Individual Tax Briefs Archives - Page 7 of 31

12 Nov 2023

Tax Implications of Renting Out a Vacation Home

Many Americans own a vacation home or aspire to purchase one. If you own a second home in a waterfront community, in the mountains or in a resort area, you may want to rent it out for part of the year. The tax implications of these transactions can be complicated. It depends on how many days the home is rented and your level of personal use. Personal use includes vacation use by you, your family members (even if you charge them market rent) and use by non-relatives if a market rent isn’t charged. Short-term rentals If you rent the property out for less than 15 days during the year, it’s not treated as “rental property” at all. In the right circumstances, this can produce revenue and significant tax...

09 Nov 2023

Casualty Loss Tax Deductions May Help Disaster Victims in Certain Cases

Roger Rossmeisl, CPA

Individual Tax Briefs

Casualty Loss Tax Deductions May Help Disaster Victims in Certain Cases

This year, many Americans have been victimized by wildfires, severe storms, flooding, tornadoes and other disasters. No matter where you live, unexpected disasters may cause damage to your home or personal property. Before the Tax Cuts and Jobs Act (TCJA), eligible casualty loss victims could claim a deduction on their tax returns. But currently, there are restrictions that make these deductions harder to take. What’s considered a casualty for tax purposes? It’s a sudden, unexpected or unusual event, such as a hurricane, tornado, flood, earthquake, fire, act of vandalism or a terrorist attack. Many unable to claim a tax break For losses incurred from 2018 through 2025, the TCJA generally eliminates deductions for personal casualty losses, except for losses due to federally declared disasters. Note: There’s an exception to...

08 Nov 2023

What are the Tax Implications of Winning Money or Valuable Prizes?

Roger Rossmeisl, CPA

Individual Tax Briefs

What are the Tax Implications of Winning Money or Valuable Prizes?

If you gamble or buy lottery tickets and you’re lucky enough to win, congratulations! After you celebrate, be aware that there are tax consequences attached to your good fortune. Winning at gambling For tax purposes, it doesn’t matter if you win at the casino, a bingo hall or elsewhere. You must report 100% of your winnings as taxable income. They’re reported on an “Other income” line of your 1040 tax return. To measure your winnings on a particular wager, use the net gain. For example, if a $40 bet at the racetrack turns into a $130 win, you’ve won $90, not $130. You must separately keep track of losses. They’re deductible, but only as itemized deductions. Therefore, if you don’t itemize and instead take the standard deduction, you...

06 Nov 2023

Evaluate Whether a Health Savings Account is Beneficial to You

Roger Rossmeisl, CPA

Individual Tax Briefs

Evaluate Whether a Health Savings Account is Beneficial to You

With the escalating cost of health care, many people are looking for a more cost-effective way to pay for it. For eligible individuals, a Health Savings Account (HSA) offers a tax-favorable way to set aside funds (or have an employer do so) to meet future medical needs. Here are four tax benefits: Contributions made to an HSA are deductible, within limits, Earnings on the funds in the HSA aren’t taxed, Contributions your employer makes aren’t taxed to you, and Distributions from the HSA to cover qualified medical expenses aren’t taxed. Eligibility To be eligible for an HSA, you must be covered by a “high deductible health plan.” For 2023, a high deductible health plan is one with an annual deductible of at least $1,500 for self-only coverage,...

06 Nov 2023

Investment Swings: What’s the Tax Impact?

Roger Rossmeisl, CPA

Individual Tax Briefs

Investment Swings: What's the Tax Impact?

If your investments have fluctuated wildly this year, you may have already recognized some significant gains and losses. But nothing is decided tax-wise until year-end when the final results of your trades will reveal your 2023 tax situation. Here’s what you need to know to avoid tax surprises. Tax-favored retirement accounts and taxable accounts If you’ve had wild swings in the value of investments held in a tax-favored 401(k), traditional IRA, Roth IRA or self-employed SEP account, there’s no current tax impact. While these changes affect your account value, they have no tax consequences until you finally start taking withdrawals. At that point, the size of your balance(s) will affect your tax bills. If you have investments in a Roth IRA, qualified withdrawals taken after age 59½...

