Personal Tax Preparation &
Income Tax Planning Tips from
Brookwood Tax Service -- Summer 2004 Archive
Articles
(NOTE: The tax
information in the following articles was current as of the date on the
page. Tax law may have changed since these articles were posted.)
New Tax Break for Medical Expenses
Check out the New Health Savings Account
You can now put aside up to $2,600 (for an
individual) or $5,150 (for a family) into a tax-deductible health savings
account (HSA) to cover out-of-pocket medical expenses in conjunction with
a high-deductible health insurance plan.
See the
Full Article
for details.
Did You Lose Money in Your IRA?
You May be Able to Deduct that Loss
If the bear market savaged your IRA and it's value
is still below the total of your after-tax contributions, you may be able
to deduct the loss on your tax return. You must cash out all IRA's
of the same type (Roth or traditional) in order to claim the deduction.
Full Article
Non-Cash Charitable Contributions
How to Claim the Deduction for Donating
Your Car
The tax code allows charitable deductions for
non-cash contributions of property such as used automobiles, but there are
specific rules that must be followed. Always document the value
claimed for the donated property -- if the value is more than $5,000, you
must have a professional appraisal.
Full Article
Does Your Employer
Give You Stock Options?
Tax Treatment Varies Depending on the Type of Option
If you exercise non-qualified stock options, the
difference between your exercise price and the market value on the day of
exercise is considered taxable earned income and will be reported on your
W-2. Incentive stock options (also called qualified options) can
qualify for the lower capital gains tax rate if the stock is held longer
than one year, but also may trigger alternative minimum tax (AMT)
liability for the employee.
Full Article
Making Gifts to
Children
Consider the Tax Consequences of the Kiddie Tax
Investment income of a child under the age of 14
is taxed at the top tax rate of the child's parents, under a provision
known as the Kiddie Tax. Parents, grandparents and other relatives
considering gifts of income-earning assets to children should consult a
tax advisor regarding the possible tax consequences.
Full Article
Sell It on e-bay!
You May Have to Report the Income on Your Tax Return
Sales of property for more than
their cost generate taxable income. Taxpayers who sell property at
garage or yard sales, or via the Internet on sites such as ebay, may have
to report taxable income.
Full Article
Repayment of Income Reported on Previous Tax
Returns
May Generate a Tax Deduction on Your Current
Year Return
Taxpayers sometimes are required to pay back part of income previously
reported on tax returns. Some types of income that occasionally are
subject to payback are disability and Social Security benefits which are
later determined to have not been properly paid. In these
situations, taxpayers may be able to claim a tax deduction for the repaid
amount.
Full Article
Payments From a Legal Settlement May be
Taxable
Unless They're Paid for Physical Injury or Illness
Most payments resulting from lawsuits are taxable
income to the taxpayer winning the lawsuit or benefiting from an
out-of-court settlement. Only where payments are for personal
physical injury or a physical illness are payments not taxable.
Full Article
Tax Benefits for Members of the Military
The Military Family Tax Relief Act of 2003 has various benefits related
to military service. Several earlier tax law provisions gave breaks to
those serving in combat areas.
Tax
Information for Members of the U.S. Armed Forces has links to these
details and more.
Deduct Tuition Payments to a Religious School?
The IRS says, "No!"
In a private letter ruling, the IRS determined that payment of
parochial school tuition is not deductible as a charitable gift, because
the parents receive a benefit for the payment in the form of the education
for their child. The IRS has previously held that "donations" to a
religious organization that operates a school with the understanding that
the donor's child will attend the school at no additional cost likewise is
not a charitable deduction.
My Stock Tanked - Can I Write Off the Loss?
A loss on a capital asset can offset a taxable
capital gain, and can be used to offset up to $3,000 of other income each
year. If your loss exceeds $3,000 in any year, you are allowed to
carry it forward to future years and use $3,000 each year to offset other
income until the full amount of your loss is used up.
