|
|
|
|
|
|
|
|
|
|
Q. Are capital gains on the sale my home taxable?
A. Most home sales will escape capital gains taxes under the current tax law.
The new rules allow an individual to exclude from income up to $250,000 of
Capital gains from the sale of a home and $500,000 for a couple filing jointly. To qualify you must have owned
and used the home as your personal residence for two of the last five years, and you have not used the exclusion
in the last two years.
Q. What are the Capital Gains Tax Rates?
A. The rate you will pay depends on your personal tax bracket, the type of asset, and the holding period.
Gains on assets held 12 months or less are generally taxed as ordinary income at your regular tax rates.
Most assets held more than 12 months are taxed 20% if you are in the upper brackets and at 10% if your are in the
15% bracket for regular income. The favorable rates do not apply to collectibles.
Beginning in 2001, the 20% rate drops to 18% for assets purchased after December 31, 2000, and held for more than
five years. The 10% rate will drop to 8%.
Q. How long am I required to keep prior years tax returns and records?
A. You should keep tax returns and any records used to prepare them at least three years after the filing
date if you only have W-2 and interest income. If your returns are more complex you should keep the returns six
years. The IRS has six years to audit you if it suspects you have underreported income by more than 25%.
Some records should be retained forever. Home purchases and sales, keep the settlement statements. These records
validate your cost basis for future home sales.
Q. Can I deduct my cost for education?
A. Several tax breaks for education expenses are available for taxpayers. Among the breaks are the Hope
and Lifetime learning credits, a deduction for interest on education loans, education IRAs, Roth IRAs and penalty-free
withdrawals from regular IRAs accounts.
Hope Credit
The Hope tax credit can only be claimed for tuition and fees relating to the first two years of post-secondary
education. The maximum credit allowed is $1,500 in tax savings per student, per year. The student must be enrolled
in an accredited school at least halftime during the year. Credit is available for either the taxpayer or dependents.
Lifetime Learning Credit
The Lifetime Learning Credit can be claimed for tuition and fees relating to any year of post-secondary education
or job-related courses taken. Expenses must have been paid after June 30, 1998. The credit is worth a maximum of
$1,000 per family per year.
Q. Can I claim both the Hope and lifetime learning credits for the same student in a given year?
A. Both the Hope and Lifetime learning credits cannot be claimed for the same student in a given year. If
there is a choice, it will generally make sense to use the Hope credit for the first two years of college.
Q. Should you file joint or separate returns?
A. A husband and wife who are married at the end of the year can file either a joint return or separate
returns, even if one spouse has neither gross income nor deductions, and even if they lived in different households
or are separated under a non-final divorce decree.
Q. Can you change your mind?
A. That depends on your original choice. If you file separate returns, you may change your mind and substitute
a joint return at any time within three years from the date your returns were due. But you can't file a joint return
and then switch to separate returns after the due date.
Q. When are office-at-home expenses deductible?
A. You may deduct business expenses that are allocable to a portion of your home only if that portions is:
- Regularly and exclusively used as the principal place of business for any of your trades or businesses.
- Regularly and exclusively used as a place of business used by your patients, clients, or customers in meeting or dealing with you in the normal course of your trade or business.
- Regularly and exclusively used in connection with your trade or business if it is a separate structure that is not attached to your dwelling unit.
|
About | The Client | Services
| Principals |
|
|
|
|
|
|
|
|
|
|
|
|
