Your Taxes
Everything tax related: Articles, Links, Presentations
Am I Having Enough Withheld?
Description: If you fail to estimate your federal income tax withholding properly, it may cost you in a variety of ways. If you receive an income tax refund, it essentially means that you provided the IRS with an interest-free loan during the year. By comparison, if you owe taxes when you file your return, you may have to scramble for cash at tax time--and possibly owe interest and penalties to the IRS as well.
Choosing an Income Tax Filing Status
Description: Selecting a filing status is one of the first decisions you'll make when you fill out your federal income tax return, so it's important to know the rules. And because you may have more than one option, you need to know the advantages and disadvantages of each. Making the right decision about your filing status can save money and prevent problems with the IRS down the road.
Accelerating Deductions/Postponing Income
Description: If you'll be in a lower tax bracket next year, you may wish to accelerate your deductions into this year and postpone your income into the following year.
Accelerating Income/Postponing Deductions
Description: If you'll be in a higher tax bracket next year, you may wish to accelerate your income into this year and postpone your deductions into the following year.
Tax Credit Sampler
Description: A tax credit reduces the amount of income tax you may have to pay. Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself.
Do I have to pay U.S. taxes when I work abroad?
Description: If you are a U.S. citizen working abroad, you may be able to minimize what you owe in U.S. income tax if you qualify for the foreign income exclusion.
Choosing a Beneficiary for Your IRA or 401(k)
Description: Selecting beneficiaries for retirement benefits is different from choosing beneficiaries for other assets such as life insurance. With retirement benefits, you need to know the impact of income tax and estate tax laws in order to select the right beneficiaries.
Designating a Beneficiary for Life Insurance
Description: A beneficiary is the person or entity you name (i.e., designate) to receive the death benefits of a life insurance policy. Some states require that your beneficiary have an insurable interest in your life or be related to you (at least at the time the contract is initiated), while others have no such restriction.
Estate Planning: An Introduction
Description: By definition, estate planning is a process designed to help you manage and preserve your assets while you are alive, and to conserve and control their distribution after your death according to your goals and objectives.
Facing the Possibility of Incapacity
Description: Incapacity means that you are either mentally or physically unable to take care of yourself or your day-to-day affairs. Incapacity can result from serious physical injury, mental or physical illness, mental retardation, advancing age, and alcohol or drug abuse.
Gift and Estate Taxes
Description: If you give away money or property during your life, those transfers may be subject to federal gift tax and perhaps state gift tax. The money and property you own when you die (i.e., your estate) may also be subject to federal estate taxes and some form of state death tax.
Trust Basics
Description: Whether you're seeking to manage your own assets, control how your assets are distributed after your death, or plan for incapacity, trusts can help you accomplish your estate planning goals. Their power is in their versatility--many types of trusts exist, each designed for a specific purpose. Although trust law is complex and establishing a trust requires the services of an experienced attorney, mastering the basics isn't hard.
Wills--The Cornerstone of Your Estate Plan
Description: If you care about what happens to your money, home, and other property after you die, you need to do some estate planning. There are many tools you can use to achieve your estate planning goals, but a will is probably the most vital.
How can I minimize taxes on my estate?
Description: This question may seem simple, but the answer is not so easy. In fact, there are experts who make their living answering just this question. Estate tax liability depends on the year in which you die and the value of your estate when you die
If I am the account owner when I die, will the value of my 529 account be included in my estate?
Description: Probably not. Generally, the value of a 529 plan is included in the estate of the designated beneficiary. All contributions to 529 plans are considered present interest gifts to the beneficiary.
The death benefit from insurance on my life will be paid to an irrevocable life insurance trust (ILIT). What if those funds are needed to pay my estate taxes?
Description: Life insurance death proceeds paid to a valid ILIT may escape estate taxation in your estate as long as the trust owns the policy and you haven't retained any incidents of ownership in the policy, such as the right to change the beneficiary.
