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Forbes
3 days ago
- Business
- Forbes
6 Above-The-Line Tax Deductions For Those Who Claim Standard Deduction
When you file your taxes, one of the biggest decisions is whether you should claim the standard deduction or go through the chore of itemizing your deductions. With the standard deduction of $15,000 for individuals and $30,000 for married couples filing jointly, itemizing requires a significant sum of deductions to make it worth it. But did you know there are 'above-the-line' deductions that you can claim even if you claim the standard deduction? Many of these deductions are claimed on Schedule 1 of your Form 1040, which can be a guide to finding these above-the-line deductions. Here are a few of the more uncommon ones: If you had to withdraw money early from a certificate of deposit (CD), you likely paid a penalty depending on the terms of the CD. For many CDs, you pay the equivalent of 6-months or more of interest back to the bank if you have to access your funds early. Fortunately, this is deductible on Line 18 - Penalty on early withdrawal of savings. If you paid student loan interest, you could get a tax break on up to $2,500 of payments as long as you qualify. There are income restrictions. You do not qualify if you have income over $80,000 for single filers and $165,000 for those married filing jointly. This can be found one Line 21 - Student loan interest deduction. If you were divorced before the start of 2019, your alimony payments are deductible from your income on Schedule 1 of your Form 1040, Line 19a - Alimony paid. If your agreement was established amended in or after 2019, unfortunately it will no longer be deductible. If you are a teacher, you can deduct up to $300 in unreimbursed expenses spent in your classroom. You must have worked at least 900 hours at a qualifying elementary or secondary school. This can be found on Line 11 - Educator expenses. If you are an active-duty service member and had qualifying moving expenses that were not reimbursed, you can claim them on Line 14 - Moving expenses for members of the Armed Forces. It covers household items, housing, storage and travel but does not include meals.
Yahoo
02-06-2025
- Business
- Yahoo
How sports betting taxes work and what you might owe
Sports betting only became legal in the United States in 2018 after the U.S. Supreme Court struck down a 1992 federal ban and ruled that states could individually determine what forms of gambling were legal within their boundaries. This opened the floodgates for various state legislatures to decide whether to allow sports betting. Currently, 40 states and the District of Columbia authorize the practice, and 34 permit online sports betting, according to the American Gaming Association. This has tax implications for millions of gamblers — who are also taxpayers. There is no ambiguity here, according to tax experts. 'Broadly, winnings from sports betting are taxable income,' said April Walker, senior manager for Tax Practice and Ethics with the American Institute of CPAs. Sports betting winnings are taxed under the Internal Revenue Service's designation for gambling income and losses. If your winnings total $600 or more and are at least 300 times the amount wagered, then a payer, such as a casino, is required to issue you a Form W-2G. While supplying the form is the responsibility of the payer, Walker noted, you are still liable for reporting and ensuring taxes are paid on those sports betting winnings, whether or not you receive the form. If you're dealing with a mobile sports gambling provider, like DraftKings or FanDuel, the reporting standards are a little different, according to New England-based accounting firm Baker Newman Noyes. If you reach net earnings above $600 or 300 times your original wager, you can also receive a Form 1099-MISC from an online sports wagering organization that will report your net earnings from the previous tax year. Net earnings would be calculated as your cash winnings minus any cash entry fees and adding any cash bonuses received from the platform. Individual tax filers must report total gambling income as 'Other income: gambling' on line 8b of Schedule 1, 1040. The only exception is if you are filing as a professional gambler, meaning someone 'engaged in sports betting primarily for profit rather than only as a hobby,' per the Journal of Financial Planning. In this case, the filer would use Form 1040, Schedule C to report profit or loss from a business, and they would note winnings as revenue and be able to deduct their losses directly. Self-employed filers — in this case, professional gamblers — must pay self-employment tax, which is 15.3 percent, half of which is subject to deduction, for Social Security and Medicare. This embedded content is not available in your region. To answer the tax rate question, we must work backward. Taxpayers whose winnings exceed $5,000 and 300 times the amount wagered will automatically have 24% of their total payout withheld by the payer, according to Walker. This rate could be higher in states that have additional income tax, in which case the 24% federal rate would be withheld on top of the state's personal income tax rate. Still, when it comes time to file your income taxes, this withholding doesn't ensure you've paid the required amount of tax. Rates range from 10% to 37%, depending on your total income, so based on what tax bracket you end up in at the end of the tax year, you'll either get a refund or have to pay out a higher amount from your winnings. Read more: How tax withholding works Perhaps the most pivotal — and confusing — part of understanding how to report gambling income on your federal income tax return is factoring in your losses. The correct method, according to Walker, comes down to what the IRS refers to as 'sessions.' This philosophy comes from a 2015 IRS notice on slot machine play, indicating that total wins and losses need to be calculated by the day they were made. Each day counts as an individual session, so rather than net your total losses against your total winnings, you will need to calculate the end amount of each session, or day, and determine which days were a loss and which days ended with winnings. Still, the only way that losses can be offset against gambling winnings is if you itemize your deductions rather than take the standard deduction, which is $15,000 for single tax filers on 2025 taxes. Using the session method, you could add your total losses on Schedule A, line 16 as gambling losses. Whether you can itemize your deductions to offset your winnings when it comes to state income tax depends on which state you're filing in. Nine states, including North Carolina, Connecticut, and Rhode Island, do not allow itemized deductions for gambling losses, per an article in the Journal of Financial Planning. Even professional gamblers can only offset their total winnings with their losses and get to zero. There is no tax refund for losses that exceed the total amount of winnings, Walker said. To minimize sports betting taxes, the key is having a demonstrable record of all of your wagers, where and when they occurred, proof that they occurred (like receipts and tickets), and evidence of your total amount of winnings and losses. This will be particularly useful if you find yourself audited by a tax authority. 'Gambling has been around for quite a while, and so the rules on that have not changed,' Walker said. 'The difference is that there might be more people who are doing it on a regular, daily basis, and I would encourage them to understand how important it is to do their bookkeeping so they are not having to scramble after the fact and if they are able to itemize, and take advantage of all of their losses.'
