New answers tagged

0

The deduction for qualified medical bills is allowed in the tax year that you pay them, assuming that you have sufficient deductions to itemize. If you take the standard deduction, you won’t be able to deduct them.


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You should report it. The tax man will come for you if you're found to have been cheating. What happens if you don't file, but then you forgot that you actually made an extra 1000 that year? The government will take that and more out of your hide for cheating them. The majority of investing firms will automatically generate the relevant tax reporting ...


0

Assuming you can take the credit for 100% of the tax owed in any year, then yes. You would take $4320 on your 2020 return (assuming the tax owed is the same as 2018) and would owe no tax that year. That would leave $1707 to use as a credit against your 2021 taxes. So yes, you should be able to use all the Federal tax credit. Don't know about Iowa ...


1

I have 3 kids, make a middle class income, have a stay at home spouse, and am a homeowner, so usually get some money back in taxes each year. Most years I have a small liability to the state, and a reasonable refund from the Feds. A refund or payment you make in April is when you settle with the government. The size of the refund is not related to how ...


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My understanding is that this would reclassify the 10% management fee from passive rental income to active property management income. Is this accurate? If so, once it's active income I should be able to use it for solo 401k contributions. I've been hesitant to answer because I don't know a great deal about Solo 401k requirements and I haven't ...


2

A wash sale violation (WSV) occurs you purchase a “substantially identical” security or option within a 60 day window around the date that you realize a loss. That's 30 days before and 30 days after the loss. A wash sale loss is deferred and you must increase the cost basis of the violating purchase by the amount of the loss. When you close the second ...


1

I would only trust a tax accountant's answer on that one. It seems like it could go either way and may even change from year to year. LLCs organized as a sole proprietorship would be tricky in this case. If, however, your LLC was organized as a S-Corp this would be an unnecessary step. You would simply hire yourself and pay yourself occasionally. Part ...


0

Taxability of Income changes based on the residential status of an Individual in India. If you an Ordinary Resident - this foreign income will be taxable. However, in the case of an NRI, you should refer to the DTAA - (Double Taxation Avoidance Agreement). DTAA between 2 countries specifies the rate at which tax should be deducted on income paid to ...


1

https://www.irs.gov/instructions/i720#idm139958484331024 : Final Return. File a final return if you have been filing Form 720 and you: Go out of business, or Won't owe excise taxes that are reportable on Form 720 in future quarters. In other words if you have collected tax this quarter, but won't do so in the future, you file a final ...


4

The shares bought in your first 3 transactions were all sold on Apr 15th for a gain of $67 (+40 +18 +9). If you were to sell the 5 shares bought on May 5th for a loss in less than 31 days after the purchase made on May 10th, that would create a wash sale violation. Selling them now would not.. But that's not what you asked. You could sell the ...


2

Several FAQs state that you can be disenrolled for not paying your IRMAA, e.g. https://www.cms.gov/Outreach-and-Education/Outreach/Partnerships/downloads/11338-P.pdf Since presumably people who are having their IRMAA paid out of SS deductions wouldn't be able to not pay their IRMAA, this strongly implies that it is possible for there to be a net amount due....


6

In a comment, you clarified that you were specifically asking about a first house: I was hoping for a more cohesive overview of what tax elements come into play for a new homeowner At the federal level, there are no tax benefits to buying your first house. You get the same benefits as anyone else who owns a house with a mortgage. This has been a change ...


9

In the US you can take a standard deduction or itemize your deductions. Mortgage interest and property tax tips the scales in favor of itemizing deductions for many people. So the answer to your question is, it depends. If the sum of your itemized deductions exceeds the standard deduction then you pay less federal income tax by itemizing your deductions. If ...


8

Possibly - you can deduct mortgage interest from your federal taxes if you itemize. In order to benefit from itemizing, though, you need have (for 2020) more than $12,400 in deductible expenses, or $24,800 if you are married and file jointly. This is not as common as it was before the recent tax changes, and typically requires either a large mortgage and/or ...


6

Do I qualify for "First Time Home Buyer" in the first place? You don't qualify as a first-time home buyer. It doesn't have to truly be the first home you've purchased, but you can't have owned a house for the last two years. I could take out a loan against the 401K, right? Would there be tax implications for this? Would this be a qualified reason for ...


4

With vehicle expenses for business you can opt to take actual expenses or a standardized rate per mile (currently $0.58/mile). If you take actual expenses, you'd typically depreciate the vehicle cost over 5 years, but there are several depreciation options. The options front-load the deprecation expense to varying degrees, it can range from taking the ...


2

I can't speak for all brokers but my brokers provides an 8949 form which calculates wash sales (and is reported to the IRS). I'd also add that they add a disclaimer that their form is "not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations, and does not resolve ...


