Here's the latest advice from IRS tax expert Jesse Weller, one of our "Ask the Experts" contributors:
Tax day may still be two months away, but the questions are piling up.
Here’s the latest advice from IRS tax expert Jesse Weller, one of our “Ask the Experts” contributors:
Q: Mom and I bought a house together last year and qualify for the (federal homebuyers) tax credit. Her tax preparer said she can claim half the mortgage interest and half the tax credit. Although the title lists us as joint tenants, I am the primary borrower. I don’t have a problem with splitting things, but want to make sure it’s OK. Can she claim half?
A: A taxpayer can normally deduct the qualified mortgage interest expense and property taxes he actually paid during the year, so it is possible to split the deductions based on circumstances.
- Seahawks get high grades for drafting of Jarran Reed, while reaction to other picks a little more varied
- TCU QB Trevone Boykin among Seahawks' undrafted free agent signings
- Oregon QB Vernon Adams to attend Seahawks rookie mini-camp on a tryout basis
- Bellevue High principal leaves school amid scrutiny of football program
- Seahawks bolster key areas of need on Day 3 of NFL draft
Most Read Stories
If both you and your mother are eligible first-time homebuyers, you may allocate the credit using any “reasonable method.” That means any method that does not allocate the credit to a co-owner who is not eligible. Both of you will need to share 2009 tax information to make sure that the combined totals for the deduction and credits are properly reported on your respective tax returns.
The maximum first-time homebuyer credit is $8,000.
When claiming the credit, both of you must attach Form 5405, First-Time Homebuyer Credit, to your federal income tax return. You also must attach documentation showing the purchase of a home between the applicable dates. (Congress has extended the credit to first-time buyers who enter a contract by April 30 and close by June 30.)
And note that you will not be able to e-file but must file a paper tax return.
Q:[space]I’ve got two questions: My two kids are watched by a baby-sitter after school since I work all day. I pay cash for the child care. Can I deduct this expense without providing the child care provider’s name or Social Security number?
Also, I gave each child an educational account (through a brokerage) as a gift. Can I claim anything on taxes?
A:[space]If you do not report the care provider’s information, you will not be able to claim the tax credit for child- and dependent-care expenses. To claim the credit, you must report the care provider’s name, address and Social Security number (or individual taxpayer identification number). Also, the care provider cannot be someone you claim as a dependent.
When you pay someone to care for a dependent so that you can work or look for work, a portion of the amount you pay (up to 35 percent of your expenses) may be claimed as a tax credit. This applies for dependent children up to age 13 or a dependent of any age if physically or mentally unable to care for himself or herself.
Credits are usually more beneficial than deductions because they reduce your tax amount dollar for dollar, while a deduction reduces the amount of income subject to tax.
For more information, see Publication 503 and Form 2441, Child and Dependent Care Expenses, both available at www.IRS.gov or by calling 800-TAX-FORM (829-3676).
As for gifts to individuals, they cannot be deducted on your federal income tax return. Large gifts totaling more than $13,000 per person per year usually require the giver to file a federal gift tax return, even though no gift tax is generally due.
The good news is that a gift is not taxable for the recipient, regardless of the amount.
Setting up education accounts was a wise move for your children’s future.
Q:[space]I received an inheritance of $40,000 from my late parents. I received it before the end of the year but cashed it in 2010. Do I pay taxes on that money?
A:[space]Generally, an inheritance is not included in your income. However, if the inherited cash or property produces income — such as interest, dividends or rents — that income is taxable. Also, if you inherited a pension or an IRA, you may need to include part of the inherited amount as income, depending on circumstances.
For more details on inheritances, see Publication 525, Taxable and Nontaxable Income, at IRS.gov or by calling 800-TAX-FORM (829-3676).