Is Home Equity Loan Interest Deductible?
Is interest on a home equity line of credit deductible as a second mortgage?
You may generally deduct home equity debt interest as an itemized deduction if all of the following conditions apply:
- You are legally liable to pay the interest
- You pay the interest in the tax year
- The debt is secured with your home
- The home equity debt is limited to the fair market value of the home reduced by home acquisition debt, up to a total of $100,000.
Deducting Contributions to Charity
What Can Be Deducted as a Charitable Contribution?
Charitable contributions are deductible only if you itemize deductions on Form 1040, Schedule A.
To be deductible, charitable contributions must be made to qualified organizations. Payments to individuals are never deductible. See Publication 526, Charitable Contributions.
If your contribution entitles you to merchandise, goods, or services, including admission to a charity ball, banquet, theatrical performance, or sporting event, you can deduct only the amount that exceeds the fair market value (FMV) of the benefit received.
Charitable Contributions: Recordkeeping Requirements
For a contribution of cash, check, or other monetary gift (regardless of amount), you must maintain as a record of the contribution a bank record or a written communication from the qualified organization containing the name of the organization, the date of the contribution, and the amount of the contribution. In addition to deducting your cash contributions, you generally can deduct the FMV of any other property you donate to qualified organizations. See Publication 561, Determining the Value of Donated Property. For any contribution of $250 or more (including contributions of cash or property), you must obtain and keep in your records a contemporaneous written acknowledgment from the qualified organization indicating the amount of the cash and a description of any property contributed. The acknowledgment must say whether the organization provided any goods or services in exchange for the gift and, if so, must provide a description and a good faith estimate of the value of those goods or services. One document from the qualified organization may satisfy both the written communication requirement for monetary gifts and the contemporaneous written acknowledgment requirement for all contributions of $250 or more.
When to Use Form 8283
You must fill out Form 8283 (PDF), and attach it to your return, if your deduction for a noncash contribution is more than $500. If you claim a deduction for a contribution of noncash property worth $5,000 or less, you must fill out Form 8283, Section A. If you claim a deduction for a contribution of noncash property worth more than $5,000, you will need a qualified appraisal of the noncash property and must fill out Form 8283, Section B. If you claim a deduction for a contribution of noncash property worth more than $500,000, you also will need to attach the qualified appraisal to your return.
For more information refer to Form 8283 and its instructions, as well as Publication 526, Charitable Contributions. For information on determining the value of your noncash contributions, refer to Publication 561, Determining the Value of Donated Property.
Unemployment Compensation Income
Is Unemployment Taxable?
Yes, unemployment compensation is includible in gross income. You must report unemployment compensation on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ.
Unemployment compensation generally includes any amounts received under the unemployment compensation laws of the United States or of a state. It includes state unemployment insurance benefits and benefits paid to you by a state or the District of Columbia from the Federal Unemployment Trust Fund. It also includes railroad unemployment compensation benefits, disability benefits paid as a substitute for unemployment compensation, trade readjustment allowances under the Trade Act of 1974, and unemployment assistance under the Disaster Relief and Emergency Assistance Act of 1974. Unemployment compensation does not include worker’s compensation.
If you received unemployment compensation during the year, you should receive Form 1099-G (PDF) showing the amount you were paid. Any unemployment compensation received during the year must be included in your income, unless you contributed to the fund (see below).
If you received unemployment compensation, you may be required to make quarterly estimated tax payments. However, you can choose to have federal income tax withheld. For more information, refer to Form W-4V (PDF), Voluntary Withholding Request.
Unemployment Income: Exceptions
Supplemental unemployment benefits received from a company financed fund are not considered unemployment compensation for this purpose. These benefits are subject to income tax withholding as wages. They may be subject to social security and Medicare taxes as well. Supplemental unemployment benefits are reported to you on Form W-2 (PDF). For more information about supplemental unemployment benefits, see Publication 15-A (PDF) , section 5.
