This week we go unscripted, with three recent tax stories that caught our attention.
First, the fine print on "no tax on overtime": why only the premium part of time-and-a-half pay qualifies for the new deduction, and what that means for a $300 overtime check.
Then Kevin tells the story of a new client with a 2,000-square-foot basement full of bourbon, and how one question turned a hobby into a business worth documenting.
We finish with a Wall Street Journal story about a man with Florida paperwork whose estate is fighting Connecticut over more than $13 million in estate tax, and why states are getting more aggressive with people who move away.
Dig a little deeper:
1. $300 of overtime, $100 deductible. Earn $20 an hour, work a 50-hour week and get time and a half for the last 10 hours, and you've made $300 in overtime. Only the $10-an-hour premium counts toward the new overtime deduction, so $100 qualifies and the other $200 is taxed like the rest of your paycheck. The deduction is capped at $12,500 ($25,000 for joint filers), phases out above $150,000 of income ($300,000 joint), and Social Security and Medicare still apply.
2. A basement full of bourbon can be a business. A new client had thousands of bottles in a finished 2,000-square-foot basement. He wrote paid reviews of bottles people sent him, bought inventory and sold bottles. "You do not have a hobby, you have a business," Kevin told him. Hobby expenses generally aren't deductible, but a business run like a business is treated differently, so step one is an inventory of the bottles, the revenue and how he sells.
3. A $100 client gift is a $25 deduction. Send 20 clients a $100 gift and only $25 of each is deductible as a business gift. The other $75 per client gets added back. Personal gifts follow a different rule entirely, with a $19,000 annual exclusion per recipient.
4. Florida paperwork didn't settle a $13 million question. Jack Anderson had a Florida driver's license, voter registration and declaration of domicile. Connecticut still assessed his estate more than $13 million in estate tax, pointing to his three condos there, and a trial court found he spent about five and a half months a year in Connecticut versus three and a half in Florida. The case is headed back for a new trial. If you plan to retire somewhere with no income tax, where you spend your time matters as much as your paperwork.
Get in touch: https://www.revotaxpayer.com/?utm_source=revo-taxpayer&utm_medium=podcast&utm_campaign=ep-33-the-variety-hour&utm_content=show-notes#contact-1
Chapters
[00:00] Going unscripted: the 10 PM tax article
[02:43] "No tax on overtime": what the IRS guidance actually allows
[05:30] The math: $300 of overtime, $100 deductible
[07:34] Kevin's client and the 2,000-square-foot bourbon basement
[10:05] "You don't have a hobby, you have a business"
[12:27] Client gifts: the $25 rule vs. the $19,000 exclusion
[14:03] Connecticut's $13.2 million estate tax claim
[16:30] States chasing people who leave, and retiring to a no-income-tax state
[18:40] Gulf Shores, South Padre and a SpaceX retirement plan
