Valentine’s Day. A time of giving. A time of love. A time to express one’s appreciation for that significant other by advancing the relationship into a whole new tax bracket (there are approximately 6 million marriage proposals on Valentine’s Day).
According to CNN.com, below is a guestimate of what Americans spent on Valentine’s Day in years past:
$18.6 billion -- Total spending by Valentine's Day.
$1.6 billion -- The amount spent on candy.
$1.9 billion -- The amount spent on flowers.
$4.4 billion -- The amount spent on diamonds, gold and silver.
$130.97 -- The estimated average that people will spend on Valentine's Day.
$4.52 -- The average amount pet owners spent on their pets on Valentine's Day in 2012.
Factor in cards, other gifts, restaurants and V-Day becomes big business.
Smolin Lupin not only appreciates the wonderful cost that is Valentine’s Day, we embrace it. Rather than counsel our clients on how a tax deferred investment is the smarter use of $18.6 billion, we offer an alternative list of gifts that say, ‘I love you, and am thinking long term about this relationship.’
As it happens, Kelly Phillips of Forbes.com did some legwork a few years back and offers a wonderful list of tax advantaged Valentine’s Day gifts:
Wedding Ring: Join the 6 million who want true love to last forever. To be clear, the actual cost of the ring isn’t deductible, but your filing status is. Filing status is determined as of the last day of the year, so even if the wedding is December 31st, you can still file as married. And don’t worry about the myth of the “marriage penalty,” the truth is that most married couples pay less in taxes than they would have paid had they stayed single.
Vacation House: Want to really set the bar high for your friends on Valentine’s Day? Hand him or her a set of house keys on February 14th and watch the ‘shock and awe’ unfold. Most people know they can deduct costs associated with buying their primary residence (mortgage interest and real estate taxes). You can also claim (subject to certain limitations) expenses associated with a second home. You don’t have to go ‘East Hamptons’ style either, a second home can be a condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities.
Donation in their Honor: As Phillips put it, ‘for someone who has everything, give something to one who has nothing.’ Make a donation to a cause in his or her name, and make sure it’s something they care deeply about or you will look self-serving. If you itemize, you can take a deduction for your gift and it’s a win-win-win: the charity wins, your sweetheart wins and you win (twice!).
Send your significant other to school: Nothing says I love you like “go get another education.” You may be able to claim a lifetime learning credit of up to $2,000 for qualified education expenses paid for your spouse (or other dependents). You don’t necessarily have to get a degree: the lifetime learning credit is available for tuition and related expenses at an eligible educational institution. An eligible education institution includes any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education (ask the admissions office if you’re not sure). Warning, if you’re not sure how they’ll take this gift, probably better to pick another from the list.
Expensive gift of your choice: If you file a federal 1040 form and itemize deductions on Schedule A, you have the option of claiming either state and local income taxes or state and local sales taxes. You can’t claim both. If you saved your receipts throughout the year, you can add up the total amount of sales taxes you actually paid and claim that amount. So if you’re thinking about buying a big ticket item (think 4 wheels, not a new dryer), take heart: the sales taxes are deductible.
Love is a many splendored thing, taxes are not. You should express your feelings to your loved ones on Valentine’s Day, then express your tax deductions to your accountant on April 15th.