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Sometimes the check really is in the mail

December 29, 2008

You have three days left to get a letter postmarked in 2008. That means that if you are a cash-basis taxpayer, like most walking, talking humans, you have three days to write a check for a deductible 2008 expense.

For purposes of timing an income tax deduction, having a check in the mail is usually good enough for cash-basis taxpayers You can still write a check to charity and deduct it on your 2008 return if it is postmarked no later than Wednesday this week. The same goes for a deductible mortgage interest payment, a property tax payment, or any other deductible personal or cash-basis business expense.

It wouldn't be the tax law without exceptions. The expense needs to be deductible in the first place, for starters. If it is to a related party, it won't be deductible in 2008 unless the related party picks it up in income this year. And many expenses that are technically deductible, like real estate taxes and income taxes, do no good for taxpayers subject to alternative minimum tax.

Also, while "the check in the mail" may be good enough to claim a deduction, it isn't good enough to achieve a completed gift for gift tax purposes. If you want to claim the $12,000 annual gift tax exclusion for 2008, the donee needs to cash the check no later than Wednesday at 11:59:59 p.m.

If you are writing a check for an amount that's large enough to worry about, you should spring for a certified mail postmark so you can prove timely mailing to the IRS.

To review our 2008 year-end planning posts, click here.

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