What is the applicable exclusion amount?
Description: The applicable exclusion amount effectively exempts a certain amount from the federal gift and estate tax. In other words, if you are a U.S. citizen or resident, you will be able to leave a certain amount of your property free from this tax
Federal Estate Tax Estimator
Description: This calculator calculates estate tax based upon a taxable estate that you input. It does not show any amounts that may pass to heirs outside the taxable estate, including any additional amounts that may pass to a surviving spouse using the marital deduction. It is possible there is other property from which the estate tax could be collected.
Table of Federal Estate Tax Brackets and Exemption Limits
Description: Current federal estate tax law (1) increases the estate tax exemption from $2 million in 2008 to $3.5 million in 2009, (2) imposes a top estate tax rate of 45 percent, (3) repeals the estate tax for 2010 only, and (4) reinstates the estate tax in 2011, with an exemption amount of $1 million and a top tax rate of 55 percent.
Will I have to pay tax on my investment income?
Description: The taxation of your investment income depends on several factors, including the type of investment income you have (e.g., tax exempt, ordinary, capital gain, or tax deferred).
Can I take the credit for the elderly or disabled?
Description: This federal income tax credit is available if you are a qualified individual and your income falls within specified limits.
What is the child tax credit?
Description: The child tax credit is a per-child tax credit against your personal income tax liability. The child tax credit is $1,000 per child.
Income Tax Planning and 529 Plans
Description: The income tax benefits offered by 529 plans make these plans attractive to parents (and others) interested in saving for college. Qualified withdrawals from a 529 plan are tax free at the federal level, and some states also offer tax breaks to their residents. It's important to evaluate the federal and state tax consequences of plan withdrawals and contributions before you invest in a 529 plan.
Surviving an Audit
Description: Even the most honest of taxpayers can be left trembling at the thought of an IRS audit. Let's face it--it's right up there with public speaking. To survive an audit, you've got to arm yourself with information. You should understand what the audit process is all about, why your return was audited, what your rights and responsibilities are, and how you can appeal the findings.
Tax Benefits of Home Ownership
Description: In tax lingo, your principal residence is the place where you legally reside. It's typically the place where you spend most of your time, but several other factors are also relevant in determining your principal residence. Many of the tax benefits associated with home ownership apply mainly to your principal residence--different rules apply to second homes and investment properties. Here's what you need to know to make owning a home really pay off at tax time.
Tax Planning for Income
Description: The goal of income tax planning is to minimize your federal income tax liability. You can achieve this in different ways. Typically, though, you'd look at ways to reduce your taxable income, perhaps by deferring your income or shifting income to family members. You should also consider deduction planning, investment tax planning, and year-end planning strategies to lower your overall income tax burden.
Tax Planning for the Self-Employed
Description: Self-employment is the opportunity to be your own boss, to come and go as you please, and oh yes, to establish a lifelong bond with your accountant. If you're self-employed, you'll need to pay your own FICA taxes and take charge of your own retirement plan, among other things. Here are some planning tips.
Taxation of Investments
Description: It's nice to own stocks, bonds, and other investments. Nice, that is, until it's time to fill out your federal income tax return. At that point, you may be left scratching your head. Just how do you report your investments and how are they taxed?
Year-End Tax Planning
Description: As the end of the year approaches, it's time to consider strategies that can help you reduce your tax bill. But most tax tips, suggestions, and strategies are of little practical help without a good understanding of your current tax situation. This is particularly true for year-end planning. You can't know where to go next if you don't know where you are now.
Personal Deduction Planning
Description: Taxes, like death, are inevitable. But why pay more than you have to? The trick to minimizing your federal income tax liability is to understand the rules and make the most of your tax planning opportunities. Personal deduction planning is one aspect of tax planning. Here, your goals are to use your deductions in the most efficient manner and take all deductions to which you're entitled.
