Wall Street Journal: 5 “Quirky” Tax Breaks that Aren’t Going Away

by Joshua on May 9, 2010

In an article by Laura Sanders of the Wall Street Journal, she notes five tax breaks that are here to stay– at least for now.

1. Tax Exemption for Employer-Provided Cellphones and Smartphones. According to the article, a bill containing this exemption was passed by the House of Representatives and is before the Senate now.

2. The “Masters exemption.” Homeowners who rent out their property for 14 or fewer days a year may pocket the income tax-free. This break has given homeowners near the Augusta National Golf club a sweet deal on income over the years, in some cases up to $20,000, from short-term rentals during the Masters tournament each April.

The property doesn’t have to be a first home, but the exemption can be taken only once a year, says CPA Douglas Stives of Monmouth University. It can be taken on more than one property, according to the IRS.

3. Employee awards. Employers can make awards to workers valued as much as $400 a year for good attendance, safe driving, years of service and so on. The criteria must be objective and fair, but the awards aren’t taxable to the employee and are fully deductible by the employer.

4. Gift-tax exclusion. One of the best estate-planning options remains the $13,000 annual gift-tax exclusion. Anyone may give anyone else up to that amount per year in cash or property, free of gift tax. One partner of a married couple can double the gift and the exemption. So a couple with three married children and six grandchildren could give away over $300,000 a year, tax-free.

This provision has some twists. Donors to 529 college-savings plans may bunch up to five years of annual gifts—as President Barack Obama and his wife, Michelle, did for their daughters a few years ago. If circumstances change, the donor can withdraw the money with little or no penalty, says Donald Tobin of Ohio State University.

5. Frequent-flier miles. If you earn frequent-flier miles on a ticket you buy, the miles aren’t taxable. But miles earned for business travel should be, in theory. After a 2002 brouhaha, the IRS said it wouldn’t tax miles unless taxpayers convert them to cash. Ever notice how perks important to Congress escape the tax man’s heavy hand?

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