The Tax Questions Blog

Archive for the ‘Taxable Income’ Category

Question: Political Survey Question 8 – Do you think the current tax system is FAIR?

Tax Brackets 2007
Taxable Income ($) Tax Bracket (%)
Single Filers 0 – 7,825 10
7,826 – 31,850 15
31,851 – 77,100 25
77,101 – 160,850 28
160,851 – 349,700 33
349,701+ 35
Head
of Household 0 – 11,200 10
11,201 – 42,650 15
42,651 – 110,100 25
110,101 – 178,350 28
178,351 – 349,700 33
349,701+ 35
Married
Filing Joint 0 – 15,650 10
15,651 – 63,700 15
63,701 – 128,500 25
128,501 – 195,850 28
195,851 – 349,700 33
349,701+ 35
Married
Filing Separate 0 – 7,825 10
7,826 – 31,850 15
31,851 – 64,250 25
64,251 – 97,925 28
97,926 – 174,850 33
174,851+ 35

Answer: I’m fine with it , but wouldn’t object to improvements .

But more importantly , I’d like much stricter regulations on who gets and how they get government aid / my tax dollars . I really liked what Tommy Thompson did for Wisconsin / Welfare years ago .

What high earners will pay if the Bush tax cuts expire

If you’re a wealthy American, you’ve probably heard that your tax bill will be higher next year if President Obama has his way. But how much more are you really going to pay?

The Laffer Curve, Part II: Reviewing the Evidence

Question: I need money from a family member. What’s the most you can “gift” to someone without paying tax?

A very nice relative has offered to help me out with a nice gift. If I accept the gift, how is it taxed? If they give me, say $20,000, do I have to declare the taxable portion as income?
Also, let’s say the tax-free limit is 100$. Could they give 100$ to me and 100$ to my wife without penalty?
Okay, I think I understand. So, let’s say I get a gift of $12,001 in 2008. The giver will have to file a gift tax form for the 1$. Then, this is applied to their $1,000,000 gift exclusion (now downt to $999,999). If we did this for a while and they used up the $1M, then they would pay gift (or estate, however the term) tax on it, correct?

Answer: The limit for 2008 is $12,000 before the giver has to be concerned with filing a Gift Tax Return. And yes, they can give $12,000 to you and $12,000 to your wife. If “they” are married, each person can give each of you $12,000 for a total money transfer of $48,000. In all of these scenarios, no one will have to pay tax and no one will have to file a gift tax return.

The recipient of a gift never has to pay tax regardless.

ADDITIONAL DETAILS:

You are absolutely correct…it is the amount over $12,000 that goes on the gift tax return and goes against the lifetime exclusion. A person could give 900,000 different people a gift of $12,001 in a year and would have to file a gift tax return which would eat up $900,000 of their $1M lifetime gift tax exclusion. When they die, that $900,000 goes against their estate exclusion. So, let’s say that when they die, there is a $2.5M estate exclusion. Theirs would only be $1.6M because they lost $900k via gift tax.

6 reasons not to roll over your 401(k)

It’s not always a good idea to take your retirement account with you when you leave an employer.

Daughters lover takes dads money father the ATM

Question: My employer paid my tuition reimbursement in excess of $8950 which is all Taxable Income, what do I need to do?

My employer paid my tuition reimbursement in excess of $8950 which is ALL taxable(overage of the $5250 non taxable allotment). If I use Turbo Tax to do my own taxes, how do I guarantee that I will do this properly? Even though I never technically was given this money as extra income, can I still claim this as tuition I paid? I think it’s called the Hope Credit.

Answer: The $5,250 that you were reimbursed by your employer for tuition and fees cannot be used to generate a tuition and fees deduction or lifetime learning credit.

You can take education tax benefits for any tuition and fees paid by your employer that are included in your W-2. This should be all amounts paid in excess of $5,250.

You can also take education tax benefits for tuition and feew you paid out of your own pocket.

You probably do not qualify for the HOPE credit because this requires you to be a full-time student and less then 2 years out of high school.

The lifetime learning credit is claimed on form 8863 and the tuition and fees deduction is claimed on form 8917. You can choose to take one of the other, but not both. If your income is too high, you will not qualify for the education benefits.

If you itemize your deductions, there may be some additional benefits.

Richard K
Master Tax Advisor
Enrolled Agent

This advice was based upon my understanding of the tax law in effect at the time it was written as it applies to the facts described by you.
See my profile for more information.

Long-term taxable travel income tax reimbursement allowance (ITRA) package (SuDoc T 22.2/15:11751) …

Le Mensuel d’AGEFI Luxembourg

The views and opinions are those of the authors and do not necessarily represent the views and opinions of KPMG Tax S.à r.l.. All information provided is of a general nature and is not intended to address the circumstances of any particular individual or entity.

‘Extension’ bond ladder makes sense now

In today’s low-rate environment, an extension bond ladder offers investors built-in flexibility.

More income, better income

Question: Can I claim expenses to lower the taxable amount reported on a 1099?

I am presenting at a museum conference later in August on technology and education. I have a feeling that my stipend will be reported on a 1099… Isn’t that heavily taxed as an independent contractor? Annnnd…. If I were to purchase a laptop (easy to justify the need for the intent of workshop), can that be claimed as an expense to lower the taxable remainder as “income?” Thanks for any feedback and advice!

Answer: Travel, meals (at 50%), & lodging, sure.

Laptop, no way. For business use of a laptop you need to apportion between business and personal use. Then you depreciate the business portion. For that trip you MIGHT be able to justify 1% of it’s use as business. So, $25 on a $2,500 laptop, depreciated on a 4 year schedule — $6. But then you convert it back to pure personal use and you have to recapture the depreciation that you took. Net: $0.

If this is a one-off, you can report the payment on line 21 of Form 1040 and the expenses as miscellaneous itemized deductions on Schedule A subject to the 2% floor. That way you skirt the self-employment tax but probably won’t be able to deduct any costs as a practical matter. Or you put it on Schedule C, claim all of the expenses against it, and pay the SE tax on Schedule SE.

Student doctors face scholarship tax slug

At least 200 Queensland medical students on Queensland Health scholarships are being forced to pay thousands of dollars in tax.