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Old 12-13-2012, 06:22 PM
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Will I pay taxes on this income?

My company is allowing me to fly myself in a small plane instead of me traveling on the airlines. They will reimburse me up to $10k per year.

A guy I know is willing to lease me 100 hours/year in his plane, but the cost would come out to be about $16k/year with the fuel.

The company that sold the guy his plane (let's call it Company X) is willing to pay the $6k I'm over budget in turn for my company doing some free marketing for them, which my bosses are fine with.

This is great, but here's the potential problem: For tax purposes, Company X wants to pay me and have me then pay the aircraft owner. If I claim this $6k as an itemized deduction, will I have to pay any taxes on this money?

Currently I use the standard deduction.



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Old 12-21-2012, 12:15 PM
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“This is great, but here's the potential problem: For tax purposes, Company X wants to pay me and have me then pay the aircraft owner. If I claim this $6k as an itemized deduction, will I have to pay any taxes on this money?”-----> If you're a W-2 wage earner with work-related expenses, the IRS allows you to take a deduction for costs incurred that are normal and necessary for your line of work. Expenses eligible for the deduction don't have to be required by your ER to be deemed necessary. You can take the deduction for qualified expenses that you do not receive reimbursement for, but if you're partially reimbursed, you can deduct the difference.Whether or not you can claim the extra $6K EE biz exp on form 2106 and Sch A of 1040 depends on yur ER’s accountable plan. For example, under an accountable plan, $6K , reimbursement you, as an EE, receives for the expenses is not included in your income. You are required to account adequately for expenses with records and return any excess reimbursement within a reasonable period of time. So, under this plan, you can’t deduct it on Sch A/form 2106(as the reimbursement is not your income) and your ER won’t report it on your W2. Under the non-accountable plan, your ER reports the reimbursement, totally $16K, on your W2. $16K is treated as compensation and so go in box 1 of your W-2; the pmts. are subject to all payroll taxes. You get to deduct the actual expenses, but that shows up as a 2% miscellaneous deduction on Sch A, which doesn't help very many people. In most cases, the overall lowest tax is when an accountable plan is utilized. So, UNLESS you itemize your deductions on Sch A of 1040, then you can’t deduct the pmts of $16K on your return.



“Currently I use the standard deduction.”---->As described above; UNESS you itemize your deductions on Sch A of 1040, then you can’t deduct the pmts of $16K on your return.



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