6th Annual Anandtech Tax Time Thread

[JonathanYoung]

Please let me know if this question has been answered, and I'll read through the entire thread.

My wife and I are currently renting a place. Near the end of 2008 (before we got married), she bought a house on behalf of her parents with everything under her name (common thing to do among Chinese people, I guess). We will not live in the house.

My understanding is that only mortgage interest from a primary residence can be deducted from your income using itemized deductions, and since we won't be living in this house we won't be able to use it to lower our tax.

What options do we have at this point? Someone mentioned claiming it as a rental property and treating it like a business. What are the pros and cons to this approach?

Thanks in advance for any help anyone can provide. We are in California, by the way.

 

[compguy786]

I am really confused on my tax status. I made $5750.17 in 2008. My dad tells me to file as a dependent, Which nets me $408, But when i file as "no one can claim me" I will
get back $889. My dad paid for my college tuition, Can he still claim that ? or i can claim it on my return ?

Please help !

 

[bignateyk]

I am going to be buying a house in about 6 months, and will be eligible for the $8000 tax credit. I want my employer to stop withholding my income tax, and they told me to modify my W4, which is really confusing.

I need to enter a number between 0 and 9 to adjust my withholding. I don't want them to withhold ANY of my income tax. Do I need to go through the trouble of filling out the worksheets and stuff to get a number? Is there a number I can enter that basically says "don't withhold any of my income tax"?

 

[EagleKeeper]

Originally posted by: JonathanYoung
Please let me know if this question has been answered, and I'll read through the entire thread.

My wife and I are currently renting a place. Near the end of 2008 (before we got married), she bought a house on behalf of her parents with everything under her name (common thing to do among Chinese people, I guess). We will not live in the house.

My understanding is that only mortgage interest from a primary residence can be deducted from your income using itemized deductions, and since we won't be living in this house we won't be able to use it to lower our tax.

What options do we have at this point? Someone mentioned claiming it as a rental property and treating it like a business. What are the pros and cons to this approach?

Thanks in advance for any help anyone can provide. We are in California, by the way.

You have three choices

1) Treat the place as a pure rental property. Use the Schedule E. You should be receiving rent from the Parents though (on paper, if not actually) to be able to justify this as an investment. It will not qualify for the tax credits for a first home but you can write off expenses for the place.

2) Treat the place as a second home (vacation). You can deduct some of the taxes on it, but it will not qualify for the tax credits for a first home.

3) Treat the place as your primary "official" residence for tax purposes (Tax returns and bills). "Officially" rent out a large chunk of the house to the parents. (#1) That will allow the tax breaks of home ownership and also allow the Schedule E depreciation/expenses.

 

[EagleKeeper]

Originally posted by: compguy786
I am really confused on my tax status. I made $5750.17 in 2008. My dad tells me to file as a dependent, Which nets me $408, But when i file as "no one can claim me" I will
get back $889. My dad paid for my college tuition, Can he still claim that ? or i can claim it on my return ?

Please help !

If you file as an dependant, you can not claim the tuition credits - your parents can
If you file as single, you get the tuition credits (which may be worthless at your income).

If you are living under your parents roof, you technically are dependant on them.



Run the numbers on yourself both ways and then have your parents run the numbers usign you as a dependent w/ tuition and then without you.

See which option generates the better situation as a whole.

 

[EagleKeeper]

Originally posted by: bignateyk
I am going to be buying a house in about 6 months, and will be eligible for the $8000 tax credit. I want my employer to stop withholding my income tax, and they told me to modify my W4, which is really confusing.

I need to enter a number between 0 and 9 to adjust my withholding. I don't want them to withhold ANY of my income tax. Do I need to go through the trouble of filling out the worksheets and stuff to get a number? Is there a number I can enter that basically says "don't withhold any of my income tax"?

There is no magic number. You enter what ever you are legally able to justify to the IRS if needed.

You may still have to pay income tax - do not place yourself in the situation where you are not paying taxes in order to purchase something in the future.

If that every falls through; you will be shafted by having to pay the back taxes & penalties.

If you want to take the time and the wratch of your HR, increase the W4 exemption by one digit and determine how that effects your taxes. Then readjust that number to what ever tax withholding you desire. You will know how many $$ each withholding exemption is worth.

 

[shortylickens]

DONE!

Did it with TurboTax and it only took an hour, and this year I had a buttload of deductions that I never used to have. Grand total of about 20 thousand in medical, school and moving expenses.

