So you are at work. Working your day away, and unexpected happens: you get injured. You file workers comp (don’t forget to call Victor Sargazy, ESQ), and receive compensation. Do you need to pay tax on this income?
In most cases worker’s compensation payments are not taxable on your tax return, benefits become taxable if person receives disability payment or supplemental social security. When filling tax return don’t forget to bring summary all your payment you receive during a year to your tax professional , so correct amount of taxable income calculated.
Mortgage interest is deductible on a tax return if you are itemizing. How much is deductible depends on when loan was originated, what was the amount and how proceeds were used.
In most cases, you can deduct all of your home mortgage interest for your primary residence. But what about that vacation home? Can one deduct mortgage interest on a second home?
Yes, but there are certain conditions that needs to be met:
1.If you have a property that is not your primary residence, and it’s not rented out or hold for resale during a year, this property qualifies as a second home, and mortgage interest might be deductible. Beauty of it, that taxpayer does not need to use a home during a year.
2.If you rent out part of the year, you also must use it during same year. Owner must use the property more than 10% of days rented or 14 days, whichever is longer. For example: if the house is rented for 20 days, 10% more than rented days is 3 day, which is less than 14, so taxpayer needs to use a house for 14 days, in order to be able to get deduction.
3.If you have more than 1 second house, you have to chose which one will be your second home.
According to The Washington Post “People are really getting into Pokemon Go, a new mobile take on the classic franchise. In fact, they’re maybe getting a little too into it.The game, made by Niantic and the Pokemon Company, was released late on July 6, and allows players to capture Pokemon in real-world locations. It also quickly led to an unexpected side effect: a number of reported Pokemon-related injuries.”
Gaming is great , but lets talk about medical expenses and whats deductible on your tax return. To start you need to itemize and medical expenses are subject to 10% of AGI. So basically if your adjusted gross income is $50,000 and your medical expenses were $7,500 . If you itemizing you can deduct $2,500 ($7,500-10% of $50,000( $5,000-$2,500). What is deductible: (IRS Topic 502 – Medical and Dental Expenses)
Fees to doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, and nontraditional medical practitioners
Payments for acupuncture treatments
Payments for a center for alcohol or drug addiction
Payments to participate in a weight-loss program for a specific disease or diseases diagnosed by a physician
Payments for insulin and payments for drugs that require a prescription
Payments for false teeth, reading or prescription eyeglasses or contact lenses, hearing aids, crutches, wheelchairs, and for guide dogs for the blind or deaf.
Payments for transportation primarily for and essential to medical care that qualify as medical expenses, such as payments of the actual fare for a taxi, bus, train, ambulance, or for transportation by personal car, the amount of your actual out-of-pocket expenses such as for gas and oil, or the amount of the standard mileage rate for medical expenses, plus the cost of tolls and parking
If medical expenses paid with a credit card, taxpayer must claim deduction in the year charge occurred, and not when payment made to the card.
If medical care provided in one year, but paid in the next year, taxpayer should claim expenses in the year payment is made, not year serves was provided.
Your theft loss is deductible if you are itemizing, and a subject to reduce loss by $100, and further to 10% of AGI. If you just missing property it’s not enough for deduction, theft needs to be proved!
In order to prove theft, one have to file a police report and attach it to tax return. Also police report needs to have detailed evidence of a break-in and list any witnesses.
Theft loss is deductible in the year its discovered, but not occurred, unless it all happened in the same year. If insurance is paying back for the lost items, then no deduction allowed. If taxpayer reimbursed only partially for the loss, then difference is deductible. If insurance reimburse taxpayer after theft-loss deduction is taken, taxpayer must add this payment back to the income on the tax return in a year reimbursement was received.
Computer fraud such as bank fraud, credit card theft, the “Nigerian” email scams, cyberextortion and ransomware, reimbursed monetary losses may be deductible as well.
Sales tax is applied to ” tangible property”, anything you can see, touch, feel, weight, measure, etc. Californians do not pay sales tax on services.
When a consumer pays tax to a retailer- it’s a sales tax, when consumer pays tax directly to the state, sales tax becomes “use tax“. Both taxes have the same rate, which is 7.5% in California as of January 1, 2013 to December 31, 2016. One should calculate and pay use tax when tangible items purchased from out-of-state retailers. Use tax has been in effect in California since 1935, but many people are not aware of it.
Your tax professional can help to chose which method to use when reporting use tax .
