06 Sep 2020
0

Stepped-Up Basis of Inherited Property

Roger Rossmeisl, CPA
Individual Tax Briefs
Stepped-Up Basis of Inherited Property

If you’re planning your estate, or you’ve recently inherited assets, you may be unsure of the “cost” (or “basis”) for tax purposes.  Generaly, there is a stepped-up basis of inherited property. Fair market value rules Under the fair market value basis rules (also known as the “step-up and step-down” rules), an heir receives a basis in inherited property equal to its date-of-death value. So, for example, if your grandfather bought ABC Corp. stock in 1935 for $500 and it’s worth $5 million at his death, the basis is stepped up to $5 million in the hands of your grandfather’s heirs — and all of that gain escapes federal income tax forever. The fair market value basis rules apply to inherited property that’s includible in the deceased’s gross estate,...

06 Sep 2020
0

Are Scholarships Tax-Free or Taxable?

Roger Rossmeisl, CPA
Individual Tax Briefs
Are Scholarships Tax-Free or Taxable?

COVID-19 is changing the landscape for many schools this fall. But many children and young adults are going back, even if it’s just for online learning, and some parents will be facing tuition bills. If your child has been awarded a scholarship, you might be wondering . . . are scholarships tax-free or taxable? Scholarships (and fellowships) are generally tax-free for students at elementary, middle and high schools, as well as those attending college, graduate school or accredited vocational schools. It doesn’t matter if the scholarship makes a direct payment to the individual or reduces tuition. Tuition and related expenses However, for a scholarship to be tax-free, certain conditions must be satisfied. A scholarship is tax-free only to the extent it’s used to pay for: Tuition and fees...

06 Sep 2020
0

Back-to-School Tax Breaks

Roger Rossmeisl, CPA
Individual Tax Briefs
Back-to-School Tax Breaks

Despite the COVID-19 pandemic, students are going back to school this fall, either remotely, in-person or under a hybrid schedule. In any event, parents may be eligible for certain back-to-school tax breaks to help defray the cost of education. Here is a summary of some of the tax breaks available for education. (1) Higher Education Tax Credits Generally, you may be able to claim either one of two tax credits for higher education expenses — but not both. With the American Opportunity Tax Credit (AOTC), you can save a maximum of $2,500 from your tax bill for each full-time college or grad school student. This applies to qualified expenses including tuition, room and board, books and computer equipment and other supplies. But the credit is phased out for...

23 Aug 2020
0

Make Sure Your Withholding is Adequate

Roger Rossmeisl, CPA
Individual Tax Briefs
Make Sure Your Withholding is Adequate

Did you recently file your federal tax return and were surprised to find you owed money? Make sure your withholding is adequate so that this doesn’t happen next year. You might even want to do that if you got a big refund. Receiving a tax refund essentially means you’re giving the government an interest-free loan. Withholding changes In 2018, the IRS updated the withholding tables that indicate how much employers should hold back from their employees’ paychecks. In general, the amount withheld was reduced. This was done to reflect changes under the Tax Cuts and Jobs Act (TCJA) — including an increase in the standard deduction, suspension of personal exemptions and changes in tax rates. The tables may have provided the correct amount of tax withholding for some...

29 Jul 2020
0

Consider Taxes When Selling Your Home

Roger Rossmeisl, CPA
Individual Tax Briefs
Consider Taxes When Selling Your Home

Traditionally, spring and summer are popular times for selling a home. Unfortunately, the COVID-19 crisis has resulted in a slowdown in sales. The National Association of Realtors (NAR) reports that existing home sales in April decreased year-over-year, 17.2% from a year ago. One bit of good news is that home prices are up. The median existing-home price in April was $286,800, up 7.4% from April 2019, according to the NAR. If this is your year, consider taxes when selling your home.  It’s a good time to review the tax considerations. Some gain is excluded If you’re selling your principal residence, and you meet certain requirements, you can exclude up to $250,000 ($500,000 for joint filers) of gain. Gain that qualifies for the exclusion is also excluded from the...

16 Jul 2020
0

Can Seniors Deduct Medicare Premiums?

