132

Your E-file return will be rejected if you are the second person to file, so you should file a paper return claiming your child, and you'll get your refund as you filed it. You and the other party claiming your child will both receive letters from the IRS notifying you that someone else has claimed your child as a dependent. If neither party files an ...


109

This was a really bad idea, on so many levels for so many reasons. Your friend accepted a tax liability that was more than the cash he got. Your friend involved himself in a fraud. When the IRS comes to his door, he should say "I have nothing to say until I consult with a lawyer". It may not be the IRS, it may be the FBI or the Department of Treasury. Your ...


108

Sanders had the following itemized deductions on his 2014 return: $22,946 on home mortgage interest $14,843 on real estate taxes $9,666 on state and local income taxes $8,000 in monetary gifts to charity $350 in gifts to charity other than by cash or check $4,473 of deductible "meals and entertainment expenses" related to his job as a senator, of which he ...


101

I would say yes and no. I have spoken with people that don't want to pay off their home because they are getting a tax deduction on the interest. I've done the math for all of them and none of them are coming out ahead. The tax bracket reasoning is somewhat flawed because you don't pay 25% on all of your taxable income just because your marginal tax rate ...


90

To expand on RonJohn's answer (and make it more explicit): Your friend met a complete stranger who asked for his SSN. The stranger promised him $20k. The best case scenario is that your friend loses a lot of money to taxes (see D Stanley's answer). The worst case scenario: the stranger now has your friend's SSN. The stranger will probably also ask for your ...


78

You need to call the IRS at 1-800-829-1040 and explain that you are the custodial parent. The IRS service representative will tell you what to do. Generally what will happen is that you will re-submit your return and the IRS will examine claims of both parties and decide who gets the dependent.


70

Another reason to use standard: audit If you get selected for an audit of your itemized deduction or a specific category (e.g. all medical expenses or all charitable contributions) then at best you have the time to send in all the receipts, and then answer questions about some. At worst, the auditor disallows something and now your itemized is less than the ...


63

Congratulations on an amazing rise on salary. Please pat yourself on the back for such an accomplishment. The best thing you can do is to hire a competent tax specialist. Here in the US, it is typically an accountant and they would tell you that there is not much they can do. Maximizing tax favored retirement accounts is about the best one can get away ...


57

There are two big problems with your complaint from the start: You are comparing federal taxes with total taxes, and you compare the tax rate with the marginal tax rate. Normally you pay a low tax rate for the first dollars, a higher tax rate for the next dollars, a high tax rate for the highest dollars. You took your rate for the highest dollars of your ...


55

In the US there's no significant difference between what a business can deduct and what an individual can deduct. However, you can only deduct what is an expense to produce income. Businesses are allowed to write off salaries, but individuals can't write off what they pay their gardener or maid (at least in the US) If you're a sole proprietor in the ...


51

Buying individual/small basket of high dividend shares is exposing you to 50%+ and very fast potential downswings in capital/margin calls. There is no free lunch in returns in this respect: nothing that pays enough to help you pay your mortgage at a high rate won’t expose you to a lot of potential volatility. Main issue here looks like you have very poorly ...


49

I often say "don't let the tax tail wag the investing dog." I need to change that phrase a bit to "don't let the tax tail wag the mortgage dog." Getting a tax deduction on a 4% mortgage basically results (assuming you already itemize) in an effective 3% rate mortgage. The best way to avoid tax is save pretax in a 401(k), IRA, or both. You are 57, and been ...


47

I’m in the same boat as you. Charitable contributions make up the majority of my itemized deductions, and I probably won’t be itemizing next year. Here is how I look at it: If I end up taking the standard deduction, instead of deducting my charitable contributions, I get to deduct more than my charitable contributions. That’s a better deal for me than if ...


44

At the end of 2017, President Trump signed into law the Tax Cuts and Jobs Act with among other things eliminated the federal tax deduction for state taxes paid. The state and local tax (SALT) deduction was not eliminated, it was capped ($10,000 for 2018). ~90% of the people that benefited from the deduction had income over $100k. So capping it limits ...


