12/29/2003 - Where is your principal residence?
If you own more than one home, do you know which is your principal residence? It could be more important than you think. Why? Because when you sell a property, you can generally exclude up to $250,000 of gain ($500,000 for a married couple) from tax. But that's only if you've used the property as your principal residence for two of the last five years.
12/22/2003 - Feeling charitable? Review the tax rules
As the holidays approach, you're probably going to give a little extra to your favorite charity. If you itemize deductions, your kindness may bring you an extra reward in the form of a tax deduction. For some time, Congress has been considering new legislation that might extend that reward to nonitemizers.
12/15/2003 - There's still time for some last-minute deductions
You still have time to cut your 2003 tax bill by squeezing in a few more itemized deductions. But first check that it still pays to itemize. The standard deduction for married filers increased to $9,500 this year. And remember that itemized deductions begin to phase out for high-income taxpayers. If you plan to itemize, here are some suggestions.
12/1/2003 - Charity benefit events: What can you deduct?
This is the season when we're often asked to buy tickets for charity events. The tickets are usually priced a little above market value because the proceeds are for a good cause. If you attend, what sort of tax write-off can you take? And what happens if you can't attend but buy a ticket anyway? Here's how the tax deduction works.
11/24/2003 - Does the IRS owe you money?
Are you still waiting to receive your check for the child tax credit from the IRS? If so, it might be because you moved this year and forgot to give the IRS your new address.
11/17/2003 - Flexible spending accounts become more flexible
If you have a flexible spending account (FSA), life just became a little easier. Companies often include FSAs as part of a cafeteria plan of employee benefits. If you participate in a FSA, you can set aside pretax dollars from your paycheck to pay for certain unreimbursed health care or child care costs. The major problem has been that you forfeit any unused dollars in your account at the end of each plan year.
11/10/2003 - Know when to deduct mortgage points
Did you refinance your mortgage this year? Or take out a mortgage for the first time? Millions of us did, attracted by the lowest rates in decades. But knowing how and when to deduct the mortgage points we paid is not quite so simple. The rules are slightly different for a first-time mortgage, a refinance, or a second refinance. Here's a quick recap.
11/3/2003 - Sneak a peek at your 2003 tax bill
This is the perfect time of year to take an advance look at your 2003 tax bill. By now you should have a pretty good handle on your likely earnings and tax deductions for the year. Yet there are still a couple of months left to make adjustments if you find you're heading for an underpayment penalty or looking at a bigger refund than you expected.
10/27/2003 - Some qualify for a tax credit to pay for health insurance
Did you know that some workers and retirees can claim a tax credit to help pay for their health insurance costs? Two groups qualify for the credit, known as the Health Coverage Tax Credit (HCTC). If you are eligible, you can claim a tax credit to pay 65% of the costs of qualified health insurance coverage.
10/20/2003 - How to be a better informed voter - courtesy of the IRS
The election season is in full swing, and we're being bombarded by ads and appeals from various political groups. But you can't always tell from the name who is behind a political group or who is providing the funding. Now the IRS has made it a lot simpler to find out. They've created a special Web site where it's easy to search for the answers.
10/13/2003 - Don't let your life insurance be subject to estate taxes
Life insurance is a valuable tool for estate planning. By having adequate life insurance to pay estate taxes, you can leave more to the next generation. The pitfall is that if you have any "incidents of ownership" in the policy, proceeds from your life insurance will be included in your estate and will be subject to estate taxes. "Incidents of ownership" include the right to cancel or assign a policy, revoke an assignment, use the policy as collateral for a loan, borrow the cash value, or change a beneficiary.
9/29/2003 - Don't ignore deductions, or you might overpay your taxes
Did you itemize your deductions on last year's tax return? Most taxpayers didn't. In recent years about 70% of filers have chosen the standard deduction instead of itemizing their state and local taxes, mortgage interest, charitable contributions, and other eligible deductions. But that could be a costly mistake. Last year, a Congressional study found that approximately one million people overpaid their taxes because they took the standard deduction rather than itemizing their deductions.
9/1/2003 - Don't neglect estate planning
Since there is no legal requirement to do estate planning, many of us let it slide. It is not like an income tax return that is required by law, so why should we bother?
8/25/2003 - Your corporation needs good corporate minutes
Writing up the minutes of board of directors' meetings is not exactly a high priority for most business owners. Yet well-documented corporate minutes can provide valuable supporting evidence if your tax positions are ever questioned.
8/11/2003 - Be aware of a new IRS audit program
Be aware of a new IRS audit program called the National Research Program that is now underway. The program is measuring taxpayer compliance and error rates. Results will provide new benchmarks for the computer programs the IRS uses to flag returns for its regular audit activities. The good news is that the audits will be less intrusive than the line-by-line audits of ten years ago, and they should result in fewer unnecessary audits in the future.
8/4/2003 - Your check may be in the mail
On Friday, July 25, the first of some 25 million checks were mailed to taxpayers by the federal government. The checks are an advance payment of the 2003 increase in the child tax credit provided by this year's new tax law.
