So I'm planning a destination wedding over a year in advanced. We've begun putting deposits down on things happening next year.

I know I still have to pay VAT in the other country (Its ridiculous). Is there anything I should know for tax purposes in the US? Also are there any special implications because i'm paying for services in the next year?

  • Why is it ridiculous? Italians pay sales tax in the US when they come. Why wouldn't you pay there? That said, in some cases foreigners are exempt from VAT, so check this. – littleadv Feb 27 '15 at 17:26
  • I meant that VAT is 20%. (I didn't state that so i see how you understood it :-D) – Carlos Bribiescas Feb 27 '15 at 18:20
  • I know how much VAT in Europe usually is. 20% is not the highest, even. – littleadv Feb 27 '15 at 18:28
  • Yup. I shopped around for other destination wedding locations and saw that. I dont see what wrong with thinking 20% is ridiculous? – Carlos Bribiescas Feb 28 '15 at 1:09

Assuming there would not normally be tax implications (in terms of income taxes), then there are no additional tax implications just because you are paying in advance. Foreign VAT is never deductible, so in this particular case there shouldn't be any tax implications. The remainder of this answer is likely not directly applicable to your problem, but may give some context for similar problems.

If this had been purchased in the U.S. in a state with a sales tax (not VAT), and you choose to deduct sales tax rather than income tax (for example, if you have no income tax in your state), then you would deduct that sales tax typically in the year you pay it. Most individuals operate on a 'cash' basis, ie, you declare income when you (constructively) receive it and declare expenses when you (constructively) pay them, regardless of when the service occurs. For example, my mortgage company failed to pay my second property tax installment on my behalf in 2012; I found out in 2013 and paid it then. As such, I had only one property tax payment to deduct in TY 2012 and three to deduct in TY 2013.

Constructive means when you deliver a check or similar instrument, even if they don't cash the check immediately (though consult a tax adviser for a better definition and clarification whether a particular payment method would count as constructive or not).

So, if there were tax implications, it would be irrelevant that the service occurred next year; it is only relevant that you paid it this year.

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  • VAT is not a sales tax and is never deductible for an individual. – littleadv Feb 27 '15 at 17:25
  • I'll update to reflect the latter. I wasn't intending to suggest it was a sales tax. – Joe Feb 27 '15 at 18:13
  • What do you mean deduct sales tax? – Carlos Bribiescas Feb 28 '15 at 1:11
  • If you choose to, you can deduct state sales tax instead of state income tax on your federal return. This is mostly for those in states with no income tax. In this case it's not applicable but I wanted to explain the basic concept with it. Apparently not usefully. – Joe Feb 28 '15 at 5:09

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