Tax Info Blog

The End of Tax Info Blog

2009-03-10T16:17:04-04:00

As you can tell from the date posts on this blog, I haven't updated in awhile. After months of telling myself I would, I just don't think I'm going to be able to consistently deliver content. Between the day job, the tax business, and my growing family, I no longer have the time. Feel free to contact me at taxplaya@gmail.com with any questions. Any clients reading this, I'm of course still going to do the tax business.

Glut of Posts Will Be Up Later This Week

2008-09-15T19:09:14-04:00

Sorry I've been slow to post--lots going on moving-wise.

Moving Expense or Medical Expense?

2008-09-02T11:39:00-04:00

Q: I have to move from my second floor condo to a ground floor because the steps are too much for me as I have a medical issue. Are my moving expenses tax deductible ? What if I were to install an elevator? Mary Kate A: As a moving expense, no way. For one thing, it doesn't even pass the distance test. However, not all is lost. It sounds to me like the elevator might be a deductible medical expense. Here's what IRS Publication 502, "Medical Expenses" has to say... You can include in medical expenses amounts you pay for...

Excluding Tax on US Pensions If You Live Overseas?

2008-08-26T11:19:00-04:00

Q: Am I entitled to any type of "foreign earned income exclusion" on my U.S. retiree pension while residing in Spain? Could I take a tax credit for foreign taxes paid on my U.S. Income? RD A: Afraid not. Chances are, Spain won't try to tax your U.S.-source pension. Since you're (presumably) a U.S. citizen or national, you will be responsible for paying U.S. income tax on the pension. In the unlikely event you must pay Spanish income tax on the U.S. pension, your only resource would be the foreign tax credit.

S-Corporations and Unemployment Tax

2008-08-20T15:02:20-04:00

Q: I know that an S-corporation shareholder-employee must be paid a "reasonable salary." Does a single-shareholder S-corporation have to pay unemployment tax on this salary? Mike A: Yes. An shareholder-employee of an S-corporation is considered a common law employee for federal employment tax purposes. This means that FICA and FUTA (unemployment) taxes must be paid. It also means that you must pay state unemployment taxes. In reality, that means that any S-corporation paying a reasonable salary must probably hire a payroll service.

The Nuts and Bolts of Leasehold Improvement Depreciation

2008-08-11T09:15:00-04:00

Q: I leased a building for five years and I have modified the inside of the building to make multiple rooms (9 rooms total plus bathroom) for my spa and hair salon business. I believe these changes fall in the leasehold improvements category but I am confused about how I should depreciate the capital improvements to the building. Do I depreciate the capital improvements over the five year lease contract or over a period of 15 years? Also, I started the modifications in late 2007 so I had expenses in 2007 but the modifications were not completed until April 2008...

"New" Rules for Charitable Contributions

2008-08-06T11:29:52-04:00

I'm not normally wont to cut and paste from an IRS update, but I get so many confused clients on the rules for deducting cash or cash-equivalent charitable contributions. So, I thought I would both link to and paste this very handy update the IRS just published: *** Charitable Contributions Did you make a cash contribution to your favorite charity? Have you recently spent a weekend cleaning stuff out of your garage or basement that you then donated to a local charity? Charitable contributions can be tax deductible, but you must have the proper records to support your deduction. Due...

Deducting Travel Expenses On a Timeshare Property

2008-08-04T10:46:05-04:00

Q: I purchased a time share a few years back and was told if I travelled to tour a property to determine whether or not I wished to purchase it, my travel expenses would be tax deductible. Any truth to this or was it just a selling point? A: The answer can be found in IRS Publication 463 (Travel, etc. Expenses), and Publication 529 (Miscellaneous Itemized Deductions), and it's somewhat of a gray area. On the one hand, you can deduct business expenses connected with earning income. Until the property is actually purchased, though, I would put this under the...

Tax Provisions of New Housing Law

2008-07-30T17:14:29-04:00

The President just signed H.R. 3221, the "American Housing Rescue and Foreclosure Prevention Act." While mostly a bill having to do with regulation of housing, there are some tax provisions: Expands and changes rules related to mortgage bonds and the low income housing credit, including how these relate to the AMT Creates a first-time homebuyer credit of 10% of purchase price up to $7500 (half that MFS) which phases out between $75,000-$95,000 MAGI ($150,000-$170,000 MFJ). "First-time" means not owning a home for three years before the purchase date. Must be a principal residence. The credit is recaptured over 15 years,...