Qualifying for the Home Office Deduction
Description: Working from home can certainly provide you with personal benefits, such as a flexible schedule and more family time. But increasing numbers of people are discovering the tax advantages as well. It's no secret that you generally can't deduct certain personal expenses (e.g., homeowners insurance, utilities, and home repairs) on your federal income tax return. But if you're using part of your home as a home office, you may be able to write off part of these expenses.
Understanding Personal Tax Credits
Description: Have you ever thought that you're paying too much income tax? You may be, if you're not claiming all of the tax credits for which you are eligible when you file your federal tax return. These credits may significantly reduce your tax liability.
Can I deduct home office expenses?
Description: If you use part of your home to conduct your trade or business, you might be able to deduct certain related expenses. To qualify for the home office deduction, you must pass certain tests.
Income Tax Tips: Business Insurance
Description: Insurance serves many purposes for a business. You'll need insurance to protect your business from property damage, personal injury suits, and other forms of financial loss. In addition, you may want to provide your employees with certain types of insurance (e.g., group health and life insurance) to attract and retain them.
Tax Planning for Annuities
Description: Favorable tax treatment is one of the main reasons for buying an annuity. But what exactly are the tax benefits? And are there any drawbacks? It's important to know the answers to these questions before deciding whether to purchase an annuity.
Tax Planning Tips: Auto Insurance
Description: It's no secret that auto insurance can safeguard your assets and provide you with peace of mind. But did you know that auto insurance may also benefit you at tax time? Certain insurance-related costs can be deducted on your individual federal income tax return. You'll need to know what can be deducted, and how insurance reimbursements can affect those deductions.
Tax Planning Tips: Disability Insurance
Description: The income you receive from disability income insurance may or may not be taxable. The taxability of disability income insurance benefits depends on what type of benefits you receive, whether the premiums were paid with pretax or after-tax dollars, and who paid the premiums (you or your employer).
Tax Planning Tips: Life Insurance
Description: Understanding the importance of life insurance is one thing. Understanding the tax rules is quite another. As insurance products have evolved and become more sophisticated, the line separating insurance vehicles from investment vehicles has grown blurry.
Tax Tips: Health Insurance
Description: Your health insurance coverage probably came in handy several times over the past year. It all seemed so simple at the time--you paid a deductible, and your insurance usually kicked in the rest. But what do you do at tax time? Just what are you taxed on, and what can you deduct on your federal income tax return?
Tax Tips: Homeowners Insurance
Description: The purpose of home insurance is obvious. The tax rules surrounding home insurance, though, aren't always so clear. For example, if your insurance won't cover you for a given loss, are you simply left holding the bag, or can you expect some tax relief? And what about premiums--can you deduct them or not? Here are some tax tips to help you make sense of it all.
Tax Tips: Long-Term Care Insurance
Description: Your chances of requiring some sort of long-term care increase as you age, and long-term care insurance (LTCI) can help you cover your long-term care expenses. Although tax issues are probably not foremost in your mind when you buy LTCI, it still pays to consider them. In particular, you should explore whether your premiums will be deductible and your benefits taxable.
General Business Tax Credits
Description: First established by Congress to further social or economic objectives such as promoting increased investment in disadvantaged communities, the general business tax credit is actually a series of nonrefundable tax credits individuals and business entities may be entitled to claim.
Is My Home Mortgage Interest Fully Deductible?
Description: Use this tool to determine whether your home mortgage interest is fully deductible or subject to limitations. First, check whether you meet the conditions to deduct home mortgage interest, then answer the questions below to determine the result.
Am I having enough tax withheld from my paycheck?
Description: It is important that you properly estimate your tax withholding. If an insufficient amount of taxes is withheld, you may end up owing a substantial sum, including penalties and interest, when you file your tax return.
Are scholarships and grants subject to federal income tax?
Description: That depends on several factors. If you are a candidate for a degree at an educational institution and receive a qualified scholarship or fellowship that you use for tuition, fees, and required expenses (e.g., books, supplies, and equipment), you need not include the scholarship amount in your taxable income.
