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Q. On an Adjusted Gross Income of $70,000 per year, what percentage can be safely deducted for charitable contributions on the federal income tax Form 1040?
>>>>>>IR$Maven's
reply:
According
to the latest guidelines from the IRS, for an AGI from $50,000 to $75,000,
an "average" taxpayer has been deducting $1,816 of charitable contributions.
This, of course, is just an average. You should always have checks or
receipts to substantiate a majority of your deduction. Otherwise, you
are playing "audit roulette", which can prove to be costly in the long
run.
******************************************
Q. My 16 year old daughter was traveling down the the expressway in her car(older-just liability insurance), when the car in front of her dropped a sofa and then drove off into the sunset. The damage to her car is over $1000 with no insurance to collect. Can this somehow be claimed on our return as a casualty loss?
>>>>IR$Maven's reply:
Yes, it can be deducted as a casualty loss. However, you can only deduct the portion of the loss that exceeds ten percent of adjusted gross income, plus $100.
***************************************************
Q. On an Adjusted Gross Income of $70,000 per year, what percentage can be safely deducted for charitable contributions on the federal income tax Form 1040?
>>>>>>IR$Maven's reply:
According to the latest guidelines from the IRS, for an AGI from $50,000 to $75,000, an "average" taxpayer has been deducting $1,816 of charitable contributions. This, of course, is just an average. You should always have checks or receipts to substantiate a majority of your deduction. Otherwise, you are playing "audit roulette", which can prove to be costly in the long run.
******************************************
Q. Can I deduct the cost of going to a community college to increase my skills as an accountant? I presently earn my living as one and want to learn more...
>>>>IR$Maven's reply:
I do think your education expenses are deductible for since you enhanced the skills required in your current position. I am assuming that subsequently you were still in the same or a similar job. To be deductible, the courses must have been related to your existing job responsibilities.
****************************************************
Q. I am beginning a new career as a Real Estate agent this year. I know I will be classified as self employed. I have always worked for a company that issues W-2's, and withholds taxes from my pay. What would be your best advise on starting off right as far as what records I need to keep during the year and how much of my commission checks should I tuck away for taxes.
>>>>>IR$Maven's Reply:
As the year progresses, keep a running list of your income checks, since mistakes are often made by payers when preparing the year-end 1099 forms. Next, open a separate checking account for the business income & expenses. If you use personal cash for business expenses, try to reimburse yourself with a business check so that all business expenses are recorded in one place. Lastly, estimate what your net income for the year will be. It will be subject to self-employed (FICA) tax at the rate of approximately 15%. This net income less your standard deduction (or itemized personal deductions) and personal exemptions produces your taxable income, which is taxable at the tax table rate. Info on tables, deductions, etc. is easily obtainable from the IRS 1040 booklets or the IRS web site at IRS.GOV. To keep down penalties, try to pay the combined FICA and income tax in 4 quarterly installments, which are due on 4/15, 6/15, 9/15/99 and 1/17/00.
***********************************
Q. I just found out about the tax deduction on student loan interest. I took out 2 loans, in 1985, and in 1986. Will I be able to take advantage of this tax break?
>>>>>>IR$Maven's reply:
It appears that you will not be entitled to a deduction if you graduated before 1994. The period in which you measure your entitlement is five years and the five year period starts with the first month that you begin to pay the interest after graduation. Also, the new law is applicable only to interest paid beginning Jan. 1, 1998.
Q.
Is the interest on a home improvement tax deductible? I have a Form 1098
from the finance company with the interest paid this tax year.
>>>>>IR$Maven's Reply:
The interest is deductible only if it is part of a home equity loan ($100,000 maximum loan). Otherwise, it is strictly personal in nature.
***********************************
Q. I had a lot of doctor and hospital bills in 1998 but I did not have enough to claim. It looks like it will happen again in 1999. My question is, can I claim these together this year?
>>>>IR$Maven's reply:
No, you cannot bunch medical bills from different years. Try to plan in advance by bunching the payments into one year, so that you can exceed the deductible threshold which is 7_% of Adjusted Gross Income.
***************************************************
Q. My brother and I own the home that our parents live in. All principal, interest, taxes and insurance are paid by us. Our parents do not contribute or pay us rent of any kind. We also own our own homes. How much of the interest and real estate taxes are deductible by us on the home our parents live in?
>>>>>>IR$Maven's reply:
Because you own the home, the full amount of interest and real estate taxes is deductible by you and your brother. Because you receive no rent from your parents, the house is not a rental property; so, you can deduct ONLY the mortgage interest and real estate taxes on your schedule A, Form 1040.
***********************************
Q. My brother and I own the home that our parents live in. All principal, interest, taxes and insurance are paid by us. Our parents do not contribute or pay us rent of any kind. We also own our own homes. How much of the interest and real estate taxes are deductible by us on the home our parents live in?
>>>>>>IR$Maven's reply:
Because you own the home, the full amount of interest and real estate taxes is deductible by you and your brother. Because you receive no rent from your parents, the house is not a rental property; so, you can deduct ONLY the mortgage interest and real estate taxes on your schedule A, Form 1040.
***********************************
Q. I am single and I was advised that I should declare "0" exemptions on my W-4 Form, which is used to compute my withholding taxes. In this way the maximum amount of taxes will be taken from my check, and when I file my taxes I would get most of the taxes back. On the other hand, I heard that I should declare up to 2 exemptions on my W-4, and put the extra taxes into a money market or some type of savings so I can earn the interest instead of the government. Which statement is true, or which would be more beneficial for me in the long run?
>>>>IR$Maven's reply:
I firmly believe that you should never have excess taxes taken from your salary that knowingly results in a substantial refund at tax filing time. In effect, you are giving the U.S. Treasury a short-term loan. However, you need to be somewhat regimented to make sure that you take the weekly/monthly tax savings and invest it consistently. One simple way would be to have a mutual fund debit your savings or checking account every month for the same amount.
*******************************************
Q. I am 19 years old in 1999 and can be claimed as a dependent by my mom. I held a job (full time) over the summer and part time during the fall semester. I wanted to know what my gross income could be before I had to pay taxes on it.Does this amount get any higher if I'm not claimed as a dependent? Is the tax break greater for me (as a non dependent) or for my my mom (if she claims me)?
>>>>>>IR$Maven's reply:
(1) If you are taken as a dependent on your mom's tax return, you can earn up to $4,300 before you are subject to income tax. This is your Standard Deduction.
(2) If not a dependent of your mom, you could have an additional $2,750 of taxable income before being hit with any income tax. This is your Personal Exemption.
(3) The $2,750 exemption for you is worth the same no matter who claims it. However, if your mom was in a taxable income bracket higher than 15%, the tax savings would be greater for her compared to the 15% tax rate on your return.
*************************************************
Q. I just found out about the tax deduction on student loan interest. I took out 2 loans, in 1985, and in 1986. Will I be able to take advantage of this tax break?
>>>>>>IR$Maven's reply:
It appears that you will not be entitled to a deduction if you graduated before 1994. The period in which you measure your entitlement is five years and the five year period starts with the first month that you begin to pay the interest after graduation. Also, the new law is applicable only to interest paid beginning Jan. 1, 1998.
*************************************************
Q. How does the IRS recognize earnings for the year? Is it based on the date of the payroll check or is it based on the the time period the check covers . For example, if the check is date 1/1/00, and it is for the pay period of 12/19/99 to 12/26/99.
>>>>IR$Maven's reply:
The IRS recognizes earnings based on the date of the payroll check. In your example, if the check is dated 1/1/00, the earnings belong to 2000 and will be included in gross wages on your W-2 for 2000.
*****************************************
