Montgomery County sentinel. [volume] (Rockville, Md.) 1855-1974, 1949-01-20

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Deductions From Gross Income
The Federal Income Tax Law
provides that the tax is imposed on
the net income of the taxpayer.
The net income is that portion of
the gross income remaining after
deductions allowed by the law have
been subtracted therefrom. Most
all taxpayers, have lawful deduc-
tons from their gross income not
withstanding that they may not be
engaged inca trade or business.
For wage earners or salafied en-
ployees the usual deductions are
contributions TO charitable organ
zationsy taxes; and losses. For the
taxpayer who spufsues'e a. trade,
business ofd profession the 'deduce
tions in addition to contributions,
taxes and losses are for allS ordia
nary and necessary expenses paid
ora incurred during the taxable
year in carrying on a lawful trade
or business, Before an expense
may be deducted the law requires
GAY that it must be incurred in the
trade or business conducted by the
taxpayer, (b)tthat the outlay must
not be o9dpeafnanent items Gas aa
general Q rule these expenditures
must be- capitalized and depfeci-
ated overea period of yeafs9, icy
that the OUTLAWS must be for s'ordil
nary and necessary1 texpenses. To
be ordinafy and necessary, how
ever, does not mean that they
must be liabituaf to the particular
taxpayer. The frequency Of that
expense in the taxpayers individ-
ual business is not the test, but
rather whether; or not it, is known
from experience in that type of
business that such an expense is
necessary and is not uncommon.
Taxes, Contributions and Losses
All taxes are not deductible from
gross income and some taxes are
deductible only if incurred as a
business expense. The Federal
Law provides that taxes imposed
by the United States, the several
states and political subdivisions
thereof may be deducted, except
federal income tax, excess profits,
estate and gift taxes, local taxes
and local estate, inheritance, Leg
acy, succession and gift taxes. 1t is
interesting to observe at this point
that State income taxes may be de-
Quoted on your Federal return but
neither State or Federal income
taxes may be deducted on your
State return. The following is a.
partial list of taxes which may be
deducted from your gross income:
ny State gasoline taxes, (2) Real
and personal property taxes, (3y
State sales tax, az State income
tax Ton your Federal return) ,
(5b Automobile tags and taxes,
90 Tax on safe deposit box,
These items are deductible by
every taxpayers even though they
may not be engaged in trade or
business. Other taxes are deduct
ible only as an expense incurred in
certain business or incurred in the
production of income. For exam
pie, the tax paid on furs and jewel
ry is not deduetible by the con-
samer but by the retailer. y
As general rule taxpayer
may deduct from his gross income
contributions made to the State or
Federal Government for public
purposes such as universities or
fire departments for public use
and contributions made to all reiii
gious and charitable organizations.
fSere is limitation, however, on
the ahsoant which may be deducted
for contributions. You may not de-
duct an amount in excess of 1870
of your adjusted gross income.
Losses incurred in your trade or
business or in transactions entered
into for a profit and all losses of
property arising from fire, storm,
shipwreck or other casualty (al-
though not connected with trade
or business) may be deducted from
your gross income. For example, it
has been held that damages to the
taxpayers residential property
caused by hurricane, food or a
bursting boiler may be deducted as
casually loss. The Tax Court has
also allowed a deduction for dam
ages caused to a residential prop
erty resulting from quarry blasts.
Expenses Incurred By
Professional People
All ordinary and necessary ex-