Home Sales When Two People on Title

2008-07-21T10:22:23-04:00

Q: I have a home I bought from my mom. It is worth $160,000. I still owe her $65,000. She is on the deed because she refuses to take a risk taking her name off. I want to sell and have been in my home over 2 years. I don't want to pay tax on the income. Because she is on the deed can I still take the tax free income for living here 2 years? Deborah A: Since you're each on title, you would each be entitled to a portion (presumably half) of the sale proceeds. The $250,000 excludable...

How to Figure the Foreign Earned Income Exclusion

2008-07-15T11:25:42-04:00

Q: Can you walk me through the new formula for figuring the foreign earned income exclusion? Katherine A: Everyone first needs to read my post on the Foreign Earned Income Exclusion. First, add together the current exclusion amount to the housing exclusion amount for the country you are in. For most people, this should be a little over $100,000, so let's say this is what it is for you. Then, assuming you have passed either the physical presence test (330 out of any 365 days) or the bona fide residence test, count how many days in the calendar year qualify...

How to Deal with Deferred Mortgage Interest

2008-07-09T17:11:23-04:00

Q: I just sold a home in which interest payments were deferred until the note was paid off. This just happened with the sale. How do I account for the mortgage interest? Josh A: Since you are a cash-basis taxpayer, it sounds to me like you'd be able to take the full deduction for interest paid this year. Assuming this was a primary residence, it would be deductible as an itemized deduction subject to the usual limits. If it's a rental property, it would be deductible that way. There's also an election you can make to "capitalize" the interest (which...

IRS Shortens Extension Deadline for Partnerships

2008-06-30T17:38:25-04:00

The IRS announced this week that they will be shortening the extension deadline for partnerships by one month, from October 15th to September 15th for calendar-year partnerships. The reason is that partnerships must issue K-1 forms when their 1065 form is filed. Until now, a partner (who needs the K-1 form to file his own return) might get the vital K-1 form after his own extended deadline. By having the partnership deadline end a month earlier, that problem is avoided. Partners will now have at least a month before their extended deadline in which to incorporate their K-1 forms. This...

New HSA Guidance Released

2008-06-27T09:54:13-04:00

Click here to read. The biggest piece of news is a new animal: the post-deductible FSA (or HRA). According to the guidance, you can use an FSA or an HRA to pay for medical expenses that occur over the deductible, but before the out of pocket maximum. As an example, suppose you have an HSA with a $2000 deductible and a $3500 maximum. This provision would allow you to contribute the usual $2850 to your HSA. If you hit your deductible, you would drain your HSA by $2000 that year. If you continued to face medical expenses while you were...

IRS Increases Standard Mileage Rate

2008-06-23T17:38:55-04:00

The IRS announced today that they have increased the standard mileage rates. For miles driven between July 1, 2008 and December 31, 2008: The business mileage rate increases from $0.505 to $0.585 per mile The medical/moving mileage rate increases from $0.19 to $0.27 per mile The charitable mileage rate is set by statute at $0.14 per mile

Itemized Deductions on Overseas Properties

2008-06-17T19:26:51-04:00

Q: Can I take a deduction for mortgage interest and property taxes on an overseas home? Robert A: Yes, assuming that you meet all the other qualifications. Since worldwide income is taxable, worldwide expenses are deductible. Click here to read my post on the mortgage interest deduction. Click here to read my post on all itemized deductions.

How to Claim the Foreign Earned Income Exclusion The Year You Move Home

2008-06-12T14:52:11-04:00

Q: For the past several years, I have been working overseas and claiming the Foreign Earned Income Exclusion. I move home for good this July 1st. How do I claim the exclusion this year? Mark A: For those that need a refresher, start with my post on the Foreign Earned Income Exclusion. In order to claim the exclusion, you must be working outside the United States for any 330 of a consecutive 365 day period. Up until now, you've probably been using Jan 1-Dec 31 as that period. However, you are free to use any 365 day period you want....