Editor's note: Every Sunday through the end of tax season, The Sun will run an edited transcript of Baltimoresun.com's weekly tax advice column featuring experts from the Sparks accounting firm SC&H Group answering reader questions. Submit questions at www.baltimoresun.com/taxtalk
I was married in June of last year and we have two kids together who are ages 3 and 7. Should we file a joint return or separately?
- Sarah, Kellogg, Idaho
In most circumstances, filing a joint return is more beneficial than filing separately.
It may be advantageous to file separately if you each have similar income levels and one spouse has a lot of medical or business expenses. These expenses are limited based on your income. If you file separately, the income level used in calculating the limitation would be lower and may allow for more deductions.
I receive monthly royalty checks for several mineral interests I own. Some are for oil and some are for gas. What is the depletion allowance this year and what kind of expenses can I deduct from this money before paying federal tax? Also, must I pay state tax on this money?
- Betty, Sun City West, Ariz.
Each year, you should receive a statement detailing the gross royalty income and expenses. You also should receive the cost depletion and percentage depletion amounts. Generally, you should use the method that gives you the larger deduction.
This income also would be taxable at the state level, assuming you meet the minimum filing threshold for that state. Note that when calculating the tax for these states, you will want to be sure to include the amount of tax withheld from your royalty proceeds. In addition, to the extent that you file tax returns in non-resident states, you will be able to take a credit on your home state return for taxes paid to other states.
What tax year is the income and filing status determined for the upcoming rebate? I will be a single filer this year but I filed as a married taxpayer for 2007. As a married couple, we qualified for a rebate. But my income exceeds the amount allowed for singles. Since I do not qualify in 2008, what should I do if I get a rebate?
- S. Anderson, Carroll County
Though lawmakers are still negotiating a rebate package, the House version is based on 2007 tax filing status. If you were married last year, then your rebate would be based on that.