Personal tax tips for tax preparation & income tax planning

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This page last updated on
October 23, 2004

Personal Tax Preparation & Income Tax Planning Tips from Brookwood Tax Service

New Tax Break for Medical Expenses
Check out the New Health Savings Account

You can now put aside up to $2,600 (for an individual) or $5,150 (for a family) into a tax-deductible health savings account (HSA) to cover out-of-pocket medical expenses in conjunction with a high-deductible health insurance plan.
See the Full Article for details.

Did You Lose Money in Your IRA?

You May be Able to Deduct that Loss

If the bear market savaged your IRA and it's value is still below the total of your after-tax contributions, you may be able to deduct the loss on your tax return. You must cash out all IRA's of the same type (Roth or traditional) in order to claim the deduction.

Full Article

Non-Cash Charitable Contributions

How to Claim the Deduction for Donating Your Car

The tax code allows charitable deductions for non-cash contributions of property such as used automobiles, but there are specific rules that must be followed. Always document the value claimed for the donated property -- if the value is more than $5,000, you must have a professional appraisal.

Full Article

Does Your Employer Give You Stock Options?
Tax Treatment Varies Depending on the Type of Option

If you exercise non-qualified stock options, the difference between your exercise price and the market value on the day of exercise is considered taxable earned income and will be reported on your W-2. Incentive stock options (also called qualified options) can qualify for the lower capital gains tax rate if the stock is held longer than one year, but also may trigger alternative minimum tax (AMT) liability for the employee.

Full Article

Making Gifts to Children
Consider the Tax Consequences of the Kiddie Tax

Investment income of a child under the age of 14 is taxed at the top tax rate of the child's parents, under a provision known as the Kiddie Tax. Parents, grandparents and other relatives considering gifts of income-earning assets to children should consult a tax advisor regarding the possible tax consequences.

Full Article

Sell It on e-bay!
You May Have to Report the Income on Your Tax Return
Sales of property for more than their cost generate taxable income. Taxpayers who sell property at garage or yard sales, or via the Internet on sites such as ebay, may have to report taxable income.

Full Article

Repayment of Income Reported on Previous Tax Returns

May Generate a Tax Deduction on Your Current Year Return

Taxpayers sometimes are required to pay back part of income previously reported on tax returns. Some types of income that occasionally are subject to payback are disability and Social Security benefits which are later determined to have not been properly paid. In these situations, taxpayers may be able to claim a tax deduction for the repaid amount.

Full Article

Payments From a Legal Settlement May be Taxable
Unless They're Paid for Physical Injury or Illness

Most payments resulting from lawsuits are taxable income to the taxpayer winning the lawsuit or benefiting from an out-of-court settlement. Only where payments are for personal physical injury or a physical illness are payments not taxable.

Full Article

Tax Benefits for Members of the Military

The Military Family Tax Relief Act of 2003 has various benefits related to military service. Several earlier tax law provisions gave breaks to those serving in combat areas.
Tax Information for Members of the U.S. Armed Forces has links to these details and more.

Deduct Tuition Payments to a Religious School?

The IRS says, "No!"
In a private letter ruling, the IRS determined that payment of parochial school tuition is not deductible as a charitable gift, because the parents receive a benefit for the payment in the form of the education for their child. The IRS has previously held that "donations" to a religious organization that operates a school with the understanding that the donor's child will attend the school at no additional cost likewise is not a charitable deduction.

My Stock Tanked - Can I Write Off the Loss?

A loss on a capital asset can offset a taxable capital gain, and can be used to offset up to $3,000 of other income each year. If your loss exceeds $3,000 in any year, you are allowed to carry it forward to future years and use $3,000 each year to offset other income until the full amount of your loss is used up.


	Don't Assume an IRS Notice is Correct If you receive a notice from the IRS, don’t assume that it is correct and automatically pay the amount shown on the notice. Many IRS notices just require you to give the IRS additional information to show why you do not owe the additional taxes or penalties. Always consult your tax preparer when you receive notices from the IRS.


	Use a Home Equity Loan to Make Non- Deductible Interest Deductible Convert nondeductible interest expense on credit cards and automobile loans into deductible home mortgage interest. A deduction for the interest on a home equity loan or line of credit is allowed if you itemize your deductions. The interest on a home equity loan is deductible no matter how the loan money is used provided the loan is not over $100,000. Interest on a home equity loan in excess of $100,000 is not deductible.


	How to Deduct the Interest on Your RV, Boat or Mobile Home Deduct the loan interest on your RV, camper, or even your boat. You are allowed to deduct mortgage interest on your primary residence and one other residence. The definition of what constitutes a residence is very broad and includes RV’s, campers, and boats as long as they have cooking, toilet, and sleeping facilities.


	Tax Break on Lump Sum Social Security Payments If you receive a lump-sum payment of social security benefits for the current year and prior years in one payment, you may be able to reduce the taxable amount of social security. This is done by making a special election that allows you to determine the amount of the social security that would have been taxable in that prior year instead of all in the current year.


	Georgia Part-Year Taxpayers There are three ways to calculate your Georgia deductions and two ways to calculate state personal exemptions. Tax-saving tip -- make sure your tax preparer knows the options and uses the best one for your tax return!

personal tax tips

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