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Money, taxes, personal finance questions?
Times personal finance editor Helen Huntley is here to answer your questions.

Click here to send Helen a question and check her blog later for an answer.

Important note: We cannot take questions on specific stocks and investments. Likewise, we cannot guarantee a response to every question.


Questions and answers:

Question: I am retired. Last year 2005 I took $5,000 out of an annuity and paid the IRS $885 tax on that amount. When I did my taxes, I had to put the full amount on form 1040. I called the IRS and was told that's the way it's done. The $885 was sent to the IRS in October when I took the money out. I don't think I should have to pay tax on the taxes. There is a difference of $135. What can I do to get the IRS to change this?

Helen Huntley: Nothing. You must report your gross income before taxes are withheld, calculate the taxes due, then subtract from that the taxes you already paid. When you were working, you paid taxes on your gross wages, including taxes on your income tax withholding and taxes on your Social Security and Medicare tax withholding.

Question: Regarding a Roth IRA, my income was only $15,000 from Social Security and about $1,000 of interest from the bank. Can I put anything in my Roth IRA for 2005? I am single and age 65.

Helen Huntley: You are not eligible. Either you or your spouse must have earned income for you to be eligible to make any type of IRA contribution.

Question: My home is in Florida, but I have spent about two months of each year in a condo I own in Ohio. I originally paid $175,000 for the condo. It was never rented out. I recently sold it for $144,000. Can I take a $31,000 capital loss on my federal tax form?

Helen Huntley: No. A loss on the sale of a second home is not deductible. The sale must be reported on Schedule D, but instead of putting in the loss amount, you write in "personal loss." If you had rented the house part of the year, you could have reported part of the loss on Form 4797 for sale of business property.

Question: Can you deduct a percentage of gas used to drive back and forth to work if you work in a different county from where you live?

Helen Huntley: No.

Question: If I have investment income from offshore investments, at what rate is that income taxed?

Helen Huntley: It is taxed the same as U.S. investment income, however, you get credit for foreign taxes paid.

Question: I recently rolled an existing IRA into a Roth IRA. I know I will owe taxes. Will I be able to request a payment schedule to pay these taxes? I probably should have taken distribution and thereby spread the tax out but I made an error and rolled the entire amount.

Helen Huntley: If you can't pay taxes you owe, you can set up an installment plan with the IRS, but you will have to pay interest.

Question: I filed Chapter 7 bankruptcy in 2005, Do I get any tax break for that? I lost about $11,300.

Helen Huntley: The first break you get is that debt cancelled in bankruptcy does not count as taxable income to you. Whether you get a break on your losses depends on what sort of losses you had. For example, if you owned stock that you sold for less than your purchase price, then your loss is a capital loss, reported on your form. However, if you sold a car or house or other personal property for less than its value, that's not a loss you can write off on your taxes.

Question: If a person claimed five exemptions for six months and on their tax return they only claim one dependent, will they owe in taxes if they only made about $2,700 for the year?

Helen Huntley: Probably not. If you are single, under age 65 and had less than $8,200 in total income, you aren't even required to file a tax return. However, you need to file one to get a refund of any taxes that were withheld. If you are married filing a joint return with your spouse, then you could owe the IRS. What matters is whether your combined withholding was more or less than your tax liability.

Question: My brother recently lost his right arm in a car accident and is disabled. He lives with me, so can I claim head of household on my income taxes and claim him as a dependent?

Helen Huntley: Yes, if he lived with you more than half the year, you provided more than half his support and he had less than $3,200 in income (not including untaxed government benefits). If he is married, he cannot have filed a joint return with his spouse. His disability is not a consideration.

Question: This will be the first year I am eligible with my employer to contribute to my company's 401(k) retirement savings plan, which I will be doing. Will I also be able to continue putting money in my Roth IRA in 2006?

Helen Huntley: Yes, as long as you don't make too much money. Eligibility is phased out starting with incomes of $95,000 (single) and $150,000 (joint).

Question: I owe the government $1,000 for 2003 taxes. Is there a way I can add that to my income for 2005? Instead of them collecting it, they can just raise my income and tax bracket.

Helen Huntley: Sorry, but IRS collections don't work that way. You can set up an installment payment plan to pay what you owe.

Question: My parents bought me a house. I have been making monthly payment for five years and I have also put money into the house, fixing things and paying yearly taxes on it. Do my parents get to write the house off on their taxes or do I?

Helen Huntley: Whose name is on the deed and the mortgage? That's who gets the deductions. If your parents own the house, the expenses you've been paying are the equivalent of rent. Your parents should be reporting these payments as taxable income, which then would be offset by the mortgage interest and tax deductions.

Question: My wife and I have opened and paid off a Florida Prepaid College Plan for our daughter. Is the interest we paid prior to paying off the college plan deductible on federal tax returns?

Helen Huntley: No.

Question: I bought a Florida investment property in 1999 that is now for sale. I do not have a primary residence. If the property sells, can I use the proceeds of the sale to buy a new residence and avoid paying capital gains taxes? Also, can I file for a 1031 exchange to avoid paying taxes?

Helen Huntley: You cannot avoid paying taxes by investing the proceeds in a home for yourself. However, you could use a 1031 exchange, purchasing another investment property, to defer payment of taxes. Just be sure to follow the rules and work with a broker who is experienced in handling 1031 exchanges.

Question: My father passed away last November and we inherited stocks. We are to pay taxes on the capital gain and there is also a savings account that we must pay taxes on. My question is will that go towards my gross income? Is there not a break for inherited money?

Helen Huntley: Yes, there is a break for inherited money. An inheritance is not taxable per se, but you could owe some taxes related to it. The value of your father's stock is "stepped-up" to the price on the day he died. That means you only owe capital gains tax on the gain that occurred since his death. There is no tax on the savings account, but the interest it earned last year is taxable. Depending on when it was earned, the interest might be part of your father's final return, an estate return or your return as beneficiary.

Question: My mother cashed in some of her mutual funds the end of 2005. The monies received will be used as a down payment on a house and property in 2006. Is all of the money taxable? Is there a period that she can reinvest without being hurt tax wise?

Helen Huntley: All of her profit is taxable. To figure that she needs to check her records to see how much she originally invested, including the value of reinvested dividends. She will owe taxes regardless of how she uses the proceeds.

Question: Can 2006 installed PGA Winguard Hurricane Windows be listed on next year's Tax Return for rebate as part of President Bush's Energy Saving Plan?

Helen Huntley: Energy-efficient exterior windows installed in 2006 or 2007 may be eligible for a total credit of up to $200. Ask the manufacturer if these particular windows meet the standard to qualify for the new credit.

Question: I sent my child to day care last year for a few months and paid $1000. Can I claim this on my taxes even if I don't work? His pediatrician recommended it, saying my child needed the interaction.

Helen Huntley: No. To claim the dependent care credit you must work at least part-time or attend school fulltime or be disabled. A regular day care facility would not qualify as a medical expense. To qualify, your child would have to have some type of mental or physical impairment and the school would have to have programs to assist with that disability.

Question: My ex-husband has not paid any child support since 2004. Can the IRS hold his refund back on behalf of his kids? Is there anything I should file or do?

Helen Huntley: Yes they can, but that won't happen immediately. The first step in the process is to call support enforcement officials for their help at 1-800-622-5437. Here's the Web site.

Question: My dad's taxable income is $22,000.00 after deductions. He is selling some property that he owned for 40 years (not living on the property) for $285,000. What would his estimated capital gains tax be and at what percent?

Helen Huntley: His profit will be taxed at 15 percent.

Question: I heard that a legally blind person could write off traveling expenses (bus fares, cabs, paying others for rides, etc.) to and from work. Is this true, and if so where in TurboTax do you indicate this?

Helen Huntley: I am not aware of any such deduction. Blind people do get an additional standard deduction and can claim as a medical expense trips to and from the doctor and doctor-recommended education, such as learning Braille. They also may be able to deduct as a business expense some expenses related to helping them be able to perform their work. However, the references that I consult all stress that commuting costs to and from work are not deductible even for those with disabilities.

Question: I'm a stay-at-home mom who pays child support and I owe back support. I got married last March and my husband is wanting to claim me as a dependent on his taxes. Can the IRS take his refund because of my back child support? My name is not going to be on the check itself. He is filing married but separate. I've been told that he should file a form called injured spouse or something like that.

Helen Huntley: If you and your husband file separate returns, he cannot claim you as a dependent and his return will not be affected by your debt. If you file a joint return, the refund probably will be withheld, but he can file Form 8379 as an "injured spouse" to get back his share of the refund.

Going forward, if he wants to file a joint return, he should adjust his withholding so he will owe the IRS a small amount rather than being entitled to a refund. You also should take steps to eliminate this problem. Get a job and use the income to pay what you owe.

Question: I was married in August of 2005 and my husband owes back child support. I have just filed my tax return and I filed married filing separately. Will the IRS take my refund?

Helen Huntley: No. Keep your finances separate.

Question: Are Social Security income and pension benefits taxable and if so at what amount?

Helen Huntley: Pension benefits are taxable. Social Security benefits are taxable if one half your benefits plus the rest of your income is more than $25,000 (single) or $32,000 (married). The rate at which you pay taxes depends on your total income from all sources. If you need help with your return, call (800) 829-1040 to find out the location of a site near you where volunteers provide free tax assistance.

Question: I was recently married and my new husband owes over $190,000 in taxes to the IRS due to not paying his employee taxes for his business. I own my home and usually get a big tax refund. Am I now liable for this debt? Can the IRS take my home? If he continues not to pay his taxes on his employees and accrue more debt while we are married am I liable?

Helen Huntley: You are not liable for his debts, but you need to take some steps to protect your assets. Keep your financial affairs completely separate. Do not file a joint return with your husband. Do not open joint bank or brokerage accounts or put his name on the title of your house. Do not open joint credit cards or cosign loans.

Question: My 25-year-old daughter has no income and was hospitalized for multiple months in 2005. We supported her and paid all of her expenses. Are we entitled to claim her as a dependent for 2005?

Helen Huntley: Yes since you provided more than half her support and her income was less than $3,200.

Question: Can my parents claim me on their tax return this year? I have paid all tuition for schooling, roughly $7,000, make $30,000 a year and pay for all other bills. I am 22.

Helen Huntley: Your parents cannot claim you on their return unless they paid more than half your support last year. If you live with them, the market value of your room (and food if applicable) count as part of their support for you. Since you say you pay your tuition and all your own bills and earn $30,000 a year, it appears to me that you should get the personal exemption on your return. Congratulations on your financial independence.

Question: My airlines stock was sold in 2003 at a huge loss, I failed to put the loss on my 2003 and 2004 tax return. Can I put it on my 2005 tax return I am currently completing? I lost about $9,500.

Helen Huntley: No, you cannot just put this on your 2005 return. However, you can file an amended 2003 return on a Form 1040X. You will need to do that before April 17 or your opportunity for a refund will be lost forever. Unless you had offsetting capital gains, you only will be able to actually use $3,000 of the loss for 2003 and carry the rest forward. You can amend your 2004 return to claim another $3,000 and you can claim $3,000 more on your 2005 return, with the last $500 on your 2006 return.

Question: A teacher who lives in Virginia has to cross a toll bridge, which costs $12, to get to school. To avoid a $25 daily cost, he rents a room in the school's town for $250 a month. He returns home on weekends. Can he deduct any of the costs on his tax return?

Helen Huntley: No, he cannot deduct these expenses.

Question: We moved to Florida in August. Do we have to file income tax in Ohio and Florida now? What is the rule on selling your home? Do we have to claim what we earned if we one of us is over 59?