 

[CupCak3]

I look forward to this thread every years. Thanks for all your dedication and helping the community!

My wife is currently earning a master's degree for work (teacher).

After reading through some posts and searching around the net, it looks like millage and other expenses are can be written off under employee expenses. Can you deduct the tuition under employee expenses and lifetime learning credit or is this considered double-dipping?

When receiving scholarships for a degree, is this money tax free? I've read conflicting information on this.

When claiming the tuition, do I need to deduct all employer reimbursements and outside scholarships?

Thanks again.

 

[MercenaryYoureFired]

Hey guys I have a probably very simple question concerning my probably very easy to do tax return, but it being my first time doing this junk, I wanted to make sure I didn't do something wrong before filing.

So I'm a full time college student and work part time and the past year I've made about $9,000, with about $2,500 of that going directly into my school expenses (All tuition).

So would there be any reason why I can't get "Lifetime Learning Credit" from these out of pocket expenses? I read the stipulations for eligibility and I can't find something that would exempt me from receiving credit; but when I enter these amounts into H&R's free software for simple tax returns, it's only giving me about $4 credit?

Thanks for any help.

 

[EagleKeeper]

Originally posted by: MercenaryYoureFired
Hey guys I have a probably very simple question concerning my probably very easy to do tax return, but it being my first time doing this junk, I wanted to make sure I didn't do something wrong before filing.

So I'm a full time college student and work part time and the past year I've made about $9,000, with about $2,500 of that going directly into my school expenses (All tuition).

So would there be any reason why I can't get "Lifetime Learning Credit" from these out of pocket expenses? I read the stipulations for eligibility and I can't find something that would exempt me from receiving credit; but when I enter these amounts into H&R's free software for simple tax returns, it's only giving me about $4 credit?

Thanks for any help.

The credit applys to taxes owed; it is not like the EIC/Child Credit which can generate $$ even if the tax bill is zero.

The tax S/W will usually allow you to inquire why the amount entered differs from the credit.

 

[EagleKeeper]

Originally posted by: CupCak3
I look forward to this thread every years. Thanks for all your dedication and helping the community!

My wife is currently earning a master's degree for work (teacher).

After reading through some posts and searching around the net, it looks like millage and other expenses are can be written off under employee expenses. Can you deduct the tuition under employee expenses and lifetime learning credit or is this considered double-dipping?

When receiving scholarships for a degree, is this money tax free? I've read conflicting information on this.

When claiming the tuition, do I need to deduct all employer reimbursements and outside scholarships?

Thanks again.

The net cost of the overall tuituion expenses for a given person is what counts.
No double dipping

 

[dabuddha]

We just bought a house in Jan 2009 and we were wondering about the 8000 refundable credit. I was told I can file an amended return to get that money back this year if I wanted to. I honestly don't care if I get it this year or next year but I guess my concern is, can this tax credit disappear next year? I'd hate to miss out on it.

 

[EagleKeeper]

Originally posted by: dabuddha
We just bought a house in Jan 2009 and we were wondering about the 8000 refundable credit. I was told I can file an amended return to get that money back this year if I wanted to. I honestly don't care if I get it this year or next year but I guess my concern is, can this tax credit disappear next year? I'd hate to miss out on it.

I do not think the credit will disappear - it would be political suicide for Congress.

IRS Link - First-Time Homebuyer Credit

 

[dabuddha]

Originally posted by: EagleKeeper

Originally posted by: dabuddha
We just bought a house in Jan 2009 and we were wondering about the 8000 refundable credit. I was told I can file an amended return to get that money back this year if I wanted to. I honestly don't care if I get it this year or next year but I guess my concern is, can this tax credit disappear next year? I'd hate to miss out on it.

I do not think the credit will disappear - it would be political suicide for Congress.

IRS Link - First-Time Homebuyer Credit

Thanks for the info Also, can we claim both credits or only the 8k? It looks like my purchase date falls within the time period for the first credit. I know you have to pay it back over 15 years but we have a couple of big projects we need to do very soon in the house (was a foreclosure) and an interest free loan looks good to me.

 

[EagleKeeper]

Originally posted by: dabuddha

Originally posted by: EagleKeeper

Originally posted by: dabuddha
We just bought a house in Jan 2009 and we were wondering about the 8000 refundable credit. I was told I can file an amended return to get that money back this year if I wanted to. I honestly don't care if I get it this year or next year but I guess my concern is, can this tax credit disappear next year? I'd hate to miss out on it.

