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Weekly Tax Tips |
| Tax Tip - October 20th, 2008
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You may think of myths as fables from ancient times, but they exist in today's world too, especially in the realm of taxes. Here are three. Myth #1: Putting assets in a trust will save income taxes. Truth: Legitimate trusts offer tax planning opportunities. However, as a general rule, trust income is subject to tax, which must be paid by the person creating the trust, the beneficiary of the trust, or the trust itself. In addition, while some trust expenses may be deductible, standard tax law caveats apply, such as the nondeductibility of personal expenses. Myth #2: There's no need to report income when no tax form is received. Truth: You're responsible for including all of your taxable income on your tax return. For instance, if you sell items via a Web-based auction site, you may have to report income. That's true even if the company operating the auction site does not send you a Form 1099. Myth #3: A loss on the sale of my house is deductible. Truth: When you sell personal property such as your home for less than you paid, the loss is not deductible. Remember though, that gains could be treated differently. Under present law, you can exclude up to $500,000 of gain on the sale of your primary residence ($250,000 for singles) if you meet certain ownership and use tests. A gain over those amounts may be taxable. Have a question about tax law and how it applies to you? Please call. We're here to help you sort fact from fiction.
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