Helen Huntley: You file one federal income tax return using your Florida address. Florida does not have a state income tax. I presume that you will owe state income tax to Ohio and have to file an Ohio return, but you'll need to check with Ohio about that.

The rule on selling your home is that if you and your spouse owned and lived in the house as your primary home for at least two out of the last five years, you can exempt up to $500,000 of profit from tax. If only one of you met that qualification or if you are single, you can exempt up to $250,000 in profit. Your age makes no difference.

Question: If I work part-time for several employers during a calendar year and earn less than $600 from all but one, do I have to claim any of it on my tax return except for the one I earned more than $600 from? Let's assume that none of them deducted any federal income tax in the first place due to the low income bracket.

Helen Huntley: You have to report all the income unless your total adjusted gross income is so low that you are not required to file a return.

Question: Can I distribute holdings equally to three of my heirs without a gift tax penalty? It would amount to about $250,000 for each, or a total of $750,000. As recipients, would they be liable for tax on the $250,000 as income?

Helen Huntley: Yes, you can give away the money without a gift tax. However, you will be obligated to file a gift tax form. You won't owe any taxes on any gifts until your lifetime reported gifts exceed $1-million. They won't owe any taxes on the gift. Gifts are not taxable income.

Question: Can I live on a boat as a primary residence and deduct the taxes and interest I pay on the loan for the boat? I can't afford to live in a house and I could use the writeoff.

Helen Huntley: Interest on a loan on a boat, trailer or RV is deductible if it's either your first or second home and it has sleeping, cooking and toilet facilities.

Question: Can I claim my mother who receives social security benefits on my taxes?

Helen Huntley: Yes if she qualifies on two key points. First, you provide more than half her support and second, her income, not including untaxed Social Security benefits, is less than $3,200. The fair rental value of where she lives is considered support. Thus, if she lives with you, it counts as part of your support for her. If she lives in her own home, it counts as part of her support of herself.

Question: Can I claim my 19-year-old on my income taxes if she made more money than me? I supported her the whole year and I would I be able to file for head of household and earned income credit since she attended college full time for 5 months.

Helen Huntley: You can't claim her if she provides more than half her own support. It's not strictly an issue of income. If she lives with you, that counts as part of your support. If your daughter's other parent provides support too so that no one provides more than 50 percent, you still might get the exemption by having the other parent sign a "multiple support agreement."

Question: My family inherited a home worth approximately $400,000 and they have never used it as their primary residence. They want to give the home to me, their son, but are unsure what exactly the tax implications to them would be.

Helen Huntley: They will need to file a gift tax return, but will not owe gift taxes. The market value of the home at the death of the previous owner will be your tax basis for figuring future capital gains.

Question: My wife makes many trips transporting her mother to doctors and to the hospital. May I deduct the mileage on her vehicle?

Helen Huntley: Only if your mother-in-law is claimed as a dependent on your tax return. Medical mileage is added with your other medical expenses, which are deductible only to the extent they exceed 7.5 percent of your adjusted gross income.

Question: I am age 75. I have worked full-time for many years. I still work full-time. Do I have to withdraw money every year from my IRA?

Helen Huntley: Yes.

Question: I was just reading the answers you gave to questions by other taxpayers. In part of your answer to one you said that pensions are not earned income! Does that mean you don't need to report your pension money on your yearly taxes?

Helen Huntley: You still have to report your pension. There's more than one type of taxable income. For example, the interest you earn on investments is taxable, even though it is not classified as "earned income."

Question: If I claim a dependent on my tax form but they owe the IRS money will I still get a refund?

Helen Huntley: If you are owed refund, it will not be affected by a debt owed to the IRS by your dependent. It will be affected if the debt is owed by your spouse and you file a joint return.

Question: Can I deduct the money I paid to install new windows in my home in 2004 on my 2005 income tax return?

Helen Huntley: No, but if you itemized on your 2004 return, you could have deducted the sales tax paid on the windows (and other building materials) in addition to the amount from the sales tax table. You cannot deduct 2004 expenses on your 2005 return.

Question: My husband and I are filing tax return jointly. He is working. I am home taking care of the younger kid and put the elder boy in preschool. Could we use the preschool tuition to take Child and Dependent Care Expenses Credit?

Helen Huntley: No. For married couples, the credit is calculated based on the earned income of the lower-earning spouse. There is an exception for spouses who are incapacitated or fulltime students at least five months of the year.

Question: I first took out a traditional IRA with Bank of America in 1994. I redeemed it last year. I received a statement from Bank of America which appears to state that the WHOLE amount is now taxable. I fail to understand why I must pay tax on the full amount and not just the interest. Am I not being double taxed on the principal amount, which came from my taxed salary? If this is how an IRA works, I now totally regret having put so much other money into IRAs and later to be double taxed for the principal. I am over 591/2 so early withdrawal is not a factor.

Helen Huntley: There are two kinds of traditional IRAs - deductible and nondeductible. If you took an income tax deduction in 1994 for your contribution, the money is not being taxed twice. Since it was not taxed in 1994, it would be taxed in 2005.

However, if you made any nondeductible contributions to IRAs over the years, then distributions from your traditional IRAs will be partly taxable and partly tax-free. The issue involves not just this IRA, but all your IRAs added together.

When you make a nondeductible contribution, you are supposed to fill out Form 8606, and then keep track each year of your total in nondeductible contributions. When you take withdrawals, you then use Form 8606 to figure out how much of your distribution is taxable.

The 1099 form shows the distribution as taxable because the bank does not know what you have been reporting on your income tax return regarding the deductibility of your contributions.

Question: I have stocks that may be worth over $125,000 in the near future. If I cash out my stocks and realize about $100,000 profit, when do I pay the tax on the gain? What rate and are there exemptions? Is the entire amount taxable the year I sell it or can I spread the gains over several years?

Helen Huntley: If you have held the stock at least a year, your profit will be taxed at 15 percent. A 5 percent rate applies if your income (including the profit) is below $29,700 if single or $59,400 if married. The gain is taxable for the year when you sell the stock. The only way to spread out the gain is to split up the stock and sell it in stages over more than one year.

Question: My son is attending the seminary and has been receiving money from people to help him with school and living expenses. Some of the money has come as a scholarship but was given to him directly. He was told that it was to be used for schooling as well as to live on. He has put this money in his checking account and has been using it as needed for tuition and books. Should we give this money to the school to hold? Since he was told by the seminary that the money is to be used over the next couple of years, he would have a balance at the end of this year, and it is my understanding that it would need to be listed as income on his taxes.

Helen Huntley: Money given to him directly by an individual is a gift and not taxable (nor is it deductible to the giver). Money given to him by the seminary or other institution as a scholarship is tax free to the extent that he has offsetting expenses for tuition and required books and supplies. Anything in excess of those expenses - including money spent on room and board - is taxable income.

It would be better if the seminary dispensed its scholarships one year at a time (most do.) However, simply giving the money to the school to hold on his behalf would not change the fact that he has received the money and owes taxes on it.

Question: How much can I claim as a deduction on my taxes if I had 75% of my tuition paid by Bright Futures? I paid the remaining 25% by myself. And also can I claim cost of textbooks?

Helen Huntley: The 25 percent that you paid (along with required student fees) can be used to claim one of the following education tax breaks: the Hope Scholarship Credit, Lifetime Learning Credit or the tuition deduction. If you qualify for it, the Hope credit will be your best bet. If not, do the calculations both ways to see whether the Lifetime credit or the deduction will be a better deal. You don't have to itemize to take the tuition deduction.

You cannot claim the cost of textbooks for any of these tax breaks unless the money was paid directly to the college. However, if you received a payout from the Florida Prepaid College Program, books as well as reasonable room and board costs count as eligible educational expenses to help you avoid taxes on the distribution.

IRS Publication 970 (Tax Benefits for Education) is very helpful. You can read it online at www.irs.gov.

Question: My mother recently passed away and left an annuity that states that about $44,000 has unpaid taxes. Will I have to pay taxes on this money or is it exempt? The estate is far less than required for inheritance taxation.

Helen Huntley: Yes you will owe income taxes when the money is withdrawn from the annuity.

Question: My mother-in-law died this past year. Her only asset was her condo which we sold and divided the monies. Our share was $33,000. Do we owe any taxes on this money?

Helen Huntley: Probably not. Your mother's estate was too small to be subject to the estate tax. There is no income tax on an inheritance. The tax basis on her condo was "stepped up" to the market value at the time of her death. You would owe capital gains tax only on the increase in value between the time of her death and the time of the sale (offset by any expenses, such as a real estate commission.) Since you sold the condo shortly after her death, that should not be an issue.

Question: Our son started receiving a Stafford Loan ($8,500 a year) last September. We provide ALL his other expenses (rest of tuition, room and board, car, auto insurance, gasoline etc.). Can we continue to claim him as a dependent in our tax returns?

Helen Huntley: Most likely. It sounds as though he meets the tests of being a fulltime student at least five months of the year, under the age of 24 and not providing more than half his own support.

Question: What is the deduction when selling a home owned for more than five years for a married couple before a capital gains tax is applied? Is there a limit on the amount one can be taxed?

Helen Huntley: If you owned and you both lived in the house for at least two of the previous five years, the first $500,000 in profit is not taxed ($250,000 for a single person.)

Question: I'm an international trainee in Louisville, Kentucky with about $21,000 income last year. I know that federal and state taxes are refundable 100%. I tried to estimate my refund for 2005 using different softwares and is always less than 100%. Being a nonresident alien, do I have to do something special to take back my taxes? Do trainees have a special status about taxes?

Helen Huntley: You are mistaken about your taxes being fully refundable. A nonresident alien's U.S. income "effectively connected" to a U.S. business is taxable the same as a citizen's. If you were in the United States working for a foreign government, your income would not be taxed here. You will need to file Form 1040NR to claim your refund. Read IRS Publication 519, US Tax Guide for Aliens for more details. (Available at www.irs.gov).

Question: If I file a separate tax return from my husband, can they take my refund for his back child support?

Helen Huntley: No.

Question: A friend of mine figured out his taxes. He is a single dad who hasn't filed taxes since 2000. Can you please let me know if there is a place in the St. Pete area that can help him? The IRS sent him all his things he needs since 2000. He just needs help putting it together.

Helen Huntley: If your friend is looking for free help, I suggest that he call the IRS at 800 829-1040 and ask for addresses and operating hours for the Volunteer Income Tax Assistance Program sites near him. This program is for people with incomes of $37,000 or less. He certainly can get help with his 2005 return and he may be able to get some assistance with earlier returns. If not, he probably will need to pay a tax preparer to assist him.

Question: My husband, his father, step-mother, and brother own a condominium jointly. My husband's brother has been living in the condo for more than five years and the others live elsewhere. We are getting ready to put the condo on the market. Can we avoid paying capital gains on the sale since the property is my brother-in-law's primary residence and we will not make more than $250,000 in profit of the sale?

Helen Huntley: Your brother-in-law will not owe tax on his share of the profits, but the rest of the owners will owe tax on their shares.

Question: Besides an annuity, are there other investments in which a beneficiary of a deceased person's assets or estate does not receive a stepped-up basis in the asset?

Helen Huntley: Yes. Money in retirement accounts such as IRAs and 401(ks) does not receive a stepped-up basis and is taxed when it is withdrawn. Beneficiaries of savings bonds also will have to pay taxes on the accumulated interest when they cash the bonds.

Question: Can I claim my disabled fiance on my income taxes?

