Category: Taxes

Establishing credit   You must first establish a credit record if you want to have ready access to loans when you need them. You establish a credit record by borrowing money from a lender who reports to a credit bureau. So, what’s the problem? The problem is that few...

If you take a distribution from your IRA intending to make a 60-day rollover, but for some reason the funds don’t get to the new IRA trustee in time, the tax impact can be significant. In general, the rollover is invalid, the distribution becomes a taxable event, and you’re...

If you rent your principal residence to others for fewer than 15 days per year, any rental income you derive is not considered taxable income. However, if you rent your principal residence for fewer than 15 days per year, or if you do not rent your home at all,...

Answer: Yes. Series EE bonds (which may also be called Patriot bonds) are generally inexpensive, low-risk investments whose earnings are exempt from state and local taxes. In addition, in the college savings game, the interest earned by Series EE bonds (and Series I bonds) may be exempt from federal...

Answer: 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. Married filing jointly: You can usually file a joint return for the year your spouse died. Generally,...

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...

The Protecting Americans from Tax Hikes (PATH) Act of 2015 In one of its final actions for calendar year 2015, Congress passed the Consolidated Appropriations Act, 2016, a massive spending bill that will keep the federal government funded for fiscal year 2016. Signed into law on December 18, 2015,...

Answer: 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...

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...

Answer: In general, life insurance proceeds paid to you because of the death of the insured are not subject to federal income tax. To qualify for such favorable tax treatment, the life insurance contract must meet certain IRS requirements. However, proceeds may be taxable in limited cases. For instance,...

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. Often, your initial tax basis equals your cost–what you paid for the asset. For example,...

Answer: 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...

What are the tax implications of child support payments? Answer: When a separation or divorce occurs and the couple involved has one or more children, the noncustodial parent is usually ordered to pay some child support to the custodial parent. The child’s expenses over and above this sum are...

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. For 2017, this amount is $2,100...

Federal Tax Bracket   15%  25%  28%  33%  35% Taxable yield Equivalent Tax-Free Yield 2% 1.70 1.50 1.44 1.34 1.30 2.5% 2.13 1.88 1.80 1.68 1.63 3% 2.55 2.25 2.16 2.01 1.95 3.5% 2.98 2.63 2.52 2.35 2.28 4% 3.40 3.00 2.88 2.68 2.60 4.5% 3.83 3.38 3.24 3.02 2.93...

  Comparing taxable and tax-free yields involves making sure you understand a bond’s tax status. The interest on corporate bonds is taxable by local, state, and federal governments. However, interest on bonds issued by state and local governments–generically called municipal bonds, or munis–generally is exempt from federal income tax....

When selling your interest in a business, you must consider a number of factors. One very important factor is taxation. Typically, you will transfer your interest in the business to others or to your corporation in return for cash or property. This will generally result in capital gain (or...

Capital gains tax is imposed on gains realized from the sale of capital assets such as a home, an investment, or a business interest. Special maximum tax rates generally apply to long-term capital gains; these rates are typically lower than the rates that apply to ordinary income. These special...

Who should file the return? Estate representative If a court has appointed a personal representative or other estate administrator, that individual is required to file returns for the decedent. If the decedent was married at the time of death, the representative and surviving spouse, if they both agree, may...

Federal Gift and Estate Tax Year Applicable Exclusion Amount Highest Tax Rate 2009 $1 million for gift tax purposes $3.5 million for estate tax purposes 45% 2010* $1 million for gift tax purposes $5 million or $0 for estate tax purposes 35% or 0% 2011 $5 million plus DSUEA**...

The act of giving away your property, either during life or at death, will probably be subject to one or more of several types of taxes (collectively referred to here as estate taxes), either on the federal level, state level, or both. These tax liabilities may be the largest...

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...

Taxation of Investments 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? Is...

My spouse passed away this year. When I file my taxes, what filing status should I claim? Answer: 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....