Editor's note: Every Sunday through the end of tax season, The Sun has run an edited transcript of Baltimoresun.com's weekly tax advice column featuring experts from the Sparks accounting firm SC&H; Group who answered reader questions. This marks the final installment for this season.
I worked as a paid high school basketball coach for the 2007-08 school year. Our season started Nov. 15, 2007, and ended in February. I received my lump sum coaching payment in March. I purchased basketball books from the beginning of the season until the end. Since I purchased the bulk of these books before Dec. 31 but received the check in March, can I write these off on my taxes? Can I also write off the books I purchased after Jan. 1?
- Allen, Baltimore
Individuals are on cash basis, which means you would report expenses when you pay them. Your expenses through Dec. 31 would be deducted on your 2007 return, assuming that the expenses meet the ordinary and necessary tests for business expenses. The 2008 expenses would be deducted on that year's return. Your expenses would qualify as employee business expenses and are treated as miscellaneous deductions subject to the 2 percent adjusted gross income limitation on Schedule A. Remember to consider the educator expense for teaching supplies, equipment and so forth used in the classroom.
Baltimore City provided three grants totaling $17,750 to help me buy my first home last year. Is that money taxable?
- Reb, Baltimore
There are many different types of "grant" programs available to help with home ownership. Without the specific details, a taxability determination cannot be made. An indication is whether you received a 1099 for the amount or if it was included in your W-2.
A program such as employer-provided assistance would most likely be taxable. Alternatively, certain other programs would not be taxable.
Instead, the amount you received would adjust your basis in the home. The gain or loss realized upon the eventual sale of the home will reflect the receipt of the incentive in the adjusted basis. An example of nontaxable grants would be HUD "mortgage assistance payments." You should contact the specific housing/mortgage agency that provided the grant to see if it can assist you with the tax treatment.