Helen Huntley: The answer depends on the law in the state where you live. Under IRS rules, you cannot claim a deduction if the relationship with the person you want to claim is illegal under state law. For example, in Florida cohabitation (living together without being married) is against the law. If you lived in Florida, you definitely could not claim your fiance as a dependent.

Question: Do the citizen have right to put conditions on their tax money so that their tax money cannot be used for certain purposes?

Helen Huntley: No.

Question: Have an ARM interest-only loan for my house. Is the interest paid tax deductible?

Helen Huntley: Yes, if you itemize deductions on your return.

Question: I'll be doing occasional day care for a friend while she works. At what point would this income be taxable? I'm estimating it would be about $4,000 per year, yet if added to my husband's income it would be taxed at the highest rate.

Helen Huntley: I hate to be the bearer of bad news, but your net earnings are taxable. If they are $400 or more, in addition to income tax, you will owe self-employment Social Security & Medicare taxes on 92.35% of your net earnings.

Net earnings are what you get after subtracting business expenses such as toys and supplies from the amount she pays you. Many child-care arrangements are under the table, but your friend will not be able to claim the child care credit for her expenses unless she gives the IRS your Social Security number.

Question: Can I cash in my EE Bonds and trade up I Bonds without paying taxes on them as income?

Helen Huntley: No.

Question: What kind of penalty do I have to pay if I cash in the I Bonds before the five-year period?

Helen Huntley: Three months' interest.

Question: Is it legal for my boss to withhold money he owes me because I quit when I had given two weeks' notice? What can I do to get my pay?

Helen Huntley: Contact the U.S. Department of Labor's Wage and Hour Division toll-free at 866-487-9243 for assistance and information about your rights. You're entitled to be paid for your work, but you might have to file a lawsuit to collect.

Question: I have a few questions for you. We just bought a home in June. What can we deduct on that? Also my daughter just started college? Do we still claim her? Also she has a job now. How do we do that? Do we claim her income too? Does she need to file separat?? My husband has also started college. Can we write off his tuition? I need help! Any information you can give me would be greatly appreciated, I guess I need to get an accountant. I dont know much about this house stuff and college stuff.

Helen Huntley: Since your family has made a lot of changes that affect your tax situation, it probably would be a good idea to get a tax professional to help you with your return this year. In addition, I highly recommend that you get a book such as JK Lasser's Your Income Tax 2006 that will allow you to look up answers to questions and help you figure out the tax implications of decisions you make.

With a house, you can deduct your real estate taxes and your mortgage interest. However, you will have to figure out whether all your deductions exceed your standard deduction. Since you bought the house mid-year, you might be better off to stick wtih the standard deduction. There are a bunch of tax breaks for education, but you can only use your tuition expense for one of the breaks. Therefore, you have to figure out which one benefits you the most. The JK Lasser book can help with that.

Your daughter will need to file a separate income tax return claiming her income, but you may still claim her as your dependent if you provided more than half her support for the year. If you do that, you get to take the personal exemption for her, but she does not get to take it for herself. Best wishes.

Question: Can I claim my disabled fiancee on my taxes?

Helen Huntley: The answer depends on the law in the state where you live. The IRS does not allow a dependency exemption if the relationship is illegal under state law. In Florida, cohabitation (living together without marriage) is illegal.

Question: I was involved in the closing of our plant at the Los Angeles Times so I'll be out of a job on Jan. 1st. Since I will need money, I'm thinking of selling my rental property. I haven't lived there more than two years. I heard that due to hardships like this, I can be excluded from capital gains tax. Is this true?

Helen Huntley: The hardship exclusion you are thinking about applies to your principal residence. For example, if you bought a house and had to move one year later because you lost your job, you could get a partial exclusion. However, that's not what happened in your case. My understanding of the rules is that you will have to pay capital gains tax on your property. I recommend getting an accountant to help you with your tax return for the year when you sell the property.

Question: I'm in the process in selling my house in Florida. Since I have not lived there for 2.5 years due to a divorce, can I use the proceeds of the sale to buy the new house and use it as a primary home?

Helen Huntley: Did you live in and own the house for at least two years of the five years ending on the date of the sale? If so, it still qualifies as your home for purposes of excluding the gain on the sale even though you haven't lived there for two and a half years. If you don't meet the two-year test, then your share of the gain is fully taxable. It makes no difference what you do with the proceeds.

Question: My fiance will be coming over from another country in January. When he does, we plan on getting married immediately. Can we file taxes for the 2005 tax year together, given that I had to send him money from the U.S. to support him?

Helen Huntley: No. You'll have to wait until 2006 to file a joint return.

Question: I filed bankruptcy in 2003 or 2004, but it was dismissed. Since January of this year I have paid on time. Now I'm buying a new home and I want to pull down the equity in my house to put toward the new one. Would my not being employed affect my being able to get a home equity loan?

Helen Huntley: Yes, unless you have other sources of income. Most lenders want to know that you have the means to repay the loan. Your credit score and your other debts also will be factors. Even though you have been paying on time since January, that probably is not enough to erase all the damage done to your credit score by your previous problems. In addition, since you say you did not get a bankruptcy discharge, I assume that you still have a lot of debts. It's possible that you might find a lender willing to make the loan based solely on the value of your property, but the interest rate and the terms will not be favorable to you.

Question: I am ready to list a condo I own for sale. It is not my primary residence and I have not lived in it for two of the last five years, so I know I am subject to capital gains taxes. My question is - if I sell the condo can I reinvest the money in my current home in the form of room additions to avoid capital gains?

Helen Huntley:
No. You can do whatever you want with the money, but you'll still owe capital gains.

Question: Half my 2004 tax refund was taken by the IRS for back taxes owed by my ex in 2001. That was the last year we were married. I filed head of house in 2005 and was wondering if I could amend it and include injured spouse to get some of what they took back.

Helen Huntley:
The IRS has two forms for spouses who feel they've been done wrong: Form 8379 for "injured" spouses and Form 8857 for "innocent" spouses. You can find them online at www.irs.gov. Also, here is an article that discussions the difference between the two categories.

Question:
If I sell my home, can I use the profits to rent a new place, without incurring a capital gains tax?

Helen Huntley: Most likely you can use the profits for anything you please. If you have owned and lived in your house for at least two years, you will owe no capital gains tax on up to $250,000 of profit ($500,000 if you are married). It doesn't matter what you do with the money.

Question: How do I find a fee-only financial advisor?

Helen Huntley:
Here are three sources for adviser referrals:
National Association of Personal Financial Advisors (http://napfa.org)
American Institute of CPAs (www.cpa-pfs.org)
Certified Financial Planner Board of Standards (www.cfp.net)

Question: Where can I find the Pinellas County money rates chart?

Helen Huntley: It now appears on Tuesdays, on page 3 of the business section. The format has changed. It is not an ad and banks pay to be included.

Question: How can I find out what the break points are for my 2005 Federal income tax I will be calculating early next year? What are the dollar amounts for the various percentages? I'm considering withdrawing some income from an IRA for a vacation but don't want to bump myself into a higher percentage bracket.

Helen Huntley: You can find the 2005 tax rates here on the IRS Web site.

Question: My job got sold and they are offering us our pension money. If I take it how much will I be penalized? It's only $15,000.

Helen Huntley:
Don't do it! You will pay regular income tax plus a 10% penalty tax on the money. If your company is requiring you to take your money out, open an IRA and have the company transfer the money directly to the IRA. It may not seem like a lot of money, but if you leave it alone to compound tax free, it could become a much more significant sum--depending on how many years you have until retirement and how you invest it. If they pay the money to you and then you open an IRA, they will have to withhold taxes. That's why you want a direct transfer.

Question:
I started receiving disability in August because of a serious illness that I have. My question is, at the beginning of the year I started a franchise cleaning business with my mate. We have not made much money from it. Will this business hurt my disability? I want to sell it.

Helen Huntley:
Whether the business affects your disability depends on how much you earn and how long you work. There are provisions for people receiving disability to have a trial work period without losing their benefits. You can read the rules regarding disability payments on the Social Security Web site (www.ssa.gov).

Question: Is it true that there will be no capital gains tax on investments sold in 2008?

Helen Huntley: For taxpayers in the 10 or 15 percent tax bracket, the tax on long-term capital gains is scheduled to drop from 5 percent to zero for the year 2008. In 2009, rates will revert to what they were in 2002. However, Congress almost certainly will make some changes to the tax law between now and then.

Question: I have been separated from my husband since January. My grandmother passed away and left me some money. I took this money and two paychecks and deposited it all. Within only a couple of days I have nothing in my account. The state took it. It seems my ex owed taxes and had a business I had nothing to do with. Do I have a chance of getting the money my grandmother left for me?

Helen Huntley: Yes, you do have a chance if you were not obligated in any way on the debt. I recommend that you see a lawyer right away. You also should open a new bank account in your name only.

Question: I recently sold a house in Massachusetts. What are the taxes I have to pay? Are they based on the amount of the sale or what I received after everything was taken out that had to be paid?

Helen Huntley: Did you live in and own this house for at least two of the past five years? If so, you don't owe any federal income tax so long as the gain was less than $250,000 (if you are single) or $500,000 (if you are married.)

If you don't meet that requirement, you will owe income tax based on your profit. To determine your profit, you have to know your cost basis. If you bought the house your basis is the price you paid plus the cost of any improvements made over the years. If you inherited the house your basis is the value at the time the person died plus any improvements you made later. If you were given the house your basis is the basis of the person who gave it to you plus your improvements.

From the sale price, first subtract your basis, then subtract selling costs such as the real-estate commission and any fix-up costs.

All of the above refers only to the federal income tax requirements. I cannot tell you whether you owe anything to the state of Massachusetts.

Question: I have a home-based office. I am not self-employed, but the main office is in Sarasota so I have an office in my home in Pinellas County. What are my write-offs for taxes and what type of records do I need to keep?

Helen Huntley: Based on what you've said, it is doubtful that you would qualify to deduct your home office expenses. For an employee to qualify, you need to either work at home for the convenience of your employer (not your convenience) or your home must be your principal place of business. See IRS Publication 587 "Business Use of Your Home" available at www.irs.gov for more details. There's a chart you can use to determine your eligibility and information about deductible expenses if you find that you qualify.

Question: Can you recommend a financial advisor? I am a 40-year-old woman with no 401(k) plan and not much in savings. I have $40,000 in equity in my home and I owe $4,500 in credit card debit. My employer offers a 401(k) plan but offers only a small match. I need to get going on my retirement savings. I know I am doing this way too late.

Helen Huntley: I'm afraid I can't give you a referral. However, you really don't need a financial adviser until you have accumulated enough assets to need help deciding how to invest them. That's at least a couple of years down the road. I can tell you what the financial advisor would say to you now:

1. You are throwing money away by not participating in your employer's 401(k) plan. You should immediately begin contributing at least enough to earn the full matching amount. Even though it's small, it's a lot better than nothing. A modest starting point would be to contribute enough so that your contribution and your employer's together equal 10 percent of your pay.

2. You should immediately stop using your credit cards and start a major push to eliminate your debt. Ideally, this should take no more than a couple of years, after which you should reallocate this money -- half to increase your retirement savings percentage and half to build an emergency fund.

3. In order to do 1 and 2, you will have to figure out how to reduce your spending or increase your income or some combination of the two. There are classes you can sign up for in budgeting and there are numerous articles on the Internet and books available on this topic. Mary Hunt has written some good books on debt reduction and living like a cheapskate. Basically, you will have to reduce your lifestyle. You will have to decide what's feasible for you, but some people give up things such as cable TV, high speed Internet, cell phones, meals in restaurants, etc. Unfortunately, there is no easy way to make debt go away and retirement savings build.

