Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.
Q: I have an IRA mutual fund and over the years dividends and capital gains have been reinvested. Now I am in my 60s and want to begin withdrawing. Is the full amount taxable at the regular rate or are the capital gains taxed at a different rate?
A: The ordinary income amount will be taxed at your regular rate, and the capital gains portion will be taxed at 28 percent or your regular rate, whichever is lower. Although you should receive a Form 1099-R from the mutual fund, it will probably not give you enough information regarding the capital gains. Therefore, use IRS Publication 590 to identify the portion that is capital gains and the annual statement from the fund to calculate the breakout of income.
Q: If you're buying a home jointly with another person who is not your spouse, how do you deduct the interest? We are paying equally.
A: The mortgage interest would be split equally. Your mortgage lender will issue a Form 1098 to only one of you under one Social Security number. The individual who receives the 1098 reports his or her portion of the interest on line 10 of Schedule A. The one who did not receive the 1098 reports his or her share on line 11 and should write in "see attached" and attach a statement to the return showing the name and address of the person who received the 1098. The IRS matches lender's reports with individual returns, so it is important to follow this procedure to avoid a notice from the IRS.
The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.
A joint service from The Baltimore Sun and the Maryland Association of Certified Public Accountants can help you with your tax queries. Association members, all CPAs, will answer questions from readers until April 15 and also offer a Tax Tip of the Week.
To submit a tax question, call Sundial, The Sun's telephone information service, at (410) 783-1800. In Anne Arundel County call 268-7736, in Harford County 836-5028, and in Carroll 848-0338. Using a touch-tone phone, enter 6225 after the greeting. Push 1 to submit a tax question; state the question in full. Push 2 to hear the tax tip. Selected questions will be answered in the Business section. No questions will be answered by phone.