Symphony Tickets Provide No Deductions Due to Benefit Of Music

I own season tickets to the Indianapolis
Symphony. If I donate money to the Symphony I can take a tax deduction. Does
part of the cost of my tickets qualify as a tax deduction too? The person I
called at the Symphony office said, no, but I thought I'd check with you before
foregoing a deduction.

T.A., Indianapolis

The cost of your tickets doesn't qualify as a charitable deduction because you get a benefit for the tickets. You get to enjoy a concert that you paid for, so you are not considered to be donating money to a charity. However, if you can't make it to one of the concerts in your series and you turn your ticket into the Symphony's box office for them to resell, it's a different story. Now you're not receiving a benefit for your ticket, so the cost of the ticket qualifies as a charitable contribution. You must be able to itemize your deductions on Schedule A in order to take advantage of this deduction.

My child turned 14 during 1997. She has income
from dividends and interest that has been taxed at my tax rates in the past.
Because she was 13 for part of 1997, does her income get taxed at my (higher)
rates for part of the year, all of the year, or can she be taxed at her own rate
now?

B.J., Brownsburg

The Kiddie Tax, the controversial tax that forces children to pay tax at their parent's tax rates, is effective for all children who earn investment income of over $1,300, who have to file a tax return, and who are under 14 for all of 1997. Since your daughter turned 14 during 1997, the child's income is no longer subject to the Kiddie Tax. Even if the child turns 14 on December 31, 1997, the child is not subject to the Kiddie Tax.

The Kiddie Tax was devised to prevent high-tax-bracket parents from diverting investments into their children's names so that the income would be taxed at the children's lower tax rates. In theory, this makes sense. But in practice, I've seen many situations in which a child has legitimate investments of his own, either from inheritance, or from gifts, or from working hard and saving his money, and this child is penalized for up to 14 years.

I'm getting a big tax refund this year. Of course
I' m glad to have the money, but I would like to have used that money last year
when I earned it. Should I try to change my withholding so that less money is
withheld? I don't want to owe a lot of tax next Spring.

L.M., Indianapolis

There are people who like receiving nice, big refunds, and there are people who would rather pay as little as possible during the year and either come out even in April, or even owe a little bit of tax. Because the IRS doesn't pay you any interest on your withholding, it seems kind of a shame to pay in more than you have to. If you consistently receive large refunds when you file your tax returns, you might want to consider changing your withholding so that less tax is taken from your paychecks. To do this, ask your employer for a W-4 form. When you read the form you will see that there are lots of options for reducing (or increasing) your withholding.

Each allowance you claim lowers the amount of tax withheld from your paycheck. Your employer can tell you how much one allowance is worth in reduced withholding based on your rate of pay. Besides claiming withholding allowances for yourself, your spouse, and your dependents, you can claim additional allowances if:

  • You are single and have only one job
  • You are married and have only one job and your spouse
    doesn. t work
  • Your wages from a second job or your spouse. s wages
    are $1000 or less
  • You will file as "Head of Household"
  • You expect to have at least $1500 in child or
    dependent care expenses and you plan to claim a tax credit for this care
  • You itemize your deductions

Alternatively, you may wish to have extra tax withheld from your pay, either because you may be coming up short in April, or you may just prefer to use the IRS as a forced method of savings. There is a worksheet on the back of the W-4 form for estimating how much tax should be withheld. Or, you can simply write in an amount that you wish to have taken from each paycheck.

Keep in mind that it is a requirement, not an option, to pay tax through payroll withholding. Even it is said that our income tax system is a volunteer system, that argument doesn't hold much water when it comes to explaining why you haven't had enough tax withheld.

copyright © 2000 Gail Perry - Fun with Taxes

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