Question: My fiance and I have been living together for two years in December and she has not had any income in this time. We are getting married June 2006. I was told that once we are married we can file jointly and save quite a bit in taxes, but I was wandering if there is any way to file jointly before we are married. Is there any chance I can use her as a dependent if not jointly? I pay 100 percent of her living expenses.

Helen Huntley: You cannot file jointly with anyone other than a spouse. You cannot claim your fiance as a dependent if your relationship is illegal under local law, as it is in many states. In Florida, it's a second-degree misdemeanor for unmarried couples to live together. You could always move up the wedding date to qualify for the tax breaks.

Question: How would one assess the value or worthwhileness of Scudder Global Bond Fund Class S?

Helen Huntley: I find Morningstar's Web site (www.morningstar.com) to be a good source of information on mutual funds. You also can check out Yahoo Finance (finance.yahoo.com). Among other things, you can see how a fund performed over various time periods and compare that to other funds in the same category. This particular fund (ticker symbol SSTGX) is doing well this year, but underperformed in the three previous years. The sits also will give you information about the fund's holdings. Yahoo sells research reports you can buy if you want in-depth information. Morningstar indicates the fund is closed to new investors, so I presume you already own it.

Q: Starting Jan. 1 citizens can take a tax credit for solar equipment. Does the credit apply to swimming pool equipment and does it apply to interest expense for borrowing money to install solar systems? Can you deduct the cost of equipment installed using a second mortgage on your house?

Helen Huntley: The tax break for solar water heating does not apply to swimming pool heaters. As Jan. 1 approaches, you will be hearing more about other tax breaks available under the new energy bill. Manufacturers and installers of qualified items will make this a marketing point. The tax breaks are based on the cost of the equipment, including installation, not on the financing method.

Q: How do I handle the gain on a tax return on an apartment that has become fully depreciated? Also, can any gain be spread out over a period of years if the house is sold on an installment plan?

Helen Huntley: I highly recommend that you get professional help you with your return. You will have a recapture of depreciation, but exactly how it will be handled depends on when the property was placed into service and the depreciation method used. In an installment sale, all the income related to depreciation will be taxed in the year of sale, but the tax on the additional gain will be spread out over the installments. Some IRS publications you might find helpful are Publication 544 (Sales and other dispositions of assets) and Publication 537 (installment sales).

Q: I just purchased a new home about 3 months ago, as a new home owner I was wondering exactly what does "homestead " mean and what are the benefits? How do I make my home homestead?

Helen Huntley: Homestead is a legal designation that applies to your primary residence; you can only have one of them. Florida gives homestead property two types of special treatment: protection from creditors (other than your mortgage lender) and property tax relief. There also are restrictions on conveyance of homestead property after your death if you are survived by a spouse or minor children. Even if you end up in bankruptcy, you can never lose your homestead property because you didn't pay your credit card bills. The tax relief starts with a $25,000 reduction in the value of your property used to determine your property taxes. You also get a limitation on how much that valuation can increase each year for tax calculations. To qualify for the tax breaks, you must formally apply for homestead exemption in person at an office of the property appraiser for your county. You can apply any time, but the deadline is March 1 for next year's taxes.

Q: My husband owed the federal government back taxes prior to our marriage five years ago. He's saying that the government states that I can be held responsible for his back tax debt to the government. Since our marriage, we never filed jointly because of this debt. Please advise.

Helen Huntley: You are not responsible for your husband's back taxes. However, the IRS might attempt to file a lien against jointly-owned property. My advice is to keep filing separately and keep your bank account and investments in your name only.

Q: I was scammed by a St. Petersburg travel company. They promised a packet of information on their promotion that I never received and they took $149 out of my bank account. It's been almost two months and they still haven't sent my money back, although they said they would refund it almost a month ago. My question is, "Do I have any recourse to get my money back?" There are numerous complaints on the company at www.rip-offreport.com.

Helen Huntley: I am sorry to hear about your problem. First discuss this fraudulent charge with your bank. Other agencies you might contact include the Florida attorney general's office (myfloridalegal.com/consumer) and Pinellas County consumer affairs (www.pinellascounty.org/consumer/complaint.htm). Never give your bank account information to someone you don't know who calls you on the phone.

Q: What is tax liability on early withdrawal of 401(k) because I became disabled and had to quit my job?

Helen Huntley: You will owe regular income tax on your withdrawal. If you are younger than 59 1/2, you also will have a 10 percent penalty unless you were totally disabled. That means your condition is expected to last indefinitely and prevent you from doing work similar to what you were doing before you became disabled.

Question: I occasionally charge office lunches to my credit card is this tax deductible? Could I save the receipts with the office delivery address and then use them when I file?

Helen Huntley: If you are the employer providing meals to your employees, yes. Meals an employer provides for the employer's convenience or as a social activity primarily for the benefit of non-highly-compensated employees, are fully deductible as a business expense. Some business meals, such as client entertainment, are generally only 50 percent deductible.

If you are one of the employees providing meals to your fellow employees, the cost is not deductible, according to my reading of the tax rules. You could get a 50 percent deduction for meals for clients as an unreimbursed employee business expense.

Question: I have $20,000 in credit card debt that I am attempting to resolve and I have very few options. Should I:
-- File bankruptcy prior to the new law taking effect in October.
-- Contact a credit counseling agency that says it will put me in a program to learn how to create a road map and goals and save money while resolving my debt.

What are other options do I have?

Helen Huntley: Before filing for bankruptcy, it is definitely worthwhile to discuss your situation with a credit counselor. Debt repayment is the best approach IF you can set up a plan that you think you realistically can follow and it will result in repayment of your debts in five years or less. Otherwise, file for bankruptcy.

There are many credit counseling agencies, some good and some bad. Since you live in the Tampa Bay area, I recommend contacting the Consumer Credit Counseling Service of Central Florida and the Florida Suncoast (call 1-800-741-7040 or go to www.cccscfl.com on the Internet.) Those outside the Tampa Bay area should contact the National Foundation for Credit Counseling (call 800-388-2227 or www.nfcc.org on the Internet).

If you are going to file for bankruptcy, do it soon before the last-minute crush of people trying to get in under the old law. Taking a class in budgeting and goal setting is a good idea under any circumstance.

Q. Do you think it is fair that Wal-Mart is giving raises to only a few of its employes because of the new minimum wage law and not to all of us?

Helen Huntley: Yes. If you make more than the new state minimum wage of $6.15 an hour, the change in the law did not change the fairness or unfairness of your pay. The law was designed to help those at the very bottom.

Your pay still could be unfair if the company isn't compensating you adequately based on your skills and performance. That's the real issue.

Q. I have a $130,000 loan on a home valued at $250,000. I would like to build a 2-car garage with mother-in-law apartment above (this is in a historic neighborhood). Should I get a home equity loan of $60,000 for this, or just skip building it and keep my built-up equity? I can afford the extra monthly payments.

Helen Huntley: It makes sense to finance the construction of home improvements with a home equity loan or by refinancing the mortgage on a house. Since you say you can afford the extra payments, the real question is whether this particular home improvement is a good idea.

Here are the issues to consider:

1. Since you mention the historic neighborhood, I assume you have checked this out. However, it's very important to be sure that construction of a garage apartment is permitted in your neighborhood and that it would not be out of place.

2. How would the proposed construction affect the resale value of your house? A real estate agent in your area should be able to help answer that. If you are increasing the value by the amount of the loan, you are not diminishing your equity.

3. What is the market like for rental units like the one you want to build? Is the rent it would generate worth the cost of construction and the hassle factor? How close would it come to covering the extra mortgage payment? If it comes anywhere close and items 1 and 2 are in favor of building, it could be a very good idea.

4. How do you feel about this? If you've always wanted a garage for some reason and you don't find the idea of being a landlord objectionable, that's another reason to go for it.

5. What else would you with the money? If you are going to end up with out-of-pocket costs above your rental income, you have an opportunity cost.

I hope that helps you think through your options.

Q: Before we met, my husband had horrible credit. I helped him to get back on a payment plan for some others and start paying is loan back. We recently refinanced our house and added him to the mortgage and everything came back fine. But within the past 3 months we have been receiving phone calls and letters on a past debt he's sure he settled. It appears that the previous creditor didn't report it properly and now a new creditor has purchased his account. He doesn't have his documentation to prove that he made a settlement on this account. We worked really hard to get his credit back and now this is the only "bad" thing left but it's pretty bad. Can we do anything about it?

Helen Huntley: His failure to save documentation of the settlement is a serious problem. His bank might have electronic records of old checks, which would prove payment, but not the fact that the debt was settled for that amount.

He certainly should call the original lender and discuss the problem. He can ask the person trying to collect the debt for documentation that he owes the money. But ultimately, if they have proof that he owes and he has no proof that he paid, the only way I know to get it off his record is to pay it or wait until it would go off his credit record -- seven years after the account originally became delinquent and was never brought current.

My wife and I are in our 20s and have recently bought a condo. I am very seriously considering selling the condo in the next six months in order to take advantage of a price differential opportunity (we bought the condo for about 10 percent under market value). I have a baby girl and our combined income is about $55,000. What are our tax consequences for this sale? I believe that the real estate bubble may be nearing a prickly finish, so I don't want to be held captive in the condo. However, if we get hit hard on the gains, it may be worth it to wait a few years.

Helen Huntley: Once you've lived there two years, you can take out up to $500,000 in profit tax free. Until then, you'll owe capital gains tax on the profit. A partial exclusion of profits is available for people who live in a house less than two years if the sale is because of a job change, health problems or "unforeseen circumstances," such as job loss, divorce or a drastic change in income that makes you unable to pay housing costs and the like.

Q: Finding simple-to-understand information on the Consumers Price Index for the Tampa Bay area is very difficult for me. Is there any merit in adding the TBCPI to the indices in the Business Section of the Times?

Helen Huntley: I don't think it would be worthwhile to run a daily listing for something that only changes twice a year. You can find the information on the BLS Web site (www.bls.gov/cpi). Scroll down to the U.S. map on the right hand side near the bottom, then find Tampa in the pull-down box for "select an MSA."

It tells you is that prices at the end of last year were 63 percent higher than they were in 1987, the base year. You also can calculate the change between any two periods by subtracting one from another and dividing by the first number, just as you would calculate any other percentage change.

Q: My fiance purchased her house in October 2003. Now that we are getting married, we are planning on selling her house and keeping mine. We will be making less than $75,000 on the house. A large portion of the profit will be used for remodeling and upgrades to my current (soon to be our) house. Will we have to pay capital gains tax? Does the fact that this is happening prior to our legal marriage mean anything? For example, would I be subject to income tax if the profit from her house was used to upgrade the house that is currently only in my name because we aren't married yet?

Helen Huntley: If your fiance owned and lived in her house for at least two of the last five years, there will be no capital gains tax on up to $250,000 in profits when she sells. How the proceeds are used has no impact on the capital gains tax.

If your fiance pays for the remodeling and upgrades on your house before you are married, legally she would be making a gift to you. This is not taxable income to you. If it's more than $11,000, she technically is required to file a gift tax return, but would not owe any gift tax. I say technically because I seriously doubt the IRS would take an interest in this situation. Once you are married, the gift tax point becomes moot.

Q: I received an IRA from my ex-husband as a form of a settlement in our divorce and I get no other compensation from him. I am permanently disabled. My problem is that I am on l6 different medications a day and I only have Medicare as my insurance. To be eligible for medical assistance, I would have to spend all of my IRA. In doing this, I would owe the government a huge tax debt. I will not have enough money to pay the IRS back. What should I do?