1

Any money that transferred to an individual bank account is not subjected to tax. However, you must declare it if the amount exceeds A$10000. The declaration is just a part of anti-money laundering measurement, no details explanation required. Do not try to outsmart the system by transfer a lot of money and make it below $9999 to avoid declaration. ...


3

If you earned the money in your PayPal account overseas before even arriving in Australia, then there is no tax payable on that money, as you would be classed as a non-resident for tax purposes. You will only pay tax in Australia on the money you earn in Australia, whether that is through employment in Australia, through a business in Australia, interest on ...


2

There is no tax exemption. You have to declare it as income from other sources and pay taxes as per tax brackets


0

If you contribute the complete amount to your 401k, you don't own taxes on it. As a result, you can claim back the taxes you already paid, in your annual tax-filing, and yes, you can put the complete amount, including the temporarily 'missing' taxes, in the 401k (assuming you have enough cash on hand).


1

As a software developer, have you considered incorporating and being paid as an independent contractor? There are a lot of things you do now that could be written off as an independent contractor such as commuting to an office, purchasing a computer, software licenses, and other office supplies. If you have a home office, you can write off the portion of ...


1

Presumably your 2018 tax return has no mention of the HSA contribution that was mistakenly associated with 2018, and your taxable income was not reduced by that amount. Also, presumably the sum of all of your 2019 contributions plus the errant 2018 contribution is still under the HSA contribution limit for 2019. If both of those statements are true, from a ...


1

I'm surprised the provider even allowed [ineligible contribution] to happen. How would they know? Unless both the old and new health plans and the HSA are managed by your employer -- which is reasonably common but by no means universal or required -- the HSA trustee has no way of knowing whether you were eligible to contribute for the prior year, and if so ...


5

Get married Get divorced A huge chunk of your income will be allocated to "spousal support", which is tax deductible for you (taxable for your ex-spouse). This will significantly reduce your tax burden.


0

Yes, there are situations where that happens. It's actually not uncommon. Sales tax/VAT is typically due in the country of sale Income from such sales may be taxable in the country of sale as well. See nonresident taxpayer or person with limited tax liability. This may be changed (everyone declaring their income in their home country) by tax treaties. ...


0

The biggest thing that seems to be missing is compounding interest on investments. The sheet just calculates a growth rate of 500% based on "...5% growth over 10 years. Obviously that ignores compounding." -- firstly, that's not how percentages work, secondly it's a very weird thing to gloss over and renders the whole thing pretty close to useless in my mind-...


0

This is what I do. This sounds crazy but it is a lot of fun. I put a lot in HSA and I have a lot of kids (like more than 5). this decreases my tax liability. You end up spending a lot on food, love, music lessons, and Doctor bills (that is why we have HSA) instead of giving to govt. We also have 401k and RothIRA. Watch your debt and you can do it.


2

Generally speaking yes. Actual physical residence is not the only test countries use to determine tax residence. Contrary to what many people seem to believe, there is no overarching internationally agreed principle that tax residence only exists if you spend X days in a country or anything like that (in fact, the tax year is not the same in all countries in ...


2

Generally speaking - it least from the US point of view - the answer is absolutely yes. For example: A foreign investor in US real estate is subject to US Federal (and possibly state and local) income tax on capital gains from the sale of the property and on any rental income received with respect to it. A foreign investor receiving dividends from a US ...


7

You're probably better off having an accountant or tax lawyer going over your finances than having people on the internet try to come up with ideas that might apply to you, but one small thing is that if you use public transit and your employer has a transit program set up, you can put $265 a month of pre-tax money on a Clipper Card or towards other public ...


2

There are two things at work here. Let's assume you are buying 300 shares for $32*300=$9600 at a time when the fair market value is $55. At this point you realize a gain of ($55-$32)*300 = $6900. As long you as don't sell anything, there are no taxes due. If you sell the stock right away and cash the $6900 you need to pay regular income tax on this. How ...


7

What are the ways I can pay less taxes? Daniel already noted that you can reduce your taxes by making charitable contributions; note that these lower your taxable income and not your taxes. That is, it is a deduction, not a credit. If you give your last earned dollar to charity, it lowers your taxes by the 32 cents that you would have paid on that dollar ...


-4

your income is personal and will be taxed accordingly. However, if you have different sources of income all accumulated on a sole proprietorship, then is the business getting taxed. If the business reinvested the income on stock market, then a loss is written as debt while a profit is taxed zero. I believe you may reinvest the low-risk income into high-risk ...


-1

Buy a copy of Lasser, and their 1001 tips books. They pretty much list all the legal ways to pay less in taxes and explain pub 17 much better than the IRS version. See a lawyer if you want to risk some creative ways to avoid taxes. What you could do is to move to a place with NO income tax as you can not avoid Federal taxes but states vary all over ...