I do not think the credit will disappear - it would be political suicide for Congress.

IRS Link - First-Time Homebuyer Credit

Thanks for the info Also, can we claim both credits or only the 8k? It looks like my purchase date falls within the time period for the first credit. I know you have to pay it back over 15 years but we have a couple of big projects we need to do very soon in the house (was a foreclosure) and an interest free loan looks good to me.

You do not get to double dip.

You purchased in 2009; The IRS has allowed you to take the 8K credit on your 2008.

This is a credit, not an interest free loan. If you have filed, use the 1040X to get the credit

This year, qualifying taxpayers who buy a home before Dec. 1, 2009, can claim the credit on either their 2008 or 2009 tax returns. They do not have to repay the credit, provided the home remains their main home for 36 months after the purchase date. They can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.

The amount of the credit begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers.

 

[alphatarget1]

Hope someone could help me. I used TurboTax last year and didn't have problems. This year is a bit dicey though.

Moved to TX in August 07 for grad school. Did a CA 540EZ form for 2007 and got a tax refund for the job (taxes overpaid) I worked in CA. Here is what the 1031 form (residency determination) says:

The underlying theory of residency is that you are a resident of the place where you have the closest connections.
The following list shows some of the factors you can use to help determine your residency status. Since your residence is usually the place where you have the closest ties, you should compare your ties to California
with your ties elsewhere. In using these factors, it is the strength of your ties, not just the number of ties, that determines your residency.

Factors to consider are as follows: (I'll list the situations after each bullet)

? Amount of time you spend in California versus amount of time you spend outside California.

I live in TX and only visit CA (probably less than 2 weeks total).

? Location of your spouse/RDP and children.

Don't have a spouse

? Location of your principal residence.

I live in TX

? State that issued your driver?s license.
? State where your vehicles are registered.

I maintain my CA DL and car registration, although my dad's name is on the title for both of the cars (I should say his name is on my car's title and my name is on one of the other cars' title).

? State in which you maintain your professional licenses.

I have a CA EIT (engineer in training) certificate but that's not really a "professional license" (I don't have to pay dues on it).

? State in which you are registered to vote.

I maintain my CA voter registration.

? Location of the banks where you maintain accounts.

All my bank accounts have TX address on file.

? The origination point of your financial transactions.

I'd say that's TX as well.

? Location of your medical professionals and other healthcare providers (doctors, dentists etc.), accountants, and attorneys.

I use the student health center here the most, does that count as TX?

? Location of your social ties, such as your place of worship, professional
associations, or social and country clubs of which you are a member.

Probably TX.

? Location of your real property and investments.

I have some stocks (which are pretty worthless now). What would that be?

? Permanence of your work assignments in California.

No work assignments in CA.

So what do y'all think? I'll probably end up asking an accountant but if there is someone in a similar situation who could give me some advice that would be great!

 

[imported_weadjust]

My Mom in law gave my Sis & Bro In law 65k to buy and rental investment property. I know the tax exempt gifting amount would be 24K. What are the tax ramifications for the 41K over the gifting amount for the giver and the receiver?

 

[EagleKeeper]

Originally posted by: weadjust
My Mom in law gave my Sis & Bro In law 65k to buy and rental investment property. I know the tax exempt gifting amount would be 24K. What are the tax ramifications for the 41K over the gifting amount for the giver and the receiver?

Receivers are in the clear.

Mom has a gift tax due against the extra 41K.

If she structured it across the end of the year, then that would bring it down to $17K.

If there is a Father-In_Law in the picture, then each parent can give $12K to each child
In that case that would be $48K per year. Split the $65K over the end of the year, and Uncle gets no penalty payments.

 

[EagleKeeper]

Originally posted by: alphatarget1
Hope someone could help me. I used TurboTax last year and didn't have problems. This year is a bit dicey though.

Moved to TX in August 07 for grad school. Did a CA 540EZ form for 2007 and got a tax refund for the job (taxes overpaid) I worked in CA. Here is what the 1031 form (residency determination) says:

The underlying theory of residency is that you are a resident of the place where you have the closest connections.
The following list shows some of the factors you can use to help determine your residency status. Since your residence is usually the place where you have the closest ties, you should compare your ties to California
with your ties elsewhere. In using these factors, it is the strength of your ties, not just the number of ties, that determines your residency.

Factors to consider are as follows: (I'll list the situations after each bullet)

? Amount of time you spend in California versus amount of time you spend outside California.

