Standard Deduction

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15. Here, MDCPA members answer some basic questions.Q. When is it better to itemize rather than take the standard deduction?A. Itemize only if the deductions exceed the standard deduction. For 1998, the standard deduction has increased to $7,100 for married filing jointly; $4,250 for singles; $6,250 for head of household and $3,550 for married filing separately. For people who are blind or over the age of 65, the standard deduction is $5,300 for single taxpayers, $7,950 for married filing jointly (assumes only one taxpayer is over 65 or blind)

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.Q. My daughter has been a resident of France for the past nine years, although she still retains U.S. citizenship. Her sole income is generated in the United States -- approximately $200 a year from a mutual fund. Does she need to file a U.S. tax return based on what she earned? Can she open an IRA here based on what she earns in France? She's planning to return here in the next three or four years.

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.Q: I invested $10,990 in an invention that never materialized. Can I declare this as a loss?A: Under the hobby loss rules, it must be demonstrated that the invention constituted a business activity entered into for profit. If deemed to be a business activity, the expenses would be deductible as ordinary losses on Schedule C; expenses incurred for a hobby would not be. A tax professional should be consulted to determine how hobby loss rules would apply in your case.

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.Q: My wife and I are separated. I would like to claim a standard deduction and she wants to itemize her deductions. How can I get around this?A: If separated spouses meet certain requirements, they are considered "unmarried" for income tax filing purposes. Spouses separated under a "decree of divorce or separate maintenance" on the last day of the tax year may file as Single or Head of Household.

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.Q: My husband and I recently refinanced our first mortgage and a home equity line into a 15-year mortgage. We paid two points. Can we deduct those points over a 15-year period on our income tax as we would mortgage interest?A: Yes. Points paid to refinance an existing mortgage generally are deductible prorated over the term of the loan. However, if the refinancing is incurred to provide additional funds for home improvements, the points can be deducted currently, in full, provided they are paid from separate funds.

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.Q: I am developing an education fund for my 15-year-old grandson. This year he received interest of approximately $800. Looking at the tax form, it appears he owes over $100 on this. Is he entitled to an exemption on his form since he is also being claimed on his mother's form as a dependent? If he has to fill out a tax form for himself, can he take any deductions? Does he have to file a state return?

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.Q: Should I itemize or take the standard deduction?A: Itemize only if deductions exceed the standard deduction. For 1995, the standard deductions have increased to: $6,550 for marrieds filing jointly; $3,900 for singles; $5,750 for head of household and $3,275 for marrieds filing separately.Q: How much can I deduct for business use of my car?A: You have the option of claiming 30 cents per mile or the actual cost of operating your car for business purposes.

Every year at this time, I interview one of America's most dapper and delightful G-men, Dominic J. LaPonzina, the IRS public affairs officer for Maryland and the District of Columbia.LaPonzina, 43, is a graduate of Calvert Hall High School, Towson State and Johns Hopkins.This year I asked him the tax questions that are uppermost on the minds of most people:O. J. Simpson is in jail. Does he have to pay taxes?"Everyone has to pay taxes if they have earnings," LaPonzina said. "They are also entitled to deductions."

NEW YORK -- New money-savers always lurk in the tax code -- often because of a change in your life. Your circumstances change, presenting new breaks that you hadn't considered before. For taxpayers combing their records for fresh possibilities, here are seven ideas:* 1. If you're itemizing deductions, maybe you should switch to the standard deduction.You're a particularly good candidate if your mortgage is almost paid off. As your mortgage-interest deduction drops, you may find that the standard deduction will actually save you taxes.

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.Q: I pay in over $1,000 in church tithes at the end of the year. Can I use that deduction on a short form?A: No. Charitable contributions are considered part of "itemized deductions," which must be reported on the long Form 1040 Schedule A, and not on the short Form 1040A or Form 1040EZ. To determine if you should report itemized deductions and use the long form, compare your total itemized deductions to the standard deduction for your filing status.