Unemployment benefits from a private fund (or, in some cases, public fund) to which you voluntarily contribute are taxable only if the amounts you receive are more than your total payments into the fund. This taxable amount is not unemployment compensation; it is reported as other income on Form 1040 (PDF).
For more information, see Unemployment Benefits in Publication 525.
IRS Standard Deduction
What is the Standard Deduction?
The standard deduction is a dollar amount that reduces the amount of income on which you are taxed. In general, the standard deduction is adjusted each year for inflation and varies according to your filing status. You cannot take the standard deduction if you itemize deductions.
Your standard deduction consists of the basic standard deduction and any additional standard deduction for age or blindness.
Basic Standard Deduction
The basic standard deduction of an individual who can be claimed as a dependent on another person’s tax return is the greater of:
- An amount specified by law, or
- The individual’s earned income plus a specified amount (but the total cannot be more than the basic standard deduction for his or her filing status)
Additional Standard Deduction for Age or Blindness
The additional standard deduction consists of the sum of any additional amounts for age or blindness. The additional amount for age will be allowed if you are age 65 or older at the end of the tax year. You are considered to be 65 on the day before your 65th birthday. For the definition of blindness, refer to Publication 501, Exemptions, Standard Deduction, and Filing Information. The additional amount for blindness will be allowed if you are blind on the last day of the tax year. For example, a single taxpayer who is age 65 and blind would be entitled to a basic standard deduction and an additional standard deduction equal to the sum of the additional amounts for both age and blindness.
If you or your spouse were age 65 or older or blind at the end of the year, be sure to claim an additional standard deduction by checking the appropriate boxes for age or blindness on Form 1040A (PDF) or Form 1040 (PDF). You may not use Form 1040EZ to claim an additional standard deduction.
Who Cannot Take the Standard Deduction
Certain taxpayers are not entitled to the standard deduction. They are:
- A married individual filing a separate return whose spouse itemizes deductions
- An individual who was a nonresident alien or dual status alien during any part of the year (note that residents of India may be able to claim the standard deduction if they meet certain criteria. Refer to Publication 519, U.S. Tax Guide for Aliens, for more information)
- An individual who files a return for a period of less than 12 months due to a change in his or her annual accounting period, or
- An estate or trust, common trust fund, or partnership
For more information, refer to Publication 501, Exemptions, Standard Deduction, and Filing Information.
When Does Tax Debt Expire?
The Collection Statute Expiration Date (CSED) for IRS taxes is, in most cases, 10 years. Once this Statute period has run, any remaining tax debt is forgiven. The statutory period begins on the date the tax debt is assessed, which is usually shortly after a taxpayer’s returns are filed. If a taxpayer never filed their returns the Collection Statute would begin on the date that the IRS creates a substitute return (SFR) for the taxpayer.
Exceptions: Extended Statute of Limitations
In some cases a taxpayer’s debt may not expire exactly 10 years from the date of IRS assessment. There are a number of ways that the IRS Collection Statute can be extended. For example, filing a Bankruptcy or Offer in Compromise (OIC) will usually extend the amount of time the IRS has to collect a tax debt. Leaving the United States for a period of time or other factors can also extend this Statute of Limitations as well. A tax debt which is assessed as a result of a citizen being convicted of tax fraud will never expire.
Your Tax Resolution Strategy Depends on the Statute of Limitations
When working to resolve an IRS tax debt, the age of the debt and CSED date are very important factors to consider when coming up with a plan of action. If the debt is close to expiring, it is very important that both the taxpayer and any tax professional they are working with are careful not to take any action which will extend the IRS statute further into the future!
IRS Problems Resolved specializes in assisting individuals and businesses with past due tax debts. If you have an old tax liability that you would like to resolve or if you have questions about the IRS Collection Statute please fill out our contact form or contact one of our tax professionals today! 855-895-1892