Helen Huntley: First, you should be sure that you have the correct information about qualifying for medical assistance in your state. You are correct that you will owe income tax on withdrawals from the IRA, but you will not owe a penalty since you are disabled. The way to handle this is to determine how much your tax liability will be and mail a check for that amount along with a form for estimated taxes to the IRS. The money will be out of your account and you'll have fulfilled your obligation to the IRS.

Q: A year ago I helped my 76-year-old mother open a Roth IRA. She'd like to take some cash distributions, but now I am told she has to wait for five years for distributions to qualify as tax free. Is that true? If so, is there anything else she can do to avoid penalties and taxes?

Helen Huntley:
The good news is that there will be no tax or penalty when she withdraws her own contributions from the account. More good news: All the distributions are first considered to have come from her own contributions. For example, If she contributed $4,000 to her account, she will not have to pay any taxes or penalties until she has withdrawn more than $4,000. At that point, taxes and penalties will apply if the account has not been open at least five years. The taxes and penalties only apply to the earnings on the account, never to her original contributions.

Q: My wife received 92 shares of Applera Corp, from the New York state comptroller for unclaimed funds. It showed a value of $1,900, which is consistent with current prices. Do we use the $1,900 as our tax basis if we wish to sell?

Helen Huntley: The key question is why she was entitled to these shares. If they were her shares in the first place, and the comptroller is only returning her own property to her, then her tax basis is her original cost. If they were an inheritance, her tax basis is the value at the date of the previous owner's death.

Q: My wife and I are 65 and 64 and retired. We have a yearly income of approximately $45,000 a year. I have $80,000 in a traditional IRA earning 4.7 percent, which I am not using and don't plan on until I have to start making withdrawals at 71.5. Would I be better off switching this money into a Roth IRA now and paying the taxes up front? Am I allowed to do a transaction like this?

Helen Huntley: Yes, you are allowed. The process is called a conversion to a Roth IRA. The drawback is that you have to pay taxes now on the money you are converting. If you ever made any nondeductible IRA contributions, then the money withdrawn will be partly taxable. If all your IRA contributions were pre-tax (deductible contributions or a retirement plan that you later rolled over to an IRA), then distributions will be fully taxable.

Yes, it might be beneficial for you to start the conversion process to avoid future taxes on your investment earnings. However, this is not a question you can answer off the top of your head. You need to either sit down with a tax software program and run your own 'what if' scenarios or ask a tax preparer to assist you (wait until after April 15 so they won't be so busy.) The key issue is: Are the taxes you would have to pay now likely to be more or less than the taxes you would have to pay in the future if you left the money in your IRA until you were forced to start withdrawals?

To get at that, you look at things such as:

1. How much could you withdraw each year without bumping yourself into the next tax bracket?

2. How would your withdrawals now affect taxation of your Social Security benefits?

3. Could you empty your traditional IRA before you hit the age of mandatory withdrawals?

4. Would not having to take withdrawals in the future reduce taxes on your Social Security benefits down the road?

Q: I forgot to include my 1098-T qualified expenses in my last year's return (around $10,000). Is it possible for me to file for it this year or fill out another form for the same?

Helen Huntley: File an amended return -- Form 1040X -- to include the tuition you paid and claim a refund. Remember that it must be reduced by any tax-free scholarships. You may be able to claim this for a Hope Scholarship Credit, a Lifetime Learning Credit or a tuition deduction, but you only get to choose one. They all have income requirements and for the Hope, you must be in your first two years of college. See IRS Publication 970 at http://www.irs.gov/publications/p970/index.html

Q: I have read the information posted online and still have a question about sales tax on building materials for a new home. We closed on our new home in 2004. It was built in 2004 and we would like to take the sales tax deduction allowed on new home building materials. Our builder refused to provide this figure saying that while he was building it it was not yet ours. Can we take a percentage of what we think would be the amount? Is there any way to get our builder to turn over this figure or receipts?

Helen Huntley: I'm afraid you aren't going to like my answer. The builder is correct. The builder paid these taxes and gets to deduct them as part of his cost of doing business. You did not pay and you can't deduct anything. The deduction for building materials is for people who do their own building. Many people who own homes buy building materials for remodeling. They're entitled to deduct the sales tax on those materials. Sorry to be the bearer of bad news.

Q: We sold stock we received as a spinoff from Abbott Labs called Hospira Inc. The other choice was to buy additional stock. How is this reported on our 1040 taxes? How do we handle it? Which form do we use?

Helen Huntley: Use a Schedule D to report the sale and determine the amount of your capital gain. The hardest part is figuring out your tax basis in the Hospira shares. Your basis in your Abbott shares has to be allocated between the Abbott and Hospira shares. Go to www.hospirainvestor.com and click on "tax/cost basis information" for help.

Q: I plan to move to Pasco County in about two to three years. I have a house in New York that I rented and is fully depreciated. If I move there and reside for at least two years could I sell the house without paying capital gain taxes?

Helen Huntley: No. You would be able to exclude part of your gain from taxes, but not all of it. You cannot exclude the part equal to any depreciation allowed as a deduction for periods after May 6, 1997.

Q: I want to file a joint tax return but my husband owes back taxes, I'm told there is a form I can fill out and my tax refund will not be taken since I was not married to him during these tax years that he owes.

Helen Huntley: The form you've heard about is Form 8379, "Injured Spouse Claim and Allocation." It allows you to get your share of a refund even though your husband's share would still be withheld by the IRS. You use the form to allocate income, exemptions, deductions, credits, etc. between the two of you.

I also recommend calculating your taxes as "married, filing separately." If the additional tax burden is not too great, it might be worthwhile to file separately. In addition, you both should change your withholding so you don't get a refund. Then you wouldn't have to worry about this in the future.

Q: My wife last year was employed as a real estate agent. Her total income was only $12,000 and I'm a bit confused by the type of deductions possible. In her type of field is there a list of say generic deductions that she can at least use as a baseline? As she didn't have taxes taken out we are looking for any deductions to reduce the impact of taxation.

Helen Huntley: I know of no such list. However, I suspect there is general information about common tax deductions available through real estate organizations and maybe even the real estate company with which your wife is affiliated. She should file a Schedule C and deduct her business expenses such as travel, advertising, telephone, etc.

To avoid IRS penalties and interest, you should be filing quarterly estimated tax payments.

Q: We purchased a home last year that was owner-financed at 8 percent interest. We have an amortization schedule that shows how much of each monthly payment is for principal and how much is for interest. Is the former owner who is the mortgage holder responsible for sending me documentation concerning the amount of interest paid or am I required by IRS to report that I paid interest and to whom?

Helen Huntley: Mortgage lenders are required to report interest payments to the IRS on Form 1098 and provide you with a statement by Jan. 31. However, an individual selling his personal residence to you and taking back a mortgage is not required to report this information.

Since it sounds as though you are in the second situation, you should report your mortgage interest on line 11 of Schedule A of form 1040. You must put information about the person to whom you paid the interest on the dotted lines next to line 11. You have to put down name, address and Social Security number or other taxpayer identification number. The seller must give you this number and you are supposed to give the seller yours. The best time to exchange this information is at closing, of course. A form W-9 can be used for exchanging information. Failure to provide information can result in a $50 penalty.

Q: I am planning a personal trip home but on this personal trip I plan to work a day or so from a satellite office in the same area. Would I be able to write it off as a business trip for 2005 taxes? If so, what could I write off (whole family is going) and what documentation would I need to prove I worked during the trip?

Helen Huntley: Since it is primarily a personal trip, you cannot deduct any travel expenses. You can only deduct your actual business expenses (such as photocopying, etc.) while you on the trip.

Q: My son is a sophomore in college. I received a 1098-T form showing tuition paid and the amount of the Bright Futures Scholarship. I also received a 1099-Q showing the Florida Prepaid distribution, earnings and basis. I'm confused! What can I claim for tuition expenses? Do I have to deduct the amount received for the Bright Futures or the Prepaid from the tuition paid? Is it better to take a tuition deduction, Hope credit or lifetime credit? I file married/jointly with an AGI under $105,000.

Helen Huntley: I fully understand your confusion. If you want to add to it, go to www.irs.gov and read Publication 970 :). My daughter is also in college with Bright Futures and Florida Prepaid so I have some personal experience with this issue. Here is my understanding of how these work together:

1. If your son has Bright Futures covering his full tuition, you can forget about taking any deduction or credit. The tuition expenses you could use for a deduction or credit must be offset by any tax-free scholarships. If your son has 75% Bright Futures, you can use the difference between the tuition paid on the 1098-T form and the amount of the Bright Futures so long as you don't have to use these expenses to offset Florida Prepaid (see No. 3). Since your son is a sophomore, you could use the Hope Credit for this amount, but if your AGI is more than $85,000, you will only be able to use part of the credit (the same income rules apply to Lifetime Learning). In that case, the deduction may be better. Calculate it both ways and see.

2. Bright Futures is tax-free so long as the tuition paid plus required books and required supplies exceeds the amount of the Bright Futures. Ideally you should have receipts for the books.

3. The Florida Prepaid is tax-free if you can offset it with education expenses not offset by Bright Futures. The big benefit is that for this purpose, in addition to using tuition, you can count room and board as a qualified education expense (room and board do not count for offsetting Bright Futures). Your son's dormitory or apartment rental should be enough to offset the prepaid distribution. I hope that helps!

Q: In 2004, my 99-year-old mother (now deceased) transferred from Franklin's Short/Intermediate Term Bond fund to their Income Series A Fund. A notice was sent to the IRS that she had received proceeds from the sale of the first fund when, in fact, she received nothing. The transfer to the second fund was for the exact amount that was in the first fund - $24,167. She did receive ordinary and qualified dividends from Franklin for $532 and $28 respectively and had no other income except Social Security. Does she need to file a federal income tax return?

Helen Huntley: Yes. A mutual fund exchange from one fund to another is treated as though the first fund was sold and then a new purchase made. From the IRS' viewpoint, she received the proceeds from the sale and then reinvested them. She needs to file a return with a Schedule D showing her basis in the fund shares and calculating whether she had a capital gain or loss. The key question is how much she invested in the first fund, including any reinvested dividends, which are part of her tax basis. If you don't have this information, you need to make a good faith effort to reconstruct it. Otherwise, the IRS assumes the basis is zero and she owes tax on the full amount of the sale. After you calculate all this, most likely she will not owe any taxes. The sad part is that if she had not made the transfer, then her basis would be stepped up to market value at her death and you wouldn't have to mess with this. Best wishes.

Q: My daughter is a senior in college and is about to turn 22. Since she was 18, she has lived on her own and supported herself, taking very little financial assistance from me. She earns $10,000 to $12,000 a year as a waitress and files her own tax returns.

She has never been able to receive financial aid while in college because I made too much money and unfortunately, regardless of whether you actually ARE supporting yourself, the government doesn't count a student as non-dependent until they reach age 23.

Since she files her own taxes, I do not claim her on my return, but would I have been better off claiming her as a dependent on my taxes over the last four years? How do I determine whether I should re-file our taxes to claim her as a dependent during that time in order to possibly recoup some tax money?

She is planning to go on to medical school, but must take off one year until she is 23 in order to qualify for financial aid. I know a few extra bucks would really help her now.

Helen Huntley: You were not entitled to claim your daughter as your dependent unless you were providing more than half her support. Claiming her would have reduced your taxes, but would have increased hers, so you would both have to file amended returns to change the situation. I do not recommend it.

The age 23 requirement for financial aid applies only to undergraduates. Graduate students (including medical students) are considered independent for federal financial aid regardless of age.