06 Nov 2023

Plan Now for Year-End Gifts with the Gift Tax Annual Exclusion

Roger Rossmeisl, CPA

Individual Tax Briefs

Plan Now for Year-End Gifts with the Gift Tax Annual Exclusion

The holidays are just around the corner. Many people may want to make gifts of cash or stock to their loved ones. By properly using the annual exclusion, gifts to family members and loved ones can reduce the size of your taxable estate, within generous limits, without triggering any estate or gift tax. The exclusion amount for 2023 is $17,000. The exclusion covers gifts you make to each recipient each year. Therefore, a taxpayer with three children can transfer $51,000 to the children this year free of federal gift taxes. If the only gifts made during a year are excluded in this fashion, there’s no need to file a federal gift tax return. If annual gifts exceed $17,000, the exclusion covers the first $17,000 per recipient,...

29 Oct 2023

Selling Your Home for a Big Profit? Here are the Tax Rules

Roger Rossmeisl, CPA

Individual Tax Briefs

Selling Your Home for a Big Profit? Here are the Tax Rules

Many homeowners across the country have seen their home values increase in recent years. According to the National Association of Realtors, the median price of existing homes sold in July of 2023 rose 1.9% over July of 2022 after a couple years of much higher increases. The median home price was $467,500 in the Northeast, $304,600 in the Midwest, $366,200 in the South and $610,500 in the West. Be aware of the tax implications if you’re selling your home or you sold one in 2023. You may owe capital gains tax and net investment income tax (NIIT). You can exclude a large chunk If you’re selling your principal residence, and meet certain requirements, you can exclude from tax up to $250,000 ($500,000 for joint filers) of gain. To qualify...

29 Oct 2023

Tax Consequences of Employer-Provided Life Insurance

Roger Rossmeisl, CPA

Individual Tax Briefs

Tax Consequences of Employer-Provided Life Insurance

If your employer provides life insurance, you probably find it to be a desirable fringe benefit. However, if group term life insurance is part of your benefits package, and the coverage is higher than $50,000, there may be undesirable income tax implications. You’re taxed on income you didn’t receive The first $50,000 of group term life insurance coverage that your employer provides is excluded from taxable income and doesn’t add anything to your income tax bill. But the employer-paid cost of group term coverage in excess of $50,000 is taxable income to you. It’s included in the taxable wages reported on your Form W-2 — even though you never actually receive it. In other words, it’s “phantom income.” What’s worse, the cost of group term insurance must be...

24 Oct 2023

Disabled Family Members May Be Able to Benefit from ABLE Accounts

Roger Rossmeisl, CPA

Individual Tax Briefs

Disabled Family Members May be Able to Benefit from ABLE Accounts

If you have family members with disabilities, there may be a tax-advantaged way to save for their needs — without having them lose eligibility for the government benefits to which they’re entitled. It can be done though an Achieving a Better Life Experience (ABLE) account, which is a tax-free account that can be used for disability-related expenses. The SECURE 2.0 law made changes that will allow more people to be eligible for these accounts, beginning in 2026. Eligibility rules ABLE accounts can be created by eligible individuals to support themselves, by family members to support their dependents, or by guardians for the benefit of the individuals for whom they’re responsible. Anyone can contribute to an ABLE account. While contributions aren’t tax-deductible, the funds in the account are...

18 Sep 2023

Can You Deduct Student Loan Interest on your Tax Return?

Roger Rossmeisl, CPA

Individual Tax Briefs

Can You Deduct Student Loan Interest on your Tax Return?

The federal student loan “pause” came to an end on August 31 after more than three years. If you have student loan debt, you may wonder whether you can deduct the interest you pay on your tax return. The answer may be yes, subject to certain limits. The deduction is phased out if your adjusted gross income exceeds certain levels — and they aren’t as high as the income levels for many other deductions. Deduction basics If you’re eligible, the maximum amount of student loan interest you can deduct each year is $2,500. The interest must be for a “qualified education loan,” which means a debt incurred to pay tuition, room and board, and related expenses to attend a post-high school educational institution, including certain vocational schools....

Tax Implications of Renting Out a Vacation Home

Casualty Loss Tax Deductions May Help Disaster Victims in Certain Cases

What are the Tax Implications of Winning Money or Valuable Prizes?

Evaluate Whether a Health Savings Account is Beneficial to You

Investment Swings: What’s the Tax Impact?

Plan Now for Year-End Gifts with the Gift Tax Annual Exclusion

Selling Your Home for a Big Profit? Here are the Tax Rules

Tax Consequences of Employer-Provided Life Insurance

Disabled Family Members May Be Able to Benefit from ABLE Accounts

Can You Deduct Student Loan Interest on your Tax Return?

ROGER ROSSMEISL, CPA

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