Non-Deductible Taxes: General Summary

The Internal Revenue Code (IRC) permits individual and business taxpayers to deduct various types of taxes imposed by some tax authorities. However, some types of taxes are not deductible under the IRC.

Here is a brief summary of most common non-deductible taxes:

1. Generally, federal income taxes, including social security and railroad retirement taxes paid by employees, are not deductible either as taxes or as business businesses. This also include one-half of the self-employment tax imposed by the IRC Section 1401;

2. Federal war profits and excess profits taxes;

3. Estate, inheritance, legacy, succession, and gift taxes;

4. Income, war profits and excess profits taxes imposed by a foreign government (or even a U.S. possession) if the taxpayer decides to take a foreign tax credit for these taxes;

5. Taxes on real property that must be treated as imposed on another taxpayer because of the apportionment between buyer and seller;

6. Certain fees and taxes under the Patient Protection and Affordable Care Act (P.L. 111-148). For example, annual fee imposed on drug manufacturers and importers for U.S. branded prescription drug sales after 2010; the 2.3 percent excise tax imposed on manufacturers, producers and importers of certain medical devices after 2012; and the annual fee imposed on certain health insurance providers after 2013 are all non-deductible taxes; and

7. Certain other taxes, such as certain additions to taxes imposed on public charities, private foundations, qualified pension plans, REITs (real estate investment trusts), stock compensation of insiders in expatriated corporations, golden parachute payments, greenmail, and other taxes.

Contact Sherayzen Law Office for Tax Planning Advice

If you need a tax advice regarding structuring your business transactions in a tax-responsible way or if you need an advice regarding deductibility of your taxes, contact Sherayzen Law Office. Our experienced tax firm will analyze your situation and propose various tax plans that will strive to reduce the risk of unfavorable treatment of your business transactions under the IRC.