Do I have to file a federal income tax return?
Description: In general, you must file a federal income tax return if you are a U.S. citizen or resident alien and your gross income equals or exceeds a specified figure. The applicable gross income figure depends on several factors, including your filing status and age. There are also special filing requirements for dependents.
How did the Jobs and Growth Tax Relief Reconciliation Act of 2003 change capital gains tax rates?
Description: If you sell or exchange a capital asset for more than your adjusted basis in the asset, the result is a capital gain. The Jobs and Growth Tax Relief Reconciliation Act of 2003 reduced the maximum tax rate on most long-term capital gains (those held for longer than 12 months) and eliminated the "super" long-term capital gains rates on the sale of assets held longer than five years. The reduced rates apply to sales and exchanges made on or after May 6, 2003 and before January 1, 2009.
I don't have the cash to pay my taxes. What can I do?
Description: If you don't have the cash to pay your taxes and are unable to borrow the money from a relative or friend, you still have a few options. You can pay by credit card, ask for a short-term extension, propose an installment payment agreement or an offer in compromise to the IRS, or declare bankruptcy if you qualify.
I have investment property. What does basis mean, and how do I determine the basis of my property?
Description: To determine your basis in an asset for purposes of calculating capital gain or loss upon the sale or other disposition of the property, you need to understand two terms--initial basis and adjusted basis.
I received a state tax refund last year. Must I include that amount as income on my federal return this year?
Description: It depends on several factors, the most important of which is whether you itemized deductions on your federal income tax return last year. If you did not itemize deductions on your federal tax return last year, do not report any of the refund as income.
My spouse passed away this year. When I file my taxes, what filing status should I claim?
Description: As the surviving spouse, you have several filing choices that may be appropriate. You may be able to choose married filing jointly, married filing separately, qualifying widow(er), or head of household.
What is my tax bracket?
Description: Generally, a tax bracket is the income tax rate at which you are taxed for a certain range of income. The income ranges vary, depending on your filing status: single, married filing jointly (or qualifying widow(er)), married filing separately, or head of household.
What is the alternative minimum tax?
Description: The alternative minimum tax (AMT) is a separate tax computation that affects only certain taxpayers. The purpose of the AMT is to ensure that taxpayers with substantial income will not escape taxation entirely by employing certain exclusions, deductions, and credits.
What is the basis of property received as a gift?
Description: To determine your basis in property you received as a gift, you must know the property's adjusted basis to the donor just before it was given to you, its fair market value (FMV) at the time it was given to you, and the amount of any gift tax paid with respect to the gift.
What is the kiddie tax?
Description: Special rules commonly referred to as the "kiddie tax" rules apply when a child has unearned income (for example, investment income). Children subject to the kiddie tax are generally taxed at their parents' tax rate on any unearned income over a certain amount.
What penalties and interest will I be charged for paying and filing my federal income taxes late?
Description: If you fail to file your federal income tax return and pay your tax by the due date, you may have to pay one or more penalties, plus interest. Although you are allowed an automatic extension for filing your return if you mail in the appropriate form, you are not allowed an extension for paying your taxes. Interest is charged on any unpaid tax from the due date of your tax return until the date of payment. The interest rate is determined every three months.
What's the difference between an "injured spouse" and an "innocent spouse"?
Description: From the viewpoint of the IRS, an injured spouse and an innocent spouse are quite different. You may qualify as an injured spouse if your joint income tax refund was held back and applied toward your spouse's past due liability for certain debts, including defaulted student loans, taxes, or child support. In contrast, you may qualify as an innocent spouse if you signed a joint income tax return but were not aware that your spouse understated the tax liability.
Can I take the tax credit for child care?
Description: The child and dependent care credit is a tax credit for up to 35 percent of certain expenses you paid to provide care for your dependent child, your disabled spouse, or a disabled dependent while you worked or looked for work. To be eligible for the credit, you must care for a qualifying person, incur work-related expenses, and have earned income.
