to the Taxation in Canada talk as well. It is more likely editors that are familiar with those tax laws would be watching that particular article. Morphh (talk) 13:15, 02 March 2008 (UTC)