40

It is possible that some people may avoid additional income out of fear they may lose welfare benefits. If you currently have $30k of income and $5k of benefits, you might not want to earn an additional $3k if it would result in losing your benefits. How common and significant welfare cliffs or poverty traps are is debated and political.


35

There are no pure income requirements when claiming someone as a dependent - the main requirement is that your parents need to have provided more than half of your support for the year. Since they paid $22k in education expenses and you only made $20k, certainly they paid for more than half of your support (even if it were less, they could claim that they ...


35

Gambling winnings are taxed when you file just like normal income so your roommate will now have to pay federal tax on $100,000 income (between 24% and 40% federal, depending on when it is reported and other income he/she has), and potentially state income tax, while the "winner" got $80K tax-free instead of paying tax on $100K. If this actually happens, ...


31

Last year you deducted all of the state tax that was withheld from your paycheck in 2016 off of your income. But then you did your 2016 state income tax return, and the state sent you some of that money back. Because you deducted it last year and then got a refund, your state income tax refund is taxable by the federal government and must be added in to ...


30

No. This logic is dangerous. The apples to apples comparison between renting and buying should be between similar living arrangements. One can't (legitimately) compare living in a 600 sq ft studio to a 3500 sq ft house. With the proposal you offer, one should get the largest mortgage they qualify for, but that can result in a house far too big for their ...


30

It depends. If you’re on a business trip or entertaining a client then yes. However, regular lunches are not deductible on your taxes since it isn’t a business need. As always, when in doubt, work with a certified accountant. Edit: Here is a Quickbooks article on that topic.


28

To the best of my understanding, the CPA is wrong. You can only deduct the contributions in the year you made them. From the IRC Sec 170: There shall be allowed as a deduction any charitable contribution (as defined in subsection (c)) payment of which is made within the taxable year. A charitable contribution shall be allowable as a deduction only ...


28

The premise that the Sanders' effective tax rate of about 13% is "amazingly low" is also false. In tables assembled from tax data by the Tax Policy Center, we can see that the average effective individual federal income tax rate in 2013 for households in the 96th-99th percentiles was 16.1%. For those in the 90th-95th percentile, the average rate was 11.6%. ...


27

No. You should only donate appreciated stock. If you own a stock at a loss, you can only deduct the FMV (fair market value) when you donate. Instead, you should sell it, take the loss on your taxes, and donate the cash.


26

No. Regular W2 employees cannot deduct housing or transportation costs related to their employment. However, in the US, many employers offer Parking and/or Transit FSA programs which are usually collectively referred to a Commuter Benefits FSA programs, this is particularly common among larger employers with locations in major metropolitan cities. Under ...


25

You're asking explicitly about $250K+ wage earners. Well, believe it or not, but this is the most discriminated group of people in the US tax code. This is what is called "the upper middle class". People who still have to work for a living, but treated as if they're rich (I don't consider people who must work to keep up their life style as rich). Many of ...


25

First off, the decision about marriage should be first and foremost about what is best for the both of you personally, rather than financially. That said, my guess is that it's not in your financial interest to get married sooner, though you should look into it in more detail. Marriage has different effects financially depending on the differences ...


24

In the US tax system, you cannot "write-off" capital assets. You have to depreciate them, with very specific exceptions. So while you may be purchasing $4500 of equipment, your deduction may be significantly less. For example, computers are depreciated over the period of 5 years, so if you bought a $1000 computer - you write off $200/year until it is ...


24

The amount the employee pays for health insurance premiums is not included in your W-2 Box 1 income. As a result, it is automatically deducted, and you do not pay tax on that portion of your income. You cannot deduct it again on line 29 or on Schedule A, because the income is already deducted/not included on line 7.


23

Probably the best approach which can work very well depending on your cashflow and the giving in question (whether it's time sensitive or not): 2018: save all $20k in the bank January 1, 2019: give all $20k to charity (from 2018) 2019: give another $20k Dec31, 2019: (optional) give another 20k 2020: give none This means you will take the standard deduction ...


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