6

In addition to the other excellent answers, consider doing a "Backdoor Roth IRA." Assuming that your income is too high to fund a traditional IRA with pre-tax dollars, fund it to the max with after-tax dollars, then immediately do a Roth IRA conversion. There is no immediate tax cost or benefit the first year, but as soon as the Roth IRA begins earning ...


3

Some points: When the company offers you a match, not contributing to your 401(k) is -- in no uncertain terms -- a pay cut. If this is your first home purchase then you'll be able to exclude $10K from the 10% penalty you'll pay on the 401(K) withdrawal. You'll have to pay income tax on the whole value of your 401(k). Thus, put aside 20-25% of the value of ...


0

The 1099-B provided by E*Trade is for the sell occurred on vest date i.e, sale proceeds from the sell of 20 shares in market. The net 100 shares you received after tax should not be on the 1099-B. The cost basis of those 20 Shares is the award price on which you received RSUs. In your case you received it as an award of 0 price. The rest 100 shares will not ...


27

Generally speaking, you cannot lower your expenses related to taxes. You can lower your taxes, but not in a way that will make sense. For example, if you qualify for itemized deductions, then a $1 deductible expense will save you up to $0.32 in taxes. While you did cut your taxes, it cost you $0.68 to reduce your taxes. There are exceptions to the above ...


3

One way to pay less taxes is with the mortgage deduction. The mortgage payment replaces a rent payment but the interest on the mortgage is deductible. Then hopefully the property also increases in value by more than the interest cost of the mortgage. Also, consider the property taxes.


51

Assuming the bulk of your income comes from "earned income," your best bets are moves that lower your taxable income. You say that some of your salary goes into a 401(k). The more you contribute to your 401(k), the less taxable income you have. In 2019 the maximum amount you can contribute is $19,000. In 2020 that number will go up to $19,500. Other tax-...


4

https://www.incfile.com/blog/post/do-llcs-get-1099/ If you’re trying to figure out if your contractor’s LLC gets a 1099 form or not, ask your contractors to fill out an IRS Form W-9, “Request for Taxpayer Identification Number and Certification.” This is a standard step in getting ready for tax time. On this form, your contractors have to check a box ...


2

I believe they will provide me with a 1099 statement. Income from contract work is considered business income and gets entered via Schedule C (or C-EZ) regardless of whether or not that income is reported to the IRS separately via 1099. You'll also record any appropriate expenses that might offset this income. If after factoring in expenses there's more ...


3

or can I just added to next years income taxes? Of course, it goes on this year's income taxes, but that's probably what you meant. Since it's so late in the year, and just $250, I'd just add it to your 2019 Tax Return and call it a day. (I hope you put about $50 away for the taxes you might owe on it.)


1

The US position is that tax on unrealized gains on investments, property, and the like should be imposed on the estate of the deceased, and not on the person(s) inheriting the asset(s). Thus, the inheritors get the stepped-up basis for the asset and pay tax only on the gain (difference between selling price and stepped-up basis) when the asset is disposed of ...


1

I'm not sure if the IRS, or indeed the US government in general, ever really justifies anything beyond "Well, we're the ones making the rules". However, I really don't understand why you can't come up with a convincing argument, since to me this seems the most obvious and fair way of doing things. Consider inheritance as a gift: when someone gives you a ...


8

I don't think you'll find "official reasoning" from the IRS. The most reasonable explanation in my view is that it prevents double-taxation of estate assets and applies a consistent methodology for taxation of inherited property. The estate tax is based on inherited value, not the basis. Say you inherited a $50M estate that had a $1M basis. Upon inheritance ...


5

One intent is to reduce double-taxation. If several people inherit a property with a low cost basis (say a house that was bought decades ago), then the most practical thing is usually for some or all of them to sell it and take the proceeds. With a very low cost basis, the total value of the property is effectively what is inherited. But in the US, there ...


1

Justin's answer is absolutely correct. I'd like to focus on the aspect of 'withheld tax' vs 'tax due'. Say I retired early. 55, so no penalty to withdraw from 401(k), and no social security income yet. At $100K withdrawn, and a standard deduction of $24,400, (married filing joint), I'd have a taxable $75,600 and a tax due of $8684, ($1940 + 12% of amount ...


4

First, using Gift Aid never really reduces your taxes: it merely allows the charity to reclaim some of the taxes you have already paid (the amount reclaimed assumes you are a basic-rate tax-payer). If you are actually a higher-rate tax-payer, you can also reclaim the remainder of the taxes you have already paid. Example 1: Normal-rate tax-payer: Consider £...


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