Q: I purchased a hybrid car in 2004 and received a certificate, which I understand entitles me to a $1,500 tax credit. Am I allowed this deduction if I do not plan to itemize?

Helen Huntley: The deduction is actually up to $2,000 and yes, you can take it even if you don't itemize. It's an "above the line" deduction on the front of Form 1040.

Q: I sold some stock last year that was purchased many, many years ago. I have no idea on what price I should put down for the purchase price. Some of it was from a split and some was purchased at different times. How can I go about figuring out what dollar amount I should put down for the purchase price? How do I treat the stock splits that I never purchased? I am totally confused.

Helen Huntley: This is a common problem with a difficult answer. If you don't have your purchase records, you need make a good faith effort to reconstruct your cost basis. Your alternative is to pay capital gains tax on the full amount of the sale.

First come up with the approximate dates for your purchases and find out what the stock price was on those dates. One good source is newspaper microfilm at the public library. If you use historical sources such as the newspaper, you will have to adjust for subsequent splits and spinoffs. If you use Internet sources such as http://finance.yahoo.com, the prices you see will already have been adjusted.

When a stock splits, you have to divide your original cost basis. For example, with a two-for-one split, you cut your original basis for each share in half. A spinoff is trickier. You need information from the company on how the basis should be allocated. For example, if you get one share of the new company for every 10 shares you own of the old company, the new share gets a little basis from each of the 10 shares. Some companies put this information on their Web sites. Another alternative is to contact a tax accountant working in the city where the company is headquartered.

Unless you specified which shares were to be sold at the time of the sale, the IRS assumes you sold the first shares you ever acquired. Use their adjusted basis as the cost on your tax return.

The moral of this story is to keep your purchase records. Alternatives are to give your stock to charity or die owning it.

Q: As a retired army warrant officer, I have a tax-exempt amount withheld from my monthly pay to pay for the Survivor Benefit Plan, which will provide my wife with some income in case of my death. Would it be correct to add this amount, plus my VA benefits, to the total income for computing the sales tax deduction?

Helen Huntley: You definitely add your VA benefits to your total income. My interpretation of the IRS rules is that you do not add back in any deductions that do not show up in your Adjusted Gross Income. Your contributions to the Survivor Benefit Plan would be in this category along with things such as 401(k) contributions.

Q: I am a 58-year-old widow. My late husband, who passed away in 2001, had been on Social Security disability since 1992 and since that was our only income we did not file tax returns for many years. In 2004 I received a check from the National Labor Relations Board for $9,202 as heir. This was paid on behalf of a company my husband worked for in 1991. I still don't know exactly why this was paid. My only other income for 2004 was interest of $2,666. Since I did not earn this money myself, I'm not sure how to file this for tax purposes.

Helen Huntley: I asked St. Petersburg CPA Wayne Fraser your question because I wasn't sure how to answer it. He said, "Generally speaking, when a person passes away, any income that a person was entitled to, which is paid after the date of death, becomes classified as income received in respect of a decedent. This means that although it is 'inherited' by a living person, if such a payment would have been treated as taxable income by the decedent, it must be treated as taxable income by the person who ultimately receives it."

However, he said he doesn't have enough information to determine if the payment you received was taxable. "If the recipient was being compensated for having been physically injured or made physically sick due to connected unfair labor practices, or something like that" it might be tax-exempt.

He suggests that you ask a lawyer to review this before paying taxes on it. Another alternative is to go to the National Labor Relations Board Web site (www.nlrb.gov) and look up the case to see what it was about. You also might try contacting them directly to find out if this might be tax-free income. If not, you'll need to file a return reporting it. Good luck.

Q: Can a non-goverment deferred compensation account qualify as exempt from the Florida intangibles tax?

Helen Huntley: It must meet the IRS definition of a qualified plan to be exempt. Cash is always exempt, regardless of the type of plan.

Q: Regarding the new sales tax deduction, what part of the gasoline taxes we pay are deductible?

Helen Huntley: None. Gasoline taxes are fuel taxes, not sales tax.

Q: My last employer in 2004 has failed to send me a 1099 form. When I do my taxes for 2004, what am I responsible to do to satisfy the IRS as far as that portion of my income is concerned? The company is non-existent and there is no one to call to request the 1099. I only received commissions for the first few months of 2004.

Helen Huntley: The IRS suggests calling them for help (1-800-829-1040) if you haven't received a 1099 by Feb. 15. It's especially important to call if any taxes were withheld by this company.

Try to reconstruct the correct amount yourself. Ideally, you kept other records such as check stubs. If not, perhaps your records of your checking account would show the deposits and you could reconstruct the information from that. If you later get a 1099, you can file an amended return if necessary.

Q: I just bought a condo in St. Pete. I am going to quit my job in Virginia and find a job there. How can I deduct my moving expenses for next year's tax return? Do I need proof of job interviews?

Helen Huntley: To deduct moving expenses, you do not have to have a job at the time you move. However, you must work full-time in the area for at least 39 weeks during the 12-month period immediately following your arrival at the new job location. Job interviews are irrelevant. You must have an actual job.

If you are self-employed, you must meet a stricter test, working at least 78 weeks during the 24 months following your arrival. You can take the deduction before you have satisfied the time on the job, but if you fail to satisfy it, you're supposed to file an amended return or report the amount deducted as income on the following year's return.

The nice thing is that moving expenses are an adjustment to income, so they can be deducted even if you don't itemize. However, there are a lot of wrinkles as far as what can or cannot be deducted, so I recommend reading up on the topic at www.irs.gov.

Q: I have some supplemental income for this past year- independent contractor. I have my 1099's but on the forms no federal taxes were taken out. How do I figure how much tax I should owe for these small jobs? I want to do the right thing and not get audited.

Helen Huntley: You'll need to fill out a Schedule C, which will allow you to deduct business expenses from your self-employment income, and Schedule SE to pay self-employment Social Security taxes. Go to www.irs.gov and read the instructions for these forms. There's also a Schedule C-EZ you can use if your self-employment income was $5,000 or less. If your income was significant, you might want to consult a tax preparer to be sure you aren't overlooking anything you could deduct. Some equipment purchases can even be expensed.

Q: I am home based in St. Pete but travel extensively and currently have a home and spend most of my time in Dominican Republic. Any tax advantage in filing my 2004 taxes using the Dominican Republic address?

Helen Huntley: The benefit of having a foreign residence for tax purposes is that you can exclude up to $80,000 of foreign earned income from U.S. taxes. If you have a U.S. residence, you can't exclude the foreign income, but you can get a credit for tax paid to the foreign country on that income. If you don't have any foreign earned income, I don't know that there is any benefit. Go to www.irs.gov to read the rules about qualifying.

Q: My father-in-law is 76 years old. He made installment arrangements with the IRS around 14 years ago. He pays 100 a month. He is on Social Security and has a part-time job on the weekends. I have no idea how much longer he can work. What can we do to help him?

Helen Huntley: As long as he is working and making his payments, you don't need to do anything. However, you might want to start reading up on "offers in compromise," which is an IRS settlement program for people who truly cannot pay what they owe. You can read about it on the IRS Web site (www.irs.gov). There's also a good article on Nolo.com.

Q: I just started using student loans last August and have not made any payments yet. How do I put that on my taxes? Do I have to declare it as income? Do I get any kind of education credits? I did not pay back any of the loans in 2004. Please help!

Helen Huntley: You do not report your loan as income.

There are a bunch of different education credits and you have to decide which one will do you the most good. See IRS Publication 970 (www.irs.gov/publications/p970/index.html). If you are in the first two years of college, the Hope Credit is probably your best bet. However, if your parents claim you as a dependent on their tax return, they get the credit. You can claim a credit for the tuition you paid with your student loan. However, if you got a Bright Futures scholarship, or other scholarship, you have to subtract that amount from the tuition paid. Essentially, the scholarship is tax-free, but the expenses can't then be used to claim a deduction.

Q: I forgot to deduct sales tax on purchase of car in 2003. Was this a legal deductible in 2003 and can I amend my return?

Helen Huntley: No. It was not deductible on 2003 returns.

Q: The new sales tax table seems vague about deductible costs beyond the tax table. It says building materials. Is this just for new home or does it include building materials for home improvement? (We added a new $20,000 room to our house) and if so, would the sales tax portion have to be itemized on the bill from the contractor?

Helen Huntley: The deduction for building materials is not limited to a new home. In my opinion, your remodeling qualifies. However, you would need a bill showing the sales tax paid. Talk to your builder about getting documentation for these expenses.

Q: I have BIG tax problems and no cash flow. We have had to pay taxes almost every year, no matter what we made. This seems terribly wrong to us. I haven't filed in 5 years because it just never works out. I can't afford to have my taxes done professionally, and they (the IRS) somehow get the upper hand, suck all of our money out of our paychecks, and we still owe. I realize we'll be penalized for not filing, but I just can't afford to pay them anything; we'll be homeless. Is there any justice for innocent folks that are just bad at finances?

Helen Huntley: You have two different problems, not filing and not paying. If you don't file, you can't correctly determine what you owe. The IRS will try to determine an amount and come after you for it. The way to avoid having to pay taxes when you file is to pay more in advance, either by increasing your withholding or making estimated tax payments. "It just never works out" is not a legitimate excuse for not filing, so I don't see how you can classify yourselves as "innocent folks."

The IRS offers installment payment plans and also has a program called "Offers in Compromise" for people who really have no money to get straight with the IRS. However, if you have the ability to pay, the IRS will not accept an offer in compromise.

You really need professional help with your return. There are free tax preparation services for low-income people and you might consider using them in the future, once your tax filing is back on track. However, your current problem is more complicated than they can handle. There is no way to wave a magic wand and solve your problem. You need to spend some money and get help.

Question: My brokerage account has a stated value of approximately $1M. The stated goal is income and asset preservation, with some risk. For 2004, what would you consider as acceptable income amount?

Helen Huntley: What really matters is the bottom line - the total return on the account - and what kind of risk is being taken to achieve that return.

"Income" can come from dividends and interest, which is probably what you think of as income, but it also can be derived from capital gains and spending of principal. There is nothing wrong with selling shares of mutual funds, for example, to generate the cash you plan to withdraw.

What's important is for your adviser to understand your need to take these withdrawals and to have your money invested with your income requirements and risk tolerance in mind.

A lot has been written about rates of withdrawal that can be sustained throughout retirement. Studies typically show that a "safe" rate of withdrawal is to start retirement withdrawing an amount equal to 4 to 5 percent of the value of your account, then to increase the dollar value each year based on the rate of inflation. This assumes that the account is invested about 60%-40% in stocks-bonds. If you are already in your 70s or 80s, then obviously you can withdraw a larger amount. Your financial adviser should be able to assist you in determining a safe withdrawal amount for you.

Question: As we understand it, to calculate the sales tax deduction the IRS allows use of a sales tax table for Florida residents based on income and number of exemptions, PLUS additions for sales taxes paid on boat or car purchases AND building materials.

We are building a home and our home builder claims we cannot use the sales tax on building materials for the new house since we have not closed on the property. Clearly we are paying these taxes even though it is paid by a third party who claims "ownership" until closing. I understand the builder wishes to claim these as a business expense. But are we not entitled to claim the sales taxes paid on the materials used? Clearly this would be a substantial deduction. What are the rules?

Helen Huntley: Your builder is right: Until you close on a house, you don't own it. Not all contracts lead to closings. If you owned the lot, bought the materials and then hired the workers to do the labor, you would have the deduction. You also would be paying interest on a construction loan, real estate taxes and insurance on the property, all costs that I presume your builder is currently paying.

