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married couple - separate cities - tax loophole?

Discussion in 'Living in Sin (City that is)' started by schwaiguy, Jul 31, 2012.

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  1. schwaiguy

    schwaiguy Low-Roller

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    Hi, Everyone,

    Someone told me years ago that if my wife and I lived in separate cities, we could write off the living expenses incurred in the new city. Since I'm in Vegas for an interview, I would like to ask about the feasibility of an arrangement I came up with based on this concept.

    We are currently New Mexico residents. Were I hired in Vegas, could I just live in a hotel and write off the bills?

    These numbers are hypothetical, but bear with me.

    Say the 2 of us combined make $100,000.

    At 28% our income tax would be $28,000.

    Could I stay in a hotel at a rate of roughly $2,333/month, write off the hotel bills, and get the $28,000 back?

    Marriott Residence Inn, for example, would probably go $89/night. Minus the $28,000, a year's rent would be $4485. That would be under $400/month rent, no utilities, etc. . . . I could probably go cheaper with Southpoint or even half with 4 Queens.

    Please bear in mind, I am financially illiterate. I'm guessing businesses do this.

    Looking forward to everyone's input, and I would never undertake anything so serious without consulting a professional.

    Thanks,

    Schwaiguy
     
    Last edited by a moderator: Aug 1, 2012
  2. Vladimir

    Vladimir Low-Roller

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    I'm not 100% sure on this but I don't believe you would et the $28,000 back.

    I think what would effectively happen would be that your taxable income reduces by this amount, so instead of being taxed on $100,000 you would be taxed on $72,000.
     
  3. GeorgeandTheBear

    GeorgeandTheBear Low-Roller

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    If what you want to do is legit, you would save the tax on the 28K, not the whole amt.
     
  4. nuggetboy

    nuggetboy Low-Roller

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    The business expenses are "tax deductions" not "tax credits". As the other posters correctly stated, you would reduce your taxable income. :nono:
     
  5. shifter

    shifter Degenerate Gambler

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    yeah it's only good to expense things that you're already going to spend anyway. it doesn't ever make sense to spend an extra $1 just to save $0.25 in tax. but if you can write things off that you're spending anyway, it's definitely a great to reduce your tax load.
     
  6. zamboni

    zamboni VIP Whale

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    Why not change residency to Nevada until you are done working and just not pay income tax? Nevada is a no income tax state.
     
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  7. 3cats

    3cats High-Roller

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    I was under the impression that only the moving expenses themselves could be deducted at some mysterious ratio.
    There are people in Vegas who would be happy to rent out a bedroom to a nice living solo married person.
    The little extra income will come in handy for them, and it would be a great situation for you while job hunting. I would not go all crazy spending and then later find out that none of it is deductible. When considering a relocation to Vegas, a person/family can never be too conservative with their money and finances.

    3cats
     
  8. Chuck2009x

    Chuck2009x VIP Whale

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    Sorry, none of your original assumptions are accurate.

    If you had a combined gross wage income of $100,000, after your personal exemptions and the standard deduction, your adjusted gross income would be $80,500 and your maximum federal tax would be $12,185.

    If you get hired as a W-2 employee by a company, you can't write off your separate living expenses just because you're not living with your wife - you're not traveling on business.
     
    Last edited: Aug 1, 2012
  9. numeno

    numeno VIP Whale

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    If you do go through with this, I would highly suggest taking to a tax specialist first. Taking a deduction of over 25% of your income I have to assume is a huge red flag to the IRS. If that doesn't get put up in the priority audit list I don't know what would.


    When I looked into taking deductions for business expenses due to working from home, I ran into many cases where it was questionable if I could deduct something or not. I honestly don't see how rent or hotel fees that are required just to live somewhere have anything to do with a business expense. Just because I work in a city, that doesn't mean I can deduct basic living expenses.
     
  10. jr7110

    jr7110 VIP Whale

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    You cannot write off a living space UNLESS you are actually working out of your apartment (I realize you are talking about a hotel but it is the same deal). And even then, you would only be able to deduct just a portion of that rent and have to itemize everything very carefully. The reason businesses might possibly be able to write off rent (and I am sure they cannot write off the entire amount) would be because they are actually conducting their business on the premises.

    As Numero stated, you would be more likely to raise flags on the IRS radar when it came time for them to look for people to audit (and the beacon you would be sending to them would be brighter than the one shining at the tip of the Luxor). You would end up in some serious trouble - tax evasion is no joke. It is considered a felony and if you are tried and convicted you are looking at up to five-years in prison and/or fines up to $100,000. I would not recommend it.
     
  11. schwaiguy

    schwaiguy Low-Roller

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    Thanks, everyone. Just Vegas pipe dreams, I guess. If hired, I will switch residencies and rent an apt. The two of us will save up hard for a house, and hopefully we can get a place cheap for cash within a year or two before the housing market recovers.

    Schwaiguy
     
  12. shifter

    shifter Degenerate Gambler

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    you can write off rent for business space in proportion to the area that you use for business. so if an office space, 100%. if part of your home, you divide the sq footage in the office space by the total sq footage in your home and that's how much of the rent you can deduct.
     
  13. shifter

    shifter Degenerate Gambler

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    that's not tax evasion. tax evasion is not reporting income or trying to hide something. deducting too much if you're audited will just result in adjustments made and you owning the extra taxes plus interest and penalties.
     
  14. craps1

    craps1 Low-Roller

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    This is true, but it needs to be 100% dedicated to business only and expect an audit. IRS doesn't let this go through lightly.
     
  15. shifter

    shifter Degenerate Gambler

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    not really, i've been doing it for years and have never been audited. you just put your rent on an other deductions document that you attach to the 1120, so they have no way of knowing based on your return whether it's a dedicated office or it's part of your home. the only time it would become an issue is if you were audited and you did something like deduct your entire mortgage as a business expense when only 10% of the home is used for the business.
     
  16. cloudi63

    cloudi63 MIA

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    Nooooo! Give up New Mexico for Nevada! Say it ain't soooo! LoL
     
  17. zamboni

    zamboni VIP Whale

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    I just got audited last month. I am not self employed, I do NOT itemize, and I let a professional tax service do my taxes. It can happen to anyone.
     
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