Here’s a Santa, there’s a Santa, everywhere there’s a Santa – but, what’s the real deal on Santa’s taxes

December 22, 2017 : Teresa L. Clark

Santa Claus exists – of course – and even he must pay taxes. Well, more specifically, the Santa Claus “representatives” paid to appear in shopping malls and at holiday parties are taxpayers. And, with taxes can come tax benefits that can lower tax liability and increase a tax refund.

For his holiday season job at the mall, Santa probably gets a W-2 that reports his income. If Santa makes a variety of personal appearances at holiday parties and other events, he might get a 1099 if he works for a company that manages his appearances and sometimes he might just get a check. If Santa is given a 1099 or a check, his work as Santa is probably done as a freelancer or contractor, and some of his supplies might be tax-deductible.

For tax purposes, potentially eligible business expenses are defined as ordinary and necessary costs of doing business. If not reimbursable by the employer, for tax year 2017 these expenses can be claimed by employees as miscellaneous itemized deductions, which are deductible to the extent they exceed 2 percent of adjusted gross income. But, business owners and taxpayers who work as freelancers and contractors are not limited on how much of these eligible expenses they can deduct.

To transform themselves into Santa, these humans/taxpayers need to look the part (think suit and beard) and know how to “ho ho ho!” (think training). But, there are some specific rules about which expenses can be potential tax deductions, and that information also can help non-Santas/other people who buy things for their jobs. The following questions and answers can help all taxpayers determine if what they buy for work is an eligible tax deduction. So, which of these expenses could Santa deduct?

  • Santa wanted to learn how to be a better Santa, so he went to a school that trains Santas: Yes, training for a job is an eligible expense
  • Santa purchased costumes for himself and his helpers/elves to wear: Yes, these supplies for a job are eligible expenses
  • Santa bought a belt with jingle bells on it to wear with his new Santa suit: Yes, this is an eligible expense; if the belt was not adorned with bells, it could be used for other purpose and might not be an eligible expense
  • Santa was going gray and decided to get his hair silvery-white for the holiday season: No, this isn’t an eligible expense because the hairstyle is not being used exclusively for his work as Santa
  • Santa was due for new car tires for the car he will use to get to his Santa jobs – right before the holiday season started: No, he can’t deduct the full cost of the tires; Santa would have to use a vehicle only for business purposes for this expense to be fully tax-deductible, but mileage from one business location to another would be deductible
  • Santa got hungry on the way home from a party he worked 10 minutes from his home and stopped for dinner: No, this meal can’t be deducted as a business expense, but…
  • Santa worked at four big parties in a city a three-hour drive from his home: Yes, if the primary purpose of the trip is for business transportation, meals and other expenses could be eligible expenses

There is much more for Santa and other taxpayers to understand about temporary employment tax deductions and their tax situation, and H&R Block can help. For help with filing an accurate tax return, talk to an H&R Block tax professional.

Taxpayers should talk to a qualified tax professional about their specific tax situation.

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Teresa L. Clark

Teresa L. Clark

Contributor

Teresa L. Clark came to H&R Block in January 2010 after working as a civil servant for more than 13 years. Since that first tax season she has written blog posts and talking points, edited content of all shapes and sizes, facilitated media interviews for the experts in The Tax Institute at H&R Block and supported the DIY team. Clark has a master's degree in integrated marketing communications from the University of Kansas and is a member of the Honor Society of Phi Kappa Phi.

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