Question: I am really confused about the sales tax deduction. Before I start adding up all my receipts from 2004. What actually can I claim for sales tax? For example can a use my receipts that were spent on clothes, shoes, home decorations? Is there an actual list that tells us what counts as a sales tax deduction?

Helen Huntley: You have two alternatives for the sales tax deduction. Alternative No. 1 is to use the IRS sales tax table plus actual tax paid on a few key items--i.e. sales tax on a car, truck, boat, RV, airplane and building materials. (See IRS publication 600 at www.irs.gov for details) Alternative No. 2 is to use actual sales tax paid on everything you bought during the year. As long as it was a sales tax and not some other kind of tax, it doesn't matter what you bought.

Question: I know you can deduct college tuition. Can I deduct the prepaid plan if I paid in lump sum for my baby and/or daughter in 2000?

Helen Huntley: No.

Question: I did not claim last year interest that I paid on my house on my taxes. Can I claim the interest that I paid on my house on this year taxes?

Helen Huntley: No. For your 2004 return, you can only deduct the mortgage interest paid in 2004. If you had some 2003 deductions you forgot to include on your 2003 return, you can file an amended return (1040X) to claim any refund you are due.

Question: I have been supporting a friend of mine for about a year now. She owes tax money to the government. If I claim her on my taxes this year as a dependant would the government withhold my tax refund?

Helen Huntley: The government would not withhold your refund because one of your dependents had a tax liability. It would be different if it were your spouse and you were filing jointly.

Just be sure that you are entitled to claim her as a dependent. For a nonrelative to qualify a list of requirements must be met, including that she lived in your household for the entire year and had gross income of less than $3,100. You can't claim someone with whom you have a relationship that would be considered illegal under state law (such as an unmarried man and woman living together.)

Question: Can a full time college student still be claimed as a dependent by their parent even if they made more than $10.000 for the year 2004? The full time student is under 22and was claimed last year.

Answer: Full-time college students under the age of 24 can be claimed as dependents PROVIDED the parent(s) contributed more than 50% of the student's support. Money the student earned and educational loans are considered the student's contribution to his or her own support. Scholarships do not count as support.

A student who earned more than $10,000 will have to pay income taxes if his/her parents claim him as a dependent. The maximum standard deduction for someone claimed as a dependent is $4,850. If the student is not claimed as a dependent, he/she can take a standard deduction of $6,050 plus the personal exemption of $3,100.

A second issue to consider is whether the student or parents would be eligible to take advantage of the tuition tax credit or the Hope or Lifetime Learning Credit. Keep in mind that tuition paid for by a scholarship such as Bright Futures cannot be claimed as qualifying expenses for these credits.

Question: The IRS has a new form for allowing retirees to not have withholding payments taken out. Do you know the form number?

Answer: You can use form W-4P and check the box on line 1. The IRS says to contact the payer of your pension or annuity to make this choice. This option is not available for rollover distributions.

Question: We had a mandatory hurricane evacuation in the Florida Keys. Can I deduct my hotel and other expenses from my 1040?

Answer: No. However, if your property was damaged by the hurricane, you may have a deductible casualty loss. In order to actually deduct anything, the damage must be more than 10 percent of your adjusted gross income plus $100. Your deduction would be based on the decrease in the property's value as a result of the hurricane. Incidental expenses such as temporary housing are not part of your casualty loss. However, in some circumstances they might be deductible as business expenses if the damaged property is business property.

Question: This question is in regards to the new rule that allows us to deduct our sales tax. Has anyone taken into the consideration the included tax with the price of gasoline? Will this be deductible as well, and if so, what are the methods for computing the tax?

Answer: The tax on gasoline is not a sales tax. It is not deductible.

Question: Is there any way to get a truly free copy of my credit report? A lot of websites say they provide you one, but there's always some money catch in there somewhere.

Answer: You'll have to wait a few more months. A new federal law gives all of us the right to a free credit report once a year from each of the three major credit bureaus. However, eligibility for the reports is being phased in gradually across the country, starting in the West. Those of us who live in the South won't be eligible until June 1. When the area where you live becomes eligible, you can sign up for free reports at www.annualcreditreport.com or by calling 877-322-8228.

Some companies currently offer free credit reports if you sign up for a free trial of a credit monitoring service. However if you fail to cancel in time, you will be charged for the service.

Questions from 2004:

Q: The new sales tax table seems vague about deductible costs beyond the tax table. It says building materials. Is this just for new home or does it include building materials for home improvement? (We added a new $20,000 room to our house) and if so, would the sales tax portion have to be itemized on the bill from the contractor?


Helen Huntley: The deduction for building materials is not limited to a new home. In my opinion, your remodeling qualifies. However, you would need a bill showing the sales tax paid. Talk to your builder about getting documentation for these expenses.

Q: I have BIG tax problems and no cash flow. We have had to pay taxes almost every year, no matter what we made. This seems terribly wrong to us. I haven't filed in 5 years because it just never works out. I can't afford to have my taxes done professionally, and they (the IRS) somehow get the upper hand, suck all of our money out of our paychecks, and we still owe. I realize we'll be penalized for not filing, but I just can't afford to pay them anything; we'll be homeless. Is there any justice for innocent folks that are just bad at finances?

Helen Huntley: You have two different problems, not filing and not paying. If you don't file, you can't correctly determine what you owe. The IRS will try to determine an amount and come after you for it. The way to avoid having to pay taxes when you file is to pay more in advance, either by increasing your withholding or making estimated tax payments. "It just never works out" is not a legitimate excuse for not filing, so I don't see how you can classify yourselves as "innocent folks."

The IRS offers installment payment plans and also has a program called "Offers in Compromise" for people who really have no money to get straight with the IRS. However, if you have the ability to pay, the IRS will not accept an offer in compromise.

You really need professional help with your return. There are free tax preparation services for low-income people and you might consider using them in the future, once your tax filing is back on track. However, your current problem is more complicated than they can handle. There is no way to wave a magic wand and solve your problem. You need to spend some money and get help.

Q: I am single, over 50, and do not have any children. I only earned $302 in 2003. Can I make a contribution to my Roth IRA? I also have a traditional IRA and wonder if I would be wise to convert some of it to my Roth IRA and if I do will I have to pay any taxes on it? Would I also qualify for Earned Income Credit?

Helen Huntley: 1. You can contribute $302 to a Roth IRA. The maximum is $3,500 or your total compensation, whichever is less. By the way, taxable alimony counts as compensation for IRA purposes if you have that as a source of income. You have until April 15 to make your 2003 contribution.

2. Converting from a regular to a Roth in a year with low income is a great idea. However, you would have had to have done it by Dec. 31 for it to be reported on your 2003 return. If you do it for your 2004 return, the amount of your conversion will be added to your other income, then you calculate your taxes. The standard deduction and personal exemption are subtracted, so only the amount in excess of that will be taxed.

3. Based on $302 in earnings, your Earned Income Credit would be $25. You might as well claim it if you are filing a tax return to get a refund anyway. However, you are not eligible for the EIC if you have investment income of more than $2,600.

Q: If I start a business, can I deduct the part of the cost of medical insurance I pay even though some of it is paid by a previous employer?

Helen Huntley: The insurance plan must be established under your trade or business. As a self-employed person, you cannot take a deduction for health insurance premiums for any month in which you were eligible to participate in a subsidized health plan maintained by your employer or your spouse's employer. If you were under your employer's plan for half the year, then started a business and got your own plan, only the premiums paid under the second plan would be deductible.

Q: I sold a second home in Spring Hill this year, after owning in for 14 years. I made a profit of about $20,000. I built and moved into a much more expensive new home in Spring Hill this year. I used the proceeds from the sale of the old home to finance the new home. I see it as a rollover. Do I have to pay federal taxes on the profit?

Helen Huntley: Probably. Your gain is tax-free only if this house was your primary residence for at least two of the five years before you sold it and if you did not take a tax-free gain on the sale of another home during the previous two years. The fact that you bought another house is irrelevant since the tax law no longer has a provision for rolling over the gain when you sell a home.

Q: I am 26 years old and have worked very little in 2003. Am I entitled to any earned income credit?

Helen Huntley: I assume that you are single and do not have a qualifying child living with you. If those assumptions are correct, you probably qualify for the credit if you cannot be claimed as a dependent on someone else's return and your income was less than $11,230 last year.

The maximum Earned Income Credit for a single person with no qualifying children is $382.

Q: I am a graduate student pursuing a PhD. Part of the payment for my tuition comes from a federal scholarship and part is paid by my department. Last year I was issued the 1098T form from my university, and it showed the amount paid on my behalf by the university. This year I did not receive a 1098T, but the money for tuition comes from the same place. I did not last year, but I am wondering if I am able to take the Lifetime Learning Credit?

Helen Huntley: Expenses that were paid for by a tax-free scholarship cannot be used to claim the Lifetime Learning Credit. I assume that the money your department paid was not taxable to you. If that's the case, forget about the credit.

Q: Later this year, I expect to receive payment on a claim from a company I used to deal with which filed for a Chapter 11 bankruptcy. The anticipated payout is in the range of 4%-9% of the claim. What are the tax implications of this? Can I claim a loss for the remaining 91%-96% on my 2004 return?

Helen Huntley: Since you did not specify, I am going to assume that this is money owed to you as an individual, not as a company. The general rule is that a nonbusiness bad debt is deductible in the year it becomes totally worthless. However, the nature of your claim makes a difference. If you gave this company cash, you probably have a deductible debt and the money you receive through the court will be considered return of your own money. However, deductions are generally not allowed for unpaid rent, salaries, fees and the like. With that type of claim, the money you receive might be considered taxable income.

Q: My wife and I are both retired and our only income is Social Security. We remortgaged our house and used the cash we received to pay off debts. How should we handle this on a tax return?

Helen Huntley: A loan is not income, so it is not reported on your tax return. You have some potential itemized deductions - real estate taxes and mortgage interest, including a portion of any points paid when you refinanced. However, that's irrelevant if your income is too low to pay taxes.

Q: I would like to know if you have more than two children why you can only claim two and not all of them?

Helen Huntley: You can claim all of them for some things, such as the personal exemption and the Child Tax Credit. However, the maximum amount for the Earned Income Credit and the Dependent Care Credit is based on two children. That's just the way Congress wrote the law. Giving more credit for additional children would have cost the government more money in the form of lost tax revenues.

Q: I was told by a tax preparer that Florida Intangible Taxes paid in 2003 were deductible on Schedule A of the 2003 Federal return. Which line should they be shown on and how identified?

Helen Huntley: The intangibles tax is classified as a personal property tax, and the amount of tax you pay is deductible on Schedule A, Line 7, of your federal Form 1040 if you itemize deductions.

Q: I was an international trainee at a hotel in Tampa and I received my W-2 tax form here in Argentina. I tried to get them done through H&R Block but it was impossible for me because I don't have a credit card and it's really difficult for me to get one as well. Is there any other way to get them done?

Helen Huntley: You might qualify for free online tax filing. Go to www.irs.gov and click on "Free file." If you find that you don't qualify for free filing, you can print out the forms you need from the IRS Web site and do your tax return by hand.

Q: I want to make sure it will be OK to file head of household. I am single and own my home. My son who is 25 returned home in the beginning of July from active military and now is going to college full time. He will have to file a tax form for the money he made while in the Navy. Can I still file head of household?

Helen Huntley: Most likely the answer is yes, assuming that your son is also single. (If he is married, qualifying is more complicated.) The general rule is that you must pay more than half the costs of maintaining a household for a qualifying relative who lived with you more than half the year. (A dependent parent would not have to live with you.) A temporary absence, such as serving in the military, does not count if your child lived with you before and after and you maintained the household in the meantime.