It's good to be average this tax season. That's because the average federal refund is up 9 percent over a year ago. The typical refund as of March 6 is $2,811, compared with $2,576 for a similar period a year ago, the latest figures from the Internal Revenue Service show. Thank some new tax breaks as well as inflation adjustments to more than two dozen items, including tax brackets. "If your income was the same year over year, it is possible that you could be in an even lower tax bracket and your tax would be lower," says Barbara Weltman, author of J.K. Lasser's 1001 Deductions & Tax Breaks.

As W-2s, 1099s and other tax forms arrive, many Americans are beginning the dreaded chore of computing their federal income taxes for 2006. My wife, Georgina, and I are just about done - for 2007. For 2006, we were basically done a year ago (with the computations, that is). Every January, we estimate our tax liability for the coming year. It takes us less than an hour, despite a fairly complicated tax situation as self-employed sole proprietors. For most Americans, the same exercise should take a half-hour.

The ever-expanding stacks of old books that my wife, Georgina, and I want to give to our public library are crowding our home office space. We are itching to clean out the bedroom closets, too, and donate clothes we haven't worn for years to our church thrift shop. But we'll put up with the clutter until after Dec. 31. Likewise, we won't do anything until January with the property tax bill that came in the mail recently. We are not always this patient, though. We are buying printing paper, envelopes and labels for our freelance work now, even if our current supply will last until February.

The wedding season is under way, and couples' minds are likely focused on invitations, dresses, tuxes and tiered cakes. But sometime between the honeymoon and April 15, newlyweds will need to consider taxes. No longer single-filers, couples have the choice of submitting returns as married filing jointly or married filing separately. That's the easy part. Being married can throw you into a higher tax bracket or result in other changes on your federal return. Here are a few tax items to consider as you start on the journey of wedded bliss: A change in status: You'll need to file a new W-4 form with your employer to change your filing status from single to married.

If you find yourself perpetually short of itemized deductions, you may want to consider bunching some of them every other year. Taxpayers younger than 65 who are not blind and not claimed as a dependent on someone else's return should take the standard deduction if the total of their itemized deductions for things such as mortgage interest, unreimbursed job expenses and charitable donations is equal to or less than: $4,750 for single filers or married...

Income tax itemizers may not be getting the maximum from deduction opportunities. "You do one tax return a year, and the law is so complicated that you just miss things," said Paul Manghera, senior financial counselor for Ernst & Young. To claim these, you must file the full 1040 and Schedule A forms. Your deductions must total more than the standard deduction to be worthwhile. For the 2003 tax year, the standard deduction is $4,750 if you are single or married but filing a separate return; $9,500 if married and filing jointly; and $7,000 if filing as head of household.

WITH SIGNS of recession growing daily, new tax proposals are emerging here that could touch millions of American homeowners. Last week, the most influential trade group representing home-mortgage lenders, the Mortgage Bankers Association of America, unveiled a housing-oriented economic stimulus plan that includes broadened deductibility for interest payments on home loans. The association called for an amendment to the federal tax code that would allow all homeowners with mortgages - not just those who itemize - to write off their annual home mortgage interest.

THE TAX DEADLINE is just around the corner, and there's a bit of good news for procrastinators. They get an extra day to file their returns because the traditional April 15 deadline falls on a Sunday. The not-so-good news is that often in the rush of last-minute filing, or in the push to get the tedious task over with, taxpayers make mistakes, experts said. Sure, the Internal Revenue Service sometimes catches math errors or fills in the blank when parents forget to claim child credits, but filers can't count on this happening.

IMAGINE a young couple, planning their wedding, making the arrangements for a new life together, thinking about the changes that married life will bring. Under todays tax laws, one of the unexpected -- and unwelcome -- surprises awaiting them comes when April 15 rolls around. Because of the combined effects of the provisions of our tax code, many married couples pay more in federal income taxes than the two individuals would owe if they were not married. The need to provide relief from this marriage tax penalty is a top priority of Congress.

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15. Here, MDCPA members answer some basic questions.Q. When is it better to itemize rather than take the standard deduction?A. Itemize only if the deductions exceed the standard deduction. For 1998, the standard deduction has increased to $7,100 for married filing jointly; $4,250 for singles; $6,250 for head of household and $3,550 for married filing separately. For people who are blind or over the age of 65, the standard deduction is $5,300 for single taxpayers, $7,950 for married filing jointly (assumes only one taxpayer is over 65 or blind)