Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.
Q: Last year I sent in estimated taxes but I ended up getting a refund because of a loss on some bonds I bought. Is this refund taxable?
A: A federal income tax refund is not subject to federal or Maryland income tax. And a Maryland income tax refund is not subject to Maryland income tax. However, all or part of a Maryland income tax refund may be subject to federal income tax. If, in the year you paid the state income tax, you did not itemize your deductions on Schedule A of your federal income tax return, none of your Maryland refund is subject to federal income tax. To determine if, and how much, of your state refund will be taxed on your 1994 return, see the work sheet on the bottom of Page 16 of your Form 1040 instruction booklet. IRS Publication 525 also addresses this.
Q: How much income can a single person 65 or older have before you have to pay taxes? How do you figure it?
A: A single person 65 or older must have more than $7,200 of
gross income before being subject to federal income tax. Gross income includes all income from all sources that are not tax exempt, including any taxable Social Security benefits.
The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.
Members of the Maryland Association of Certified Public Accountants will answer tax questions from readers until April 15 and also offer a Tax Tip of the Week.
To submit a 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. Please leave your name and phone number.