I live in TX and only visit CA (probably less than 2 weeks total).

? Location of your spouse/RDP and children.

Don't have a spouse

? Location of your principal residence.

I live in TX

? State that issued your driver?s license.
? State where your vehicles are registered.

I maintain my CA DL and car registration, although my dad's name is on the title for both of the cars (I should say his name is on my car's title and my name is on one of the other cars' title).

? State in which you maintain your professional licenses.

I have a CA EIT (engineer in training) certificate but that's not really a "professional license" (I don't have to pay dues on it).

? State in which you are registered to vote.

I maintain my CA voter registration.

? Location of the banks where you maintain accounts.

All my bank accounts have TX address on file.

? The origination point of your financial transactions.

I'd say that's TX as well.

? Location of your medical professionals and other healthcare providers (doctors, dentists etc.), accountants, and attorneys.

I use the student health center here the most, does that count as TX?

? Location of your social ties, such as your place of worship, professional
associations, or social and country clubs of which you are a member.

Probably TX.

? Location of your real property and investments.

I have some stocks (which are pretty worthless now). What would that be?

? Permanence of your work assignments in California.

No work assignments in CA.

So what do y'all think? I'll probably end up asking an accountant but if there is someone in a similar situation who could give me some advice that would be great!

CA voter registration, tags and driver license:
You are still a resident of California.

All legal documentation indicates TX is temp for school only.

 

[Patt]

I just received my documents to sign from my accountant (father in law), and I'm getting $14548.42 back!

This has come about because of approximately $35000 in moving expenses (moving company, lawyers fees, property transfer tax ...), and also the fact that I took a couple of university level programs that I'll also get reimbursed for.

:beer: for me!

 

[EagleKeeper]

Originally posted by: Patt
I just received my documents to sign from my accountant (father in law), and I'm getting $14548.42 back!

This has come about because of approximately $35000 in moving expenses (moving company, lawyers fees, property transfer tax ...), and also the fact that I took a couple of university level programs that I'll also get reimbursed for.

:beer: for me!

If you are reimbursed for tuition, then you can not claim - double dipping.

Lawyer fees are not usually deductible on a person return

Moving expenses should only apply if for work related move - not college move.

From your brief statement, it sounds like someone is playing fast and loose with numbers.

You better look at what you are actually signing and make sure that it falls within the tax guidelines.

 

[Patt]

Originally posted by: EagleKeeper

Originally posted by: Patt
I just received my documents to sign from my accountant (father in law), and I'm getting $14548.42 back!

This has come about because of approximately $35000 in moving expenses (moving company, lawyers fees, property transfer tax ...), and also the fact that I took a couple of university level programs that I'll also get reimbursed for.

:beer: for me!

If you are reimbursed for tuition, then you can not claim - double dipping.

Lawyer fees are not usually deductible on a person return

Moving expenses should only apply if for work related move - not college move.

From your brief statement, it sounds like someone is playing fast and loose with numbers.

You better look at what you are actually signing and make sure that it falls within the tax guidelines.

Thanks for the comments EagleKeeper, but perhaps the Canadian Tax laws are slightly different. I am not reimbursed for the tuition, I meant a tax credit - my bad. I did move for a work-related reason, I just took some university courses while working.

I am 100% confident in my father-in-law ... he has been a CA for over 30 years, and has a huge business. If anything was remotely dodgy, he wouldn't even consider it. That said, because of the value of the refund, he said he wouldn't be surprised if we do get audited. However, we have all the documentation/receipts etc, and feel pretty comfortable with everything.

Again, thanks for the concern, and for looking out for the posters in the thread. :beer: to you EagleKeeper.

 

[EagleKeeper]

My comments had applied to the US tax laws,. I have NO understanding of the Canadian laws

 

[lykaon78]

Health Savings Account Question:

Basic's
My wife's employer offers a health insurance plan that includes a health savings account.

In 2008 her employer contributed $1,000 and we contributed an extra $1,500.

On her W-2 her employer reported $2500 in box 12a using a code of W. According to some W-2 instructions I found on irs.gov the "W" code is used for "W?Employer contributions to your Health Savings Account.
Report on Form 8889, Health Savings Accounts (HSAs)".

Two questions:
1. Did my wife's employer mis-report their contribution?
2. Does this impact our return?

 

[RedArmy]

Thanks for the tax thread again EagleKeeper! I don't do much with taxes but I always learn something from reading this thread.