Santa as we know him today dates back to 1809. Over the next hundred years or so his traditional red and white clothes and a home in the North Pole complete with a workshop for building toys and the large book filled with the names of naughty and nice children throughout the world evolved. Finally, in 1939, a copywriter who worked for Montgomery Ward department stores created the story of Rudolph and the rest is, well, history.
Given that tax season is right around the corner, what could Santa expect when he files? He certainly has a lot of deductions, so as soon as Christmas passes, he's likely going to start collecting his documents and making any final contributions or payments needed before January 1 and so he will be ready for his tax return.
So what does Santa's tax return look like?
Santa will likely file a joint return using his legal name as it appears on his Social Security card, Kris Kringle, with his wife, Jessica Kringle. Their address is 1 Christmas Lane, North Pole Village, North Pole per public records, AND MY KIDS telling me so. It is very important to use their legal names and correct address instead of his alias because the IRS is unable to process a tax return when the taxpayer or spouse's names do not match the Social Security Administration's database. They have no children, they are self-employed, and they are very, very charitable.
SELF EMPLOYED. Santa is self-employed and accordingly would file a Schedule C, Profit or Loss from Business (Sole Proprietorship), for his business of Toy Manufacturing and Distribution. Santa can claim expenses for feeding and providing regular vet visits for his reindeer - we will discuss elves in a bit. He also has flying classes throughout the year so he must pay instructors, purchase flight manuals and maintain his flight certifications in the many countries he uses airspace. He has many elf employees with the associated expenses such as wages, health, dental and vision insurance, employment taxes, and a fully funded retirement plan. The health insurance plan is one of the best available so Santa doesn't have to worry about any penalty under the Affordable Care Act as an employer and the elves don't have to worry about the Health Insurance Marketplace or the tax credit since Santa pays the full cost of each elf's insurance.
Santa also provides onsite daycare complete with meals and employer provided education expenses for those who wish to branch out into other career fields needed in the village, such as dentistry. The Santa Claus Toy Shop provides employees with daily snacks of cookies, milk and hot chocolate which are considered business expenses. The office expenses are pretty common, paper, pencils, computer programs and computers to track all the children and their antics during the year as well as the wish list of all these children. Santa doesn't keep an inventory since he gives away everything in the shop Christmas Eve and the whole village is on vacation Christmas Day through New Year's Day when they start production for the next year.
Santa has a large number of renovations and equipment purchases each year due to the ever growing number of children he provides Christmas gifts for. It is not uncommon for Santa to claim the maximum $500,000 section 179 deduction for his new equipment each year and to depreciate any new buildings, like the new reindeer stables this year, and depreciate the remaining equipment above his maximum section 179 deduction.
Itemized Deductions. Santa donates large sums of money to various children's charities throughout the year, such as Toys for Tots, the Make a Wish Foundation, and many local organizations throughout the world that provide toys, clothes, shoes and other necessities for children.
In addition to his charitable contributions, Santa has some really high medical expenses. You see, his doctor's worry about his weight, cholesterol levels, and the effect on his heart when someone stops believing. Because of their worries, the doctors run quite a number of tests, put Santa on a strict weight-loss program throughout the year and prescribe the latest cholesterol and blood pressure medications. Santa also needs to have regular teeth cleanings and dental check-ups to ensure his teeth stay healthy enough to eat and drink all the cookies, milk, and hot chocolate he consumes on Christmas Eve. Santa has his eyesight checked each year just before his big trip and gets new glasses.
Other adjustments to income. Santa and Mrs. Claus have health insurance they pay for directly, so they can deduct the cost of their health insurance directly on their Form 1040. They are also eligible to deduct one- half of any Self-Employment taxes paid on their profit.
Even though Santa Claus is one of the most unique individuals around, his tax return is very similar to millions of other taxpayers with unique deductions, credits and other considerations. He and his family have many of the same issues and opportunities that each of us have, both good and bad. He may overlook deductions if he is not careful and leave tax refund money on the table or make some other mistake and have a tax headache. He is challenged with tax issues from changing tax rules, new tax law and even his own personal life changes that may lead to new tax deductions or benefits. I am sure right after December 25, Santa will be getting his "shoe box" ready and organizing his tax document s and planning to file as soon as he can--even Santa knows it's good to file early. Plus, he will certainly have some free time in the next few weeks and have a perfect time to get his taxes done.