Members of the Maryland Association of Certified Public...

Tax answers

March 25, 1996

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.

Q: I'm on Social Security disability. Am I required to pay taxes on that money? I'm very poor.

A: Disability benefits paid under the Social Security Act are taxed the same as benefits received by retirees. Like retiree benefits, how much is taxed depends upon your filing status and your total income, both taxable and exempt. The method used to calculate taxability of benefits is quite complex. Depending on your situation, none to as much as 85 percent of your benefits might be taxable. Thus, in the worse case, only 15 percent of your benefits would escape taxation. The state of Maryland will not tax any of your Social Security benefits. However, your total benefits, both taxable and nontaxable, will reduce the pension exclusion (now as much as $13,800) that the state allows the elderly and the disabled.

Q: Last year I had a capital loss of approximately $5,000. I deducted the maximum of $3,000, which left a balance of $2,000. When I fill out my 1995 return, do I have to send in a copy of my 1994 information about the stock that I sold, selling price and the purchase price, to verify that?

A: No, you are not required to repeat the 1994 information that verifies the loss on a stock sale. Part I, Line 6 or Part II, Line 15 of the 1995 Schedule D will ask for the capital loss carry over from the prior year. Use Line 6 for a short-term loss carry-over or Line 15 for a long-term loss carry over. This capital loss may also be entered on Line 7 of Maryland Form 502, the Resident Tax Return.

The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.

A joint service from The Sun and the Maryland Association of Certified Public Accountants can help you with your tax queries. Association members, all CPAs, will answer questions from readers until April 15. To ask a tax question, call Sundial, The Sun's telephone information service, at (410) 783-1800. Using a touch-tone phone, enter 6225 after you hear the greeting. Callers are asked to leave their names and phone numbers, should questions need to be clarified. Selected questions will be answered in the Business section. No questions will be answered by phone.

Pub Date: 3/25/96

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