This last November, the USDA planned to collect a $.15 surcharge on real Christmas tree sales for those that sell 500 or more Christmas trees. Sales in the real Christmas tree industry have been losing market share to fake trees for years. Revenues are down from a high in 2005 of $32.8 million to $27 million last year. The agency was collecting for what would have been a Christmas tree industry marketing campaign aimed at boosting real tree sales.
Outrage over the “Christmas tree tax” prompted the USDA to give Christmas tree consumers a reprieve this holiday season. But, just because Christmas trees are tax free this year doesn’t mean you can’t get tax breaks on some of your other holiday expenses. There are a number of Christmas gift opportunities that can be written off on this year’s taxes.
A Savings Bond
There might be better ways to provide investments for your children. However, government savings bonds are a traditional option for giving your children a “tax-free” savings instrument. I put quotes around “tax-free,” because for most children, interest earned on government savings bonds is tax-free.
Government savings bonds can only be taxed at the Federal level. They also come with an option to defer taxes on interest until redemption or annually as interest accrue. However, since children rarely have additional income, most children can file their taxes, claim the interest earned each year and not owe any income taxes. Once the interest is claimed, it cannot later be taxable when redeemed.
A College Education
Payments into a child’s 529 plan are generally deductible from state income taxes and earnings in the accounts avoid both state and federal income taxes . Sure an education can’t be wrapped, tagged and slapped together with a bow. Well maybe, if you are creative. However, tuition has been increasing faster than inflation for years. They will thank you in the end.
New Work Clothes
Is your spouse wearing an old uniform or clothing required by a job? Give the gift of new work clothes and the tax deduction that comes with it.
For families that itemize, work related clothing purchases are deductible on your taxes. However, there is a challenging standard that needs to be met. The uniform/clothing must be a requirement of your job and it must not be able to be used for everyday use – think of the tights professional wrestlers wear.
A Chevy Volt
You can earn a credit of up to $7,500 for buying an electric vehicle. The Chevy Volt meets the requirements. Of course I don’t sanction car gifting at Christmas as a frugal gift option. However, if you are in the market this holiday season, there are tax breaks.
There are still a number of energy related home improvements that qualify for an energy credit. Windows and doors would be the most aesthetic remodeling option with a maximum savings of $500 for doors and $200 for windows. However, insulation, roofing and energy efficient water heaters are still an option for 2011, but you need to make the purchase before the end of the year.
Own stock? So long as you itemize, there might be a chance that you can deduct the subscription to investing magazines. The IRS allows households to deduct these costs when they own stock and the cost, along with other miscellaneous itemized deductions, exceed 2% of AGI.
Christmas trees are tax free this year, but there are many Christmas gifts you can give your family with tax benefit implications.