Deductions

Dear Liz: My two brothers have taken over managing my 81-year-old mother's two rental properties. They have told her that a ski vacation she paid for, which she took with their families, is a business deduction. Same with many other credit card purchases. Are they putting my mother at risk? Two other brothers have gotten a lot of heat for charging ski vacations to the company credit card. Their names are Mark and Andrew, and their dad's name is Bernie Madoff. Ring a bell? It is possible to combine a vacation with a business trip and deduct some of your own expenses.

For those in preemptive mourning for Fox's Sherlock Holmes-inspired "House,"which comes to an end later this month, a bit of comfort: Season 2 of "Sherlock,"the BBC's flirty but still faithful contemporary rendition of the unforgettable detective, begins on PBS' "Masterpiece Mystery" Sunday night. As reimagined by British TV maestro Steven Moffat ("Doctor Who," "Jekyll") and Mark Gatiss ("Doctor Who"), this Sherlock, played with aquamarine and alabaster radiance by Benedict Cumberbatch, is a London consulting detective as brilliant, icy and occasionally preening as the original.

On Aug. 24, you published a letter implying that teachers can no longer deduct their expenses from their state and federal income taxes. Though it is true that tax credits have been suspended, these credits are not synonymous with deductions. Teachers, like business people, still retain the right to deduct expenses that are necessary to their employment: books, conferences, professional memberships and supplies that are not provided by the school. Here is my situation: Last year I spent approximately $4,000 on school expenses.

Off the rails Re "Blue Line's woes a black mark for Metro," April 21 No one should be surprised that the Blue Line light-rail system from downtown L.A. to Long Beach has high maintenance costs. The goal of Propositions A and C and Measure R, which raised the sales tax, was to build a rail system, but not necessarily to maintain and operate one. As more lines are built, more money must be spent to maintain the system. The question now is whether the system has reached the size where all the construction money is required for maintenance and none is left for construction.

If you own a home, it pays to know the tax breaks that could be available to you. Here are five deductions spotlighted by personal finance writer David Bakke for the Zillow real estate blog. For more specific information, see your tax preparer or call the IRS help line at (800) 829-1040. • Mortgage interest. You're generally entitled to reduce your taxable income by the amount of mortgage interest you pay, as long as you itemize deductions on your tax return. Your lender should have sent you a 1098 form in January showing exactly how much interest was paid.

Dear Karen: I need help in my new business but can't afford an assistant. What are my options? Answer: Entrepreneurs who lack funds or space for employees often use virtual assistants. Paid $20 to $70 an hour, these assistants -- working outside the office -- perform such tasks as e-mail management, social media marketing, research and trip scheduling, said Priscilla Walker at Your Dependable VA, a virtual-assistant firm in Silver Spring, Md. More information can be found through the International Virtual Assistants Assn.

The Supreme Court today resolved a tax dispute between the insurance industry and the Internal Revenue Service in a decision dealing a significant financial setback to many insurance companies. The justices in a 6-3 vote ruled that the "ceding commissions" a life insurance company pays when reinsuring another firm's policies may not be claimed as deductions for the year they are paid. Instead, the court ruled that any tax deductions for those commission payments must be spread out over the anticipated life of the policy.

Off the rails Re "Blue Line's woes a black mark for Metro," April 21 No one should be surprised that the Blue Line light-rail system from downtown L.A. to Long Beach has high maintenance costs. The goal of Propositions A and C and Measure R, which raised the sales tax, was to build a rail system, but not necessarily to maintain and operate one. As more lines are built, more money must be spent to maintain the system. The question now is whether the system has reached the size where all the construction money is required for maintenance and none is left for construction.

After throwing in a few irrelevant figures on Medicare taxes and tax rates, the Feldsteins claim that one can easily reduce taxable income by 10%; presumably by increased deductions. I have found it extremely difficult, particularly since loopholes were closed, and the many deductions such as charity, sales tax, local taxes, home office deductions, business expenses, second homes, entertainment, etc., have been severely limited or eliminated. Finally they claim that a seven-cent tax on gas would provide the same revenue as a high-income tax. But if this true, surely the logical argument could be used that consumption would decrease to offset the tax increase, similarly to the high-income people reducing their taxes "by working less."

It's that horrible time of year we all know as tax time again. And, as usual, I begin scurrying around looking for every conceivable and even a few inconceivable deductions. If only the IRS and our congressional representatives would think about the absurdity of the situation. Why, when a taxpayer claims on his/her W-2 form submitted to the employer what he/she is in fact entitled to, should that person then have to dig, scrounge and scrape for deductions in order to compensate for the government's failure to deduct the appropriate revenue from the beginning?