Now that my child is in college, am I entitled to any education tax credits?
Description: You may be. There are two education tax credits--the American Opportunity credit (Hope credit) and the Lifetime Learning credit. To claim either credit in a given year (you cannot claim both in the same year), you must list your child as a dependent on your tax return. In addition, you must meet income limits.
What are the Hope credit and the Lifetime Learning credit?
Description: The Hope credit (renamed the American Opportunity credit) and the Lifetime Learning credit are tax credits for taxpayers who pay certain higher education costs. These credits depend on the amount of qualified tuition and related expenses you paid in a given year, as well as the level of your modified adjusted gross income (MAGI).
What is the earned income credit and who qualifies for it?
Description: The earned income credit (EIC) is a refundable tax credit available to certain low-income individuals who have earned income, meet adjusted gross income thresholds, and do not have more than a specified amount of disqualified income (excess investment income). If you file a federal tax return and meet all applicable requirements, your income tax (if any) will be reduced and you might receive a refund.
Can I deduct premiums paid for long-term care insurance (LTCI)?
Description: It depends on several factors. Your LTCI contract must be a qualified one, and the total of your medical expenses (including your LTCI deduction) must exceed 7.5 percent of your adjusted gross income (AGI). Qualified LTCI premiums are deductible as medical expenses (subject to the 7.5 percent of AGI floor) within certain limits, based on your age.
Can I deduct the cost of improvements or repairs I've made to my home?
Description: Generally speaking, you can deduct neither the cost of improvements nor the cost of repairs you've made to your principal residence. (However, improvements to your home for necessary medical care may be deducted as a medical expense, if all requirements are met.) Although the improvements cannot be deducted, they do increase the basis of your home.
How do I deduct and substantiate my gambling losses?
Description: You can deduct gambling losses only if you itemize deductions on your federal income tax return. Also, the amount of losses you deduct cannot exceed the amount of gambling income you have reported on your return.
I paid my mother's real estate taxes last year. Can I deduct this on my tax return?
Description: Probably not. A real estate tax can be deducted only by the owner of the property upon which the tax is imposed. Therefore, if the deed to the property lies in your mother's name, you are not entitled to a deduction for the real estate taxes even if you are the one who actually paid them. Generally speaking, taxes are deductible in the year you pay them.
I refinanced my principal home last year and paid points. What are points, and can I deduct them on my tax return?
Description: Points are costs that a lender charges when you take a loan on your home. One point equals 1 percent of the loan amount borrowed. If the points are charged for services that the lender provided in preparing or processing the loan, they are not deductible. However, if the lender charges the points as up-front interest and in return gives you a lower interest rate on your loan, the points may be deductible. It doesn't matter whether your lender calls the charge "points" or an "origination fee.
If I work at home occasionally, am I entitled to a home office deduction?
Description: To qualify for an income tax deduction for home office expenses, the IRS requires that you meet two tests--the place of business test and the exclusive and regular use test.
Is student loan interest deductible?
Description: You may be able to deduct all or part of the student loan interest you've paid during the year, assuming you meet the requirements. You may be able to deduct up to $2,500 each year from your gross income if you've paid interest on a qualified education loan for qualified higher education expenses during the year.
My spouse and I are filing separate returns. Can we both itemize our deductions? If so, how do we split the deductions?
Description: When spouses file separately, both must use the same method of claiming deductions. That is, either both parties must itemize, or both parties must take the standard deduction. If you choose to itemize, it's important to know how to divide your deductions.
My town has assessed against me a real estate betterment for new sewer lines installed in my street. May I deduct this amount on my tax return?
Description: Probably not. In general, taxes charged for local benefits and improvements that increase the value of the property are not deductible as real estate taxes. Examples of betterments include assessments for sidewalks, streets, water mains, sewer lines, and public parking facilities.


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