7/28/2003 - There are tax breaks when you do charitable work
If you do volunteer work for a charitable organization and have not kept track of your out-of-pocket expenses, you might be passing up an excellent opportunity to lower your tax bill. To qualify, your unreimbursed expenses must relate directly to the charity, and you must itemize your deductions on your tax return. Here is a brief rundown of some possible deductions.
7/14/2003 - An amended return may make sense for you
Since the tax return deadline for 2002 has come and gone, you may be tempted to file your tax records and forget about them. However, there may be some situations in which you may want to re-visit your taxes and file an amended return to claim a refund.
6/30/2003 - Should you change your tax payments?
The new tax law cut 2003 tax rates for many taxpayers. With lower tax rates, you may be wondering if you should change your tax withholding or quarterly tax estimates. The answer depends on how you earn your income.
6/23/2003 - Should you expect a refund check for the child tax credit?
This year's tax legislation raised the child tax credit from $600 to $1,000 per child, effective for 2003. Congress has instructed the IRS to mail out checks this summer for the amount of the 2003 increase. The idea is to pump money into the economy now, rather than waiting until people file for their refunds next year.
6/9/2003 - Plan for lower investment taxes
There's good news if you have investment income from dividends or capital gains. The new tax law cuts the tax rate on both. It's worth doing a little planning to maximize your tax savings.
5/26/2003 - Your boat or RV might be your second (tax) home
You may spend so much time in your boat or RV that it feels like a second home. Did you know that the IRS might agree with you? In fact, a boat or recreational vehicle can qualify for some of the tax breaks associated with a second home. Specifically, interest you pay on a loan to purchase a boat or RV could be deductible as mortgage interest.
5/5/2003 - Watch out for use taxes when you shop out of state
Everyone has heard of sales tax, but few people are familiar with use tax. Use taxes are similar to state sales taxes but with one difference. A sales tax is levied on purchases made within the state. A use tax is levied on purchases made out of state when the goods are brought into the state to be used.
4/28/2003 - The disabled get tax breaks
A variety of tax breaks are available to help disabled taxpayers cope with the financial burdens of disability. Tax relief falls into three categories. First, many types of disability payments are exempt from taxes. Second, disabled taxpayers can deduct a number of special expenditures related to their disability. Finally, some special tax credits are available. Businesses that improve access for the disabled are also eligible for tax credits and deductions.
4/21/2003 - A gift isn't complete without tax records
Imagine this scenario. Your wealthy Uncle John is something of an art collector, buying paintings and sculptures from promising young artists. When he retires, he moves into a small condo in a retirement community and has to downsize his art collection. He gives away much of his art to family members, and you receive an abstract painting. He tells you that he paid $5,000 for it only two years ago.
4/14/2003 - Self-employment gives you some tax breaks
When it comes to taxes, being self-employed has some advantages. Whether you work for yourself on a full-time basis or just do a little moonlighting on the side, the government has provided you with a variety of attractive tax breaks.
4/7/2003 - The "saver's credit": one more reason to save for retirement
Did you know you might be able to earn a tax credit as well as a tax deduction for contributing to your IRA or company retirement plan? In 2001, Congress authorized the "saver's credit" to encourage lower-income taxpayers to save more for retirement. If you qualify, a percentage of your contributions to an IRA or a qualifying plan will directly reduce the taxes you owe. Here's how it works.
3/10/2003 - Consider your tax filing status when planning for divorce
It's difficult enough to think about taxes under normal circumstances. Finding yourself amid a divorce action can make this task even more daunting. A little planning, however, may ease this burden. Consider, for example, the following ideas about your tax filing status if your divorce wasn't final by December 31, 2002.
2/10/2003 - A tax professional gives you more than a tax return
At this time of year, advertising for tax preparation software is everywhere. You may be asking yourself, "Why do I need a tax professional when sophisticated tax software is readily available? After all, tax software contains all the latest tax changes and automatically checks for arithmetic errors."
2/3/2003 - Know the tax difference between alimony and child support
Divorce is a sad experience for all concerned. The last thing you want to think about is taxes, but tax issues are important. If you fail to negotiate your divorce settlement with taxes in mind, you may regret it for years to come. One important tax issue is whether you call support payments alimony or child support.
1/20/2003 - Get tax relief when disaster strikes
Wildfires and floods in the summer, tornadoes in November, ice storms in December - 2002 was a typical year for disasters. If a natural disaster strikes your area, the only bright spot might be the opportunity for tax relief.
1/6/2003 - Pay attention to the "nanny tax"
Do you remember the nanny tax scandals? In recent years, several high-profile political figures had their appointments derailed because it turned out they hadn't paid their nanny taxes. You may not lose out on high political office, but you could be liable for interest and penalties if you overlook this tax.
"Tax Tips" are published weekly to provide useful tax information. Return to this site every week for helpful tax-cutting suggestions, tax reminders, and current tax information.
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