Question: For more than five years, I have lived in a rental house. Throughout this time, I have been forced to go into my own pocket to pay for the most basic repairs, such as emergency plumber calls. I have paid for repairs myself because my landlord always takes too long to respond. I have been very careful to keep copies of all the repair bills I paid, and they total more than a month's rent. I have found a new place to live that is newer and in better condition. I would like to skip payment of the last month's rent on my current home as a way to make sure I am compensated for at least some of the bills I had to pay. Will I be able to do that?

If you own a home, it pays to know the tax breaks that could be available to you. Here are five deductions spotlighted by personal finance writer David Bakke for the Zillow real estate blog. For more specific information, see your tax preparer or call the IRS help line at (800) 829-1040. • Mortgage interest. You're generally entitled to reduce your taxable income by the amount of mortgage interest you pay, as long as you itemize deductions on your tax return. Your lender should have sent you a 1098 form in January showing exactly how much interest was paid.

Though its demise drew little attention because of the partisan year-end brawl over the payroll tax cut extension in Congress, a key mortgage financing benefit disappeared at the end of December: the ability of large numbers of home buyers and owners to write off the premiums they pay for mortgage insurance. The loss of that tax deduction — plus mandatory new fees imposed by Congress on all new conventional and FHA loans — could effectively increase the costs of homeownership this year.

Small-business owners will be greeted Jan. 1 with dozens of new laws and regulations. In California, they will include new mandates concerning employees, including a partial ban on checking the credit reports of workers and job applicants. And it's no surprise that there are changes at the federal level too. Here's a guide to some of the new laws and regulations set to go into effect in 2012. Federal taxes As of January, there will be a major decrease in how much of the total cost of new equipment - including items such as computers, machinery and vehicles - a business can deduct upfront on its tax return.

Year-end financial planning is probably the last thing you want to think about while you're whipping up eggnog. But spend a few minutes now and you can save a bundle on your taxes. "No one wants to make the time at this time of year," says Philip J. Holthouse, partner at the Los Angeles tax law and accounting firm of Holthouse Carlin & Van Trigt. "But a little last-minute planning can reap rewards worth thousands of dollars. " Charitable contributions: Gifts to charity soar near the holidays.

Psst: Want to know a way to reduce our national debt by a quarter of a trillion dollars over the next decade, and remove an often abused and possibly unconstitutional section of the tax code? Are you sure you do? You may want to sit down. Get rid of the federal charitable-giving tax deduction. I know that statement will create a firestorm. I ran the California Community Foundation for 25 years, and the foundation — not to mention your alma mater, the Girl Scouts, the AARP and many other charities — think pretty highly of the tax deduction.

Many recent buyers of condominiums in Southern California have already experienced a sizeable decrease in property values. The Reagan tax proposal, which would eliminate deductions for property, among other taxes, will further erode the value of these homes. Other proposed changes, including the higher zero-bracket amount and the partial taxation of employer-paid health benefits, will add to the problem. Some of us, who qualified for mortgages by counting on all currently available tax deductions, may well be forced to sell our homes at a loss and return to apartment living.

The tax reform bill being considered is an outrage against decency and fairness. Consider this: 1--Taxpayers who are primarily renters and make $10,000 to $30,000 a year (the majority in this country), subsidize those who make much more money and get deductions for even two houses. 2--Individual Retirement Account deductions are overwhelmingly taken by those who make more than $30,000 and who already will get pensions and Social Security. So again, the poor subsidize the rich.

U.S. employers, struggling to contain rising healthcare costs, are offering workers more high-deductible insurance options that help reduce monthly insurance premiums but may shift a greater share of medical expenses to employees. In 2011, 32% of companies with 500 or more employees offered high-deductible plans. That was up from 23% in 2010, according to a survey of 2,844 private and public employers by the benefits consulting firm Mercer. In all, 13% of insured employees in the survey were enrolled in such a plan this year, up from just 3% five years ago. Under high-deductible plans, employees pay for more of their initial medical expenses with money deposited by them and their employers into health savings accounts.

For the second time in eight months, California health insurer Anthem Blue Cross is being sued over allegations that it has breached contracts with individual policyholders for hiking annual insurance deductibles in the middle of the year. The latest lawsuit, filed Monday by the group Consumer Watchdog, says that California's largest for-profit health insurance company used "bait and switch" tactics to raise deductibles and other out-of-pocket costs for some customers May 1. Anthem, the consumer group contends, violated state law by misrepresenting the cost of its coverage for more than 100,000 customers.