Friday, August 3, 2012
Selling your home? Find out what you need to know about taxes
Income tax Services If you're selling your home, there are a few things you need to know
about federal taxes. If you make a profit on the sale of your home, you may
need to report the profit as a capital gain when you file your taxes. However,
if you owned and lived in the home as your main home for at least 2 out of the
past 5 years, you may be able to exclude up to $250,000 of the gain ($500,000
for married couples filing jointly). If you are eligible to exclude the gain,
you don’t need to report the sale on your tax return unless you receive a Form
1099-S, Proceeds from Real Estate Transactions.
Here are some other points to remember:
·
You cannot deduct a loss from the sale of your main home
·
Special rules may apply when you sell a home for which you received the
first time homebuyer credit. See Publication 523, Selling Your Home, for
details.
·
If the home was used for business or rental purposes, special rules
apply.
·
When you move, be sure to update your address with the IRS and the U.S.
Postal Service to ensure you receive refunds or correspondence from the IRS.
Use Form 8822, Change of Address, to notify the IRS of your address change.
For more information contact us today for no
obligation fee consultation.
Amare Berhie, Tax
Advisor
612-282-3200
866-936-0430 Toll Free
Thursday, August 2, 2012
TAX IMPLICATIONS OF THE HEALTH CARE ACT
The July 2012 Supreme Court ruling upholding
what's collectively referred to as the "Affordable Care Act" (ACA) or
"Health Care Act" has resulted in a number of changes to the US tax
code. As such there are a number of tax implications for individuals and
businesses. With that in mind, let's take a closer look at what it might mean
for you.
INDIVIDUALS
INDIVIDUALS
Individual Mandate
Starting in 2014, US citizens and legal residents not qualified for Medicare or Medicaid must obtain minimum essential health care coverage for themselves and their dependents or pay a tax penalty that varies based on income level. In 2014, the basic penalty for an individual (no dependents) is $95, with substantial increases in subsequent years--$325 in 2015 and $695 in 2016, indexed for inflation thereafter.
Starting in 2014, US citizens and legal residents not qualified for Medicare or Medicaid must obtain minimum essential health care coverage for themselves and their dependents or pay a tax penalty that varies based on income level. In 2014, the basic penalty for an individual (no dependents) is $95, with substantial increases in subsequent years--$325 in 2015 and $695 in 2016, indexed for inflation thereafter.
Refundable Tax Credit
Effective in 2014, certain taxpayers will be able to use a refundable tax credit to offset the cost of health insurance premiums so that their insurance premium payments do not exceed a specific percentage of their income. Qualified individuals are those with with incomes between 133 percent and 400 percent of the federal poverty level. A sliding scale based on family size will be used to determine the amount of the credit. In addition, married taxpayers must file joint returns to qualify.
Effective in 2014, certain taxpayers will be able to use a refundable tax credit to offset the cost of health insurance premiums so that their insurance premium payments do not exceed a specific percentage of their income. Qualified individuals are those with with incomes between 133 percent and 400 percent of the federal poverty level. A sliding scale based on family size will be used to determine the amount of the credit. In addition, married taxpayers must file joint returns to qualify.
FSA Contributions
FSA (Flexible Spending Arrangements) contributions are limited to $2,500 per year starting in 2013 and indexed for inflation after that.
FSA (Flexible Spending Arrangements) contributions are limited to $2,500 per year starting in 2013 and indexed for inflation after that.
New Rules for HSAs and Archer MSAs
Tax on non-qualified distributions from HSAs and Archer MSAs that are used to cover the cost of over the counter medicine without a script will increase to 20 percent starting in 2011. Medical devices, eyeglasses, contact lenses, copays, and deductibles are not affected, nor is Insulin even if it is non-prescription.
Tax on non-qualified distributions from HSAs and Archer MSAs that are used to cover the cost of over the counter medicine without a script will increase to 20 percent starting in 2011. Medical devices, eyeglasses, contact lenses, copays, and deductibles are not affected, nor is Insulin even if it is non-prescription.
Medicare Part D
Medicare Part D, the tax deduction for employer provided retirement prescription drug coverage, will be eliminated in 2013.
Medicare Part D, the tax deduction for employer provided retirement prescription drug coverage, will be eliminated in 2013.
Increase in AGI Limit for Deductible Medical
Expenses
The deduction is currently 7.5 percent of AGI, but next year, in 2013, that increases to 10 percent of AGI. The 7.5 percent threshold continues through 2016 for taxpayers aged 65 and older, including those turning 65 by December 31, 2016.
The deduction is currently 7.5 percent of AGI, but next year, in 2013, that increases to 10 percent of AGI. The 7.5 percent threshold continues through 2016 for taxpayers aged 65 and older, including those turning 65 by December 31, 2016.
Health Coverage of Older Children
The cost of employer provided health care coverage for children (through age 26) claimed as dependents on tax returns is excluded from gross income.
The cost of employer provided health care coverage for children (through age 26) claimed as dependents on tax returns is excluded from gross income.
Medicare Tax Increases for High Income
Earners
Starting in 2013, there will be an additional 0.9 percent Medicare tax on wages above $200,000 for individuals ($250,000 married filing jointly).
Starting in 2013, there will be an additional 0.9 percent Medicare tax on wages above $200,000 for individuals ($250,000 married filing jointly).
Also starting in 2013, there is a new
Medicare tax of 3.8 percent on investment (unearned) income for single
taxpayers with modified adjusted gross income (MAGI) over $200,000 ($250,00
joint filers). Investment income includes dividends, interest, rents,
royalties, gains from the disposition of property, and certain passive activity
income. Estates, trusts and self-employed individuals are all liable for the
new tax.
Exemptions are available
for business owners and income from certain retirement accounts, such as
pensions, IRAs, 401(a), 403(b), and 457(b) plans, is exempt.
If you need assistance
navigating the complexities of the new health care act, don't hesitate to call
us. We're here to help.
Amare Berhie, Tax
Advisor
612-282-3200
866-936-0430 Toll Free
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