Paul Johnson, Hurricane, W.Va.: When you sell a home, can the state [and] county tax stamps based on the sale price be deducted somewhere?
Jim Wilhelm, a partner with SC&H Group, leads the income tax department, providing tax compliance and consulting services to private and public companies throughout the region.
Stuart Rudo is a tax partner with SC&H Group, focusing his practice on individual and corporate tax services and cost segregation studies.
Greg Horning is a founding partner of SC&H Group. He provides comprehensive tax, investment advisory and financial planning services to high net-worth individuals.
Generally, you can exclude up to $250,000 ($500,000 for married couples) of gain on the sale of your home. If your gain will be below the exclusion amount, you do not have to report the sale anywhere on your tax return.
Kevin Carter, Westminster: During this most recent tax year, I cashed in some U.S. Savings Bonds Series E and EE. The total amount of interest on the bonds was $5,200 and this was evenly split between the series. This money is being used to pay my son's college expenses (tuition/room/board). My wife tells me that only the interest on the EE bonds can be deducted for college expenses. Is this correct?
SC&H Group: Only income from Series EE and Series I bonds qualify for the higher education exclusion. This exclusion prevents interest income on these bonds from being taxed if the income is used for qualified higher education expenses of either the taxpayer, their spouse or a dependent.
It should be noted that this exclusion is phased out depending on your income. For 2005, the phase-out range for joint filers is $91,850 to $121,850 ($61,200 to $76,200 for individual filers) of Adjusted Gross Income (AGI). This means that you can receive the full exclusion if your AGI is below $91,850 and that you will receive none of the exclusion if your AGI is above $121,850. If your AGI falls in between these amounts, an additional calculation will be required to determine the amount of your exclusion. Form 8815 should be used to claim your exclusion.
Mick Corbett, Pikesville: I have some old life insurance policies [to which] I have been letting the dividends and interest accumulate to the cash value. I have been receiving 1099 [interest] for the interest each year and reporting [the] same. I have received a letter from the insurance company stating that the dividends will now be taxable, as they have exceeded the total premiums paid.
I have received a 1099-R covering these dividends. I thought a 1099-R was for pensions and annuities.
SC&H Group: Taxable dividend distributions from life insurance contracts are indeed reported on Form 1099-R. This is one of the few types of dividends that is not reported on a 1099-DIV.
Jennifer, Ronkonkoma, N.Y.: I filed for divorce [more than] a year ago, [and I am] currently still married. My husband and I have lived apart since December of 2004. I have sole custody of our 2-year-old child. I currently and for the past year have been living at my aunt's house, in which I do pay rent and share household expenses.
Now, my question is, can I claim head of household, and if so, what proof do I need to have to claim this? Thank you.
SC&H Group: A married taxpayer will be considered unmarried, and therefore eligible for head of household status, if the taxpayer's spouse did not live in the household during the last six months of the year and the household is the primary home for a dependent child of the taxpayer. This is true, even if the taxpayer waives the dependency exemption for that child to the noncustodial parent.
Patricia Hammond, Baltimore: I had a lottery winning for $2,500. I paid the taxes within a week of the winning. I am a homeowner of three years. How can I write this winning off on my taxes?
I know that I can't claim my 21-year-old daughter, who is a college student, because she grossed close to $19,000 herself last year. What are some other item[s] that I can claim? I am diabetic -- can I claim medical expenses? Thank you.
SC&H Group: Your lottery winnings will be taxable on your individual tax return for the year (Line 21 of Form 1040). Any amount of federal income tax that you paid to the IRS on these winnings (or any federal income taxes that were withheld from your winnings by the payer) is included on your tax return as taxes paid for the year (Line 64 of Form 1040). In addition, you may be able to deduct your gambling losses for the year on Schedule A. These losses must exceed 2 percent of AGI to be deducted.
It is likely that you will not be able to claim your daughter because her income level likely means that she provides for most of her own expenses. The dependency rules allow you to claim your own child provided that: