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Financial Questions and Answers

Q: I want to throw a party for my five employees this holiday season. How will the costs be treated for tax purposes?

A: As a general rule, the IRS considers anything an employer gives to employees to be taxable compensation for their services. One exception is “de minimis” fringe benefits. These include occasional cocktail parties, group meals, or picnics provided for employees and their guests. Additionally, it’s likely that you can deduct all of your costs for hosting your holiday get-together.

Q: Ill health is forcing me to sell my home. I’ve lived in it for only the last 15 months. Can I claim the capital gain exclusion?

A: Taxpayers who have owned and used a home as their principal residence for at least two out of the five years before a sale generally can exclude from income up to $500,000 (if they are married and filing jointly) of the capital gain on the sale. Single filers can exclude up to $250,000. Although you do not meet the two-out-of-five-years requirement, you may qualify for a reduced maximum exclusion. To claim the exclusion, you must have had to sell your home because of a change in place of employment or health or because of “unforeseen circumstances.” Your health issues may qualify you for the reduced exclusion.

November 2016 Newsletter Previous Article