Yahoo
26-05-2025
- Business
- Yahoo
Schedule E: How to use this tax form to report rental income and losses
If you own rental property, you'll need to file a Schedule E tax form with the IRS to report rental income income or losses. Schedule E is filed along with your Form 1040 individual income tax return. While having rental income and losses is a common reason for filing a Schedule E — and what we'll focus on here — you'll also need to complete this form for other sources of supplemental income, including from royalties, partnerships, S corporations, estates, trusts and residual interests in real estate mortgage investment conduits (REMICs). Schedule E is a tax form that individual taxpayers must file to the IRS along with their Form 1040. Taxpayers need to complete a Schedule E to report supplemental income and losses, including from rental real estate and other sources. Schedule E is one of several different types of tax forms that taxpayers may need to complete to calculate different types of income, credits and deductions. Schedules provide additional information beyond what's included on Form 1040. Learn more: Current tax brackets and federal income tax rates Taxpayers who own rental real estate must file Schedule E to report any income or loss generated from their property. On this tax form, you'll detail all of the income and expenses for each of your rental properties. But Schedule E is only applicable to individual taxpayers, not people who are in the business of renting property (those taxpayers must instead file Schedule C — more on this below). While rental real estate is a common reason why taxpayers have to file Schedule E, there are other income situations also captured on this form: royalties, partnerships, S corporations, estates, trusts and residual interests in REMICs. If you file your taxes electronically with tax preparation software, you'll be prompted to fill out Schedule E based on your answers to questions about sources of income. However, if you still file taxes by paper, there isn't a specific prompt related to Schedule E on Form 1040. The closest mention of Schedule E on the 1040 is line 8, which instructs taxpayers to enter 'additional income' from Schedule 1. Schedule 1 is where income from Schedule E is entered, as well as income from other forms and schedules, and then that income flows to line 8 of the 1040. Whether you need to file Schedule E or Schedule C depends on whether you're renting out property as a business or as a supplementary source of income. When to file Schedule E: If you're renting out part of your home or other property that you own, and it's a passive source of income, then you should file Schedule E. When to file Schedule C: If you rent out property as a business, such as short-term vacation rentals, then you should file Schedule C if you're actively involved in providing services to tenants. For more information, check out the IRS instructions regarding rental income and expenses. Need an advisor? Need expert guidance when it comes to managing your investments? Bankrate's AdvisorMatch can connect you to a CFP® professional to help you achieve your financial goals. Schedule E is a two-page form that is split into five parts, including sections applicable to four specific sources of income and a summary section. You only need to complete the parts relevant to your income situation. If you own rental real estate, you will need a variety of details about your rental property handy, including information about your various expenses. This is the applicable section for taxpayers who have rental real estate, though it also covers income or loss from royalties. To complete this section, you will need to provide several basic details about the property, including: The physical address of each applicable property The type of property The number of rental days and days used for personal use Income, and specifically rents received Expenses, including insurance, management fees, utilities, taxes, and more If you are completing this section for income or losses related to royalties, you will need to provide information about royalties received and any applicable expenses. To complete Part I, you will sum the total income or loss from rental real estate and royalties and, if no other parts of Schedule E are applicable to you, you can enter this total on line 5 of Schedule 1. This section needs to be completed by taxpayers who are a member of a business partnership or a shareholder of an S corporation. You will need several basic details to complete Part II of Schedule E, including: The name of the entity The employer identification number (EIN) of the partnership or S corporation A breakdown of whether the relevant income and loss was passive or non-passive, which refers to whether you materially participated in the business To complete Part II, you'll need to refer to Schedule K-1, the form you receive from organizations in which you have a financial interest. If you have a passive loss, you will also need to complete Form 8582, and if you have a Section 179 deduction, you will need to complete Form 4562. You need to complete Part III if you're a beneficiary of a trust or an estate and have an income or loss to report. To complete Part II, you will need the following information: The name of the estate or trust