Roger Rossmeisl, CPA
Individual Tax Briefs
Can Seniors Deduct Medicare Premiums

If you’re age 65 and older, and you have basic Medicare insurance, you may need to pay additional premiums to get the level of coverage you want. The premiums can be costly, especially if you’re married and both you and your spouse are paying them. You may be wondering, can Seniors deduct Medicare premiums? The silver lining is that you may qualify for a tax break for paying the premiums. Tax deductions for Medicare premiums You can combine premiums for Medicare health insurance with other qualifying health care expenses for purposes of claiming an itemized deduction for medical expenses on your tax return. This includes amounts for “Medigap” insurance and Medicare Advantage plans. Some people buy Medigap policies because Medicare Parts A and B don’t cover all...

16 Jul 2020
0

Erroneous Economic Impact Payments Must Be Returned

Roger Rossmeisl, CPA
Individual Tax Briefs
Erroneous Economic Impact Payments Must Be Returned

The IRS and the U.S. Treasury had disbursed 160.4 million Economic Impact Payments (EIPs) as of May 31, 2020, according to a new report. These are the payments being sent to eligible individuals in response to the economic threats caused by COVID-19. The U.S. Government Accountability Office (GAO) reports that $269.3 billion of EIPs have already been sent through a combination of electronic transfers to bank accounts, paper checks and prepaid debit cards.  Eligible individuals receive $1,200 or $2,400 for a married couple filing a joint return. Individuals may also receive up to an additional $500 for each qualifying child. Those with adjusted gross income over a threshold receive a reduced amount.  However, the IRS says some payments were sent in error and such erroneous economic impact...

16 Jul 2020
0

3 Issues to Consider After Filing Your 1040 on July 15th

Roger Rossmeisl, CPA
Individual Tax Briefs
3 Issues to Consider After Filing Your 1040 on July 15th

The tax filing deadline for 2019 tax returns was extended until July 15 this year, due to the COVID-19 pandemic. Now that your 2019 tax return has been successfully filed with the IRS, there may still be some issues to bear in mind. Here are 3 issues to consider after filing your 1040 on July 15th. 1. Some tax records can now be thrown away You should keep tax records related to your return for as long as the IRS can audit your return or assess additional taxes. In general, the statute of limitations is three years after you file your return. So you can generally get rid of most records related to tax returns for 2016 and earlier years. (If you filed an extension for...

06 Jul 2020
0

IRA for a Nonworking Spouse

Roger Rossmeisl, CPA
Individual Tax Briefs
IRA for a Nonworking Spouse

It’s often difficult for married couples to save as much as they need for retirement when one spouse doesn’t work outside the home — perhaps so that spouse can take care of children or elderly parents. In general, an IRA contribution is allowed only if a taxpayer has compensation. However, an exception involves a “spousal” IRA. It's essentially an IRA for a nonworking spouse and allows a contribution to be made for that nonworking spouse. Under the spousal IRA rules, the amount that a married couple can contribute to an IRA for a nonworking spouse in 2020 is $6,000, which is the same limit that applies for the working spouse. Two main benefits As you may be aware, IRAs offer two types of benefits for taxpayers who make...

06 Jul 2020
0

Deductibility of Student Loan Interest

Roger Rossmeisl, CPA
Individual Tax Briefs
Deductibility of Student Loan Interest

The economic impact of the novel coronavirus (COVID-19) is unprecedented and many taxpayers with student loans have been hard hit.  The Coronavirus Aid, Relief and Economic Security (CARES) Act contains some assistance to borrowers with federal student loans. Notably, federal loans were automatically placed in an administrative forbearance, which allows borrowers to temporarily stop making monthly payments. This payment suspension is scheduled to last until September 30, 2020. But what about the deductibility of student loan interest? Deductibility of student loan interest Despite the suspension, borrowers can still make payments if they choose. And borrowers in good standing made payments earlier in the year and will likely make them later in 2020. So can you deduct the student loan interest on your tax return? The answer is yes, depending...

ROGER ROSSMEISL, CPA

Kho & Patel CPAs
160 E. Arrow Highway
San Dimas, CA 91773

(714) 325-0442
roger@khopatel.com

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