Q: Do you have to claim scholarships earned in high school on your taxes?

Helen Huntley: No. That's assuming that the amount is not greater than the cost of tuition plus any required fees, books, supplies and equipment.

Q: My girlfriend recently submitted her income tax by telefile and she owes money she doesn't have. She had gotten some bad advice not to itemize even though she tithes at church and is purchasing her condo. Is there a way she can amend her tele-file? Also is it worth it?

Helen Huntley: Yes, your girlfriend can amend her return by filing Form 1040X. It is worth itemizing if her deductions are more than the standard deduction ($4,750 if she is single; $7,000 if she has a dependent and files as head of household.) Her charitable contributions, real estate taxes and mortgage interest all would be deductible. It sounds to me as though it would be worthwhile to at least review her return to be sure she really owes that money.

Q: I worked and drew Social Security in 2003. I received a statement of the amount of Social Security that I received in 2003 from the Social Security Administration. I recently received a notice that I had been paid $1,224 too much Social Security in 2003 due to the fact that my wages exceeded the amount allowed. The Social Security Administration plans to deduct this amount from the payment that I will receive in May 2004. My question is, can I deduct $1,224 from the amount of Social Security that I report on my income for 2003 or do I have to wait to report this on my 2004 taxes? I did not receive a corrected statement from Social Security.

Helen Huntley: Since you received this money in 2003, report it on your 2003 return. You'll be paid less this year so you'll have less to report for 2004. There really is nothing to deduct.

Q: I have a capital loss from sale of a mutual fund that I can't use because income is so slow. Is there a way to carry back to previous years?

Helen Huntley: No. But you can use $3,000 per year against other income and carry forward unused losses to future years. If you have $3,000 or less in income (before subtracting personal exemptions or the standard deduction), you can carry forward all or part of the $3,000 you would have used in 2003.

Q: I inherited an IRA from my mother in 2003. I have closed the account and have received the proceeds. What are the tax implications of this transaction and how do I report this transaction?

Helen Huntley: This is fully taxable unless your mother made nondeductible contributions to her IRA. If she did, the amount of those nondeductible contributions would not be taxed. If you are not sure about that, check her old tax returns to see if she filed a Form 8606 reporting a nondeductible contribution. IRA expert Ed Slott says the distribution of an inherited IRA is treated the same on your tax return as a distribution from your own IRA, except there is no penalty for early withdrawal if you happen to be younger than 59 1/2. He says the IRS will know this is an inherited IRA because of the coding in the 1099-R form you received.

Q: I know that when you reach 70 1/2, you must calculate the minimum amount of withdrawal using the balances in all IRA accounts, but you may withdraw the minimum amount from any one of them. You do not have to take a proportionate amount from each account. I have a traditional IRA and I also have a tax deferred 403b account from my years as a teacher. Can I combine the total of the IRA and the 403b to determine the minimum amount, and then withdraw from the IRA or the 403b account? Or do I have to take a proportionate amount from both the IRA and the 403b?

Helen Huntley: You have to take minimum withdrawals from both the IRA and the 403b. All your traditional IRAs can be lumped together in doing your calculations, but a 403b must be treated separately. If you had a 401k, it would have to be treated separately as well.

Q: My wife and I own a home in Florida and a home in New York state. We reside six months in each. We both work seasonal jobs in New York and pay New York state tax on the income. Our legal residence is Florida so we can get the homestead exemption. The question is if we sell the New York house how can we avoid paying capital gains tax?

Helen Huntley: To avoid paying capital gains tax, the house must have been your primary residence for at least two of the five years preceding the sale. If you spent slightly more time in New York than in Florida and filed your tax return from your New York address, that would help you establish New York as your primary residence. However, that might have other implications as far as your New York state income taxes are concerned. I recommend consulting a tax preparer in New York.

Q: I filed a Chapter 13 bankruptcy in 2003 and I received a notice of deficiency for $139 for the tax year ending 12/31/01. Do I have to pay this? If not, what documents do I need to send to the IRS?

Helen Huntley: Either pay it or talk to your lawyer about it. Since it's a relatively small amount, the simplest thing would be to pay it. However, there is a chance you have an out. It depends on such things as when you filed your case, whether the IRS received notice of your filing and whether it still has time to file a claim that could be included in your repayment plan.

Q. I re-financed my house and I have to spread the deduction for the points over the life of the mortgage. Do I get any sort of deduction for the doc stamps?

Helen Huntley: No.

Q: I am retired and had no earned income except my pension. My wife earned $3,000 cleaning houses. Can we make a contribution into our existing Roth IRAs based on those earnings?

Helen Huntley: Yes, but your combined contributions cannot exceed $3,000. A pension is not earned income.

Q: My wife and I live at two separate addresses, although we are not legally separated. Can we file a joint return?

Helen Huntley: Yes

Q: I was visiting West Virginia and won a $5,000 jackpot. No taxes were taken out by the casino. Also, I've been playing the local Lotto (Cash 3). How do I claim this on my taxes? Normally I do my own taxes, but with the added income I'm at a loss. Any help you can provide will be greatly appreciated.

Helen Huntley: Gambling winnings are taxable as "other income." The $5,000 should be reported on Line 21 of Form 1040. If you itemize, losses up to the amount of your winnings can be deducted as miscellaneous itemized deductions. They are not subject to the same income limits as other miscellaneous deductions. You will need proof of your losses if your return is audited.

Q: In 2003 we sent our son $2,500. We thought this could be listed tax-free. On what tax form (and line) do you list as donor a gift to a relative?

Helen Huntley: You don't have to do anything. Gifts are not listed on income tax returns. Gifts of more than $11,000 are reported on a gift tax return.

Q: I lost $5,000 in my IRA when Worldcom stock went bankrupt. I eventually sold it for 2 cents a share. Can I deduct this as a capital loss?

Helen Huntley: The short answer is "no." The only way you can get a tax benefit from a loss in an IRA is if you meet all these conditions: 1. You made nondeductible contributions to your IRA and 2. You withdrew all your money from all your IRAs and 3. Your total withdrawals were less than the basis for your nondeductible contributions. The difference is your loss, which is only deductible as a miscellaneous itemized deduction.

Q: Are charitable contributions deductible even if I take the standard deduction?

Helen Huntley: No.

Q: Can a person who files "married, filing jointly" claim an exemption or credit for being legally blind? (Less than 20/200 vision, receiving Social Security disability for last 10 years.) If so, where does the entry go?

Helen Huntley: You qualify for a larger standard deduction. On Form 1040 check the box on line 36a and use the standard deduction chart for people age 65 or older or blind. It is also possible that you may qualify for the Credit for the Elderly or the Disabled.

Q: Can summer camp expenses be deducted as child care expenses?

Helen Huntley: Yes if it's a day camp. No if it's an overnight camp.

Q: I had a $7,000 capital loss that I claimed last year. How do I resubmit it this year?

Helen Huntley: I assume that you claimed the loss on your 2002 return but were only able to use part of it. Your unused loss can be carried over to your 2003 return on line 14 of Schedule D.

Q: My son received forms 1098-T and 1099-Q. He has received a Bright Futures scholarship. Do I need to account for those amounts received on my 1040?

Helen Huntley: Scholarships do not have to be reported so long as they do not exceed expenses for tuition, fees, required books, equipment and supplies. Also, the student must be a candidate for a degree at an accredited institution. Scholarships that pay for room and board are taxable.

Note that expenses that are covered by a tax-free scholarship cannot be used to qualify for any of the education tax breaks such as the Lifetime Learning Credit.

Q: Ordinary dividends vs. qualified dividends? I have had my stock holdings for 20 to 30 years, and I still pay top tax dollar, at the ordinary dividend rate. Why?

Helen Huntley: Some dividends are "qualified" and entitle you to lower tax rates and some are merely "ordinary." If you own shares of stock in a company, call the company's investor relations department to ask why your dividends are not qualified.

If your stock holdings are in the form of mutual funds, the issue is more complicated. Even though your distributions are called dividends, some or all of them may come from capital gains or from interest earnings, neither of which would qualify for the special tax treatment. Sorting this out has been so confusing that some mutual fund companies and brokerage firms sent out wrong information and have been issuing corrected 1099 forms.

Q: In the past, on the advice of my tax preparer, my wife and I have always taken the standard deduction rather than itemize. My question is: We both pay a monthly fee for long term health insurance. For 2003, can we deduct that amount from our income?

Helen Huntley: Only if you itemize and maybe not even then. Premiums for qualified long-term care insurance as well as for other types of health insurance are classified as medical expenses, which are only deductible to the extent that they exceed 7.5 percent of your adjusted gross income. For example, if your adjusted gross income is $40,000 and you had $5,000 in medical and dental expenses, only $2,000 of those expenses could actually be deducted. You would then add the $2,000 to your other itemized deductions such as charitable contributions, real estate taxes and mortgage interest. Only if the grand total exceeded your standard deduction would it pay to itemize. Most likely your tax preparer's advice still holds true for your situation.

Q: If you got an $800 tax credit in August, then discover your refund this year is less than that, do you owe the difference? Wasn't the tax check in August effectively an advance on your tax refund?

Helen Huntley: The August check was not an advance on your refund. It was an advance on the child tax credit, which is just one of the factors taken into account in determining whether you get a refund or owe money.

When you do your return, you will need to fill out the child tax credit worksheet. The money you already got will be subtracted from your maximum child credit. However, your maximum credit will not go below zero.

For example, with two children, your advance credit was $800. When most two-child families do their worksheets, they will find they qualify for another $1,200 ($2,000 minus the $800 received in advance). But if it turns out your income was too high to qualify for any advance credit, you don't get any extra money, but you also don't have to pay back the $800 you already got.

After you have figured out your child credit and all the other stuff on your return, you will calculate how much tax you owe and subtract the tax you paid in advance. The bottom line may be that you owe the government or that the government owes you.

Q: When my dad died, he left his home to me with a life interest to his widow. She sold her interest to me last year and then I sold the house. How do I figure the taxes? According to the IRS, the tax basis of inherited property is the value at the date of death. How can I determine what the value of the house was more than four years ago? Since the house was not mine to sell until my dad's widow relinquished her life interest, shouldn't the cost basis be the value at the time I bought the life interest? Does the amount I paid for the life interest fit in somewhere?

Helen Huntley: The tax basis for inherited property is the value at the date of death. In your case, the original basis was the market value when your father died minus the market value of your stepmother's life interest. What you paid for that interest then would be added to your basis.

It is up to you to come up with a good faith estimate of the market value to use as your basis. St. Petersburg accountant Celia Hall says you might hire an appraiser to make an estimate for you, particularly if the house sold for a hefty price say $300,000 or more.

Or you could do your own research, perhaps consulting with the county property appraiser's office and with a real estate agent. Some of the information to collect would be the property appraiser's assessment of the property's value, sales prices for comparable houses and how much property in the area has appreciated since your father's death.

One option would be to work backward from the sale price, subtracting the estimated appreciation since your father's death. Hall suggests attaching something to your return explaining the method you used to estimate the property's value.

Q: Who qualifies for the earned income tax credit and how much is it?

Helen Huntley: You have to have earned income to qualify, just not too much of it. The maximum qualifying income for 2003 returns is $11,230 with no children, $29,666 with one child and $33,692 with two. Add $1,000 to the limits for married couples who file jointly. Combat pay for people serving in the military does not count. The maximum credit is $382 if there are no children, $2,547 with one qualifying child and $4,204 with two or more qualifying children.

More information is available on the IRS Web site (www.irs.gov), at IRS offices or by calling toll-free 1-800-829-1040.

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