2009 Tax Strategy II – When is an Expense Deductable

This is my second posting of a daily tax tip about when is an expense deductable for taxes. Please feel free to call me if you have any questions.

When is an Expense Deductable

I was recently asked if parents could take a partial deduction for Property Taxes paid by their daughter and son-in-law. The parents sold their home and moved in with their children and paid for an addition to the home in which they lived.

The parents are not allowed to deduct the property taxes because of two general rules that dictate when a Taxpayer is allowed to take a tax deduction:

(1) The expenditure must be in payment of a legal obligation of the taxpayer or the Taxpayer must have benefited from or consumed the expenditure
(2) The Taxpayer must make the payment of the expenditure himself/herself.

So in this case a tax deduction for property taxes is not allowed because the parents:

(1) Were not legally required to pay the property taxes; and
(2) They did not pay the tax directly

Another example: In order to take a medical deduction the person receiving the services is the only person that can take the deduction, PROVIDING the person paid for the medical expense. The only exception is in case of dependents of the Taxpayer.


To help with your 2009 US taxes, I will post a daily tax tip on my Blog from now until April 15.