The EIN A breakdown of whether the relevant income or loss was passive or nonpassive As with Part II, you will need to refer to the Schedule K-1 that you received, if applicable, and will need to complete Form 8582 if you have a passive loss. You will need to complete Schedule E's Part IV if you're an investor in a real estate mortgage investment conduit, or REMIC, which is a structure for pooling mortgages. To complete this information, you will need to refer to the Schedules Q that you received from the REMIC, along with: The name of the REMIC The EIN Information from Schedules Q, including excess inclusion, taxable income or net loss, and income If you completed more than one section on Schedule E, then in Part V you will total the income or loss from these various sources. You then enter that total on line 5 of Schedule 1. See this IRS page for more details on how to fill out Schedule E. 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Globe and Mail
08-05-2025
- General
- Globe and Mail
Welcome home, snowbirds – but don't forget your U.S. tax filings
My parents just returned from their winter home in Arizona. They've made lots of friends down there. Friends my mother can share her innermost secrets with. It's not that they've become really close – it's just that they're all old enough that they can't remember anything she's said to them. Now that my parents are back, I reminded them of the rules around U.S. tax filings. Many Canadian snowbirds are surprised to find out that spending time down south can make them subject to U.S. taxes on their worldwide income – if they're not careful. Here's a primer on the rules. The test The U.S. levies taxes on its citizens but also on non-citizens if they reside in the U.S. for a certain amount of time. There's a test, called the 'substantial presence test' (SPT), that could cause you to face taxes in the U.S. The SPT adds up three numbers: (1) your days spent in the U.S. in the current year, (2) one-third of the days spent in the U.S. in the preceding year and (3) one-sixth of the days in the U.S. in the year before that. If the total is 183 or more, you'll meet the SPT (although you'll automatically avoid meeting it if you spent less than 31 days in the U.S. in the current year). If you do meet the SPT, the Internal Revenue Service will consider you to be a resident of the U.S. for tax purposes unless you take some additional steps. Being a U.S. resident for tax purposes may require you to file a full-blown U.S. tax return (Form 1040). It's not only painful paperwork; it means splitting your tax dollars between the U.S. and Canada every year (you won't save tax overall, but you'll have to file in both countries). As for the average snowbird? Many will be caught meeting the SPT. If you spend, on average, 122 days (about four months) or more in the U.S. each year, you'll meet the SPT after three years. What should you do if that happens? You may be able to maintain your tax status as a non-resident of the U.S. and avoid having to file a tax return there, but that will require filing a special form. The form Filing U.S. Form 8840, Closer Connection Exception Statement, essentially tells the IRS that, notwithstanding the fact you meet the SPT, you have a closer connection to Canada as your permanent home and should not be considered a resident of the U.S. for tax purposes. To be eligible to file Form 8840, you must have spent fewer than 183 days (about six months) in the U.S. in the current year. If you spend 183 days or more in the U.S. in any year, you may then need to rely on the Canada-U.S. tax treaty's tiebreaker rules to avoid facing taxes in the U.S.– but this gets complicated (you'll need to file U.S. Form 8833 and may need legal help). Form 8840 is due by June 15 each year for the prior calendar year's filing. If you meet the SPT for 2024, the deadline is extended to June 16, since June 15 is a Sunday this year. Some Canadians may be required to file a U.S. non-resident tax return (Form 1040-NR) if they earned certain types of U.S. income (rental income or income for work performed in the U.S., for example). If you have to file Form 1040-NR, then your Form 8840 is due with that tax return (generally by June 15 each year, but this deadline can be extended to Oct. 15). Speak to a tax pro about Form 1040-NR. If you fail to file Form 8840 on time, or if you meet the SPT but don't meet the other conditions to file Form 8840 (see below), you could become subject to U.S. tax on your worldwide income or face a penalty for not filing the appropriate statements with the IRS. The nuances You won't be eligible to file Form 8840 if you spent 183 days or more in the U.S. in a particular tax year – as I mentioned – or if you're a green card holder or have applied for a green card. Also, you've got to count a partial day in the U.S. as a full day. In some limited cases, you can ignore certain days spent in the U.S. – if you're unable to leave the country owing to a medical condition, if you're in the U.S. for less than 24 hours while in transit to another country or in certain other cases for students, teachers, trainees, foreign government officials or commuters. Tim Cestnick, FCPA, FCA, CPA(IL), CFP, TEP, is an author and co-founder and CEO of Our Family Office Inc. He can be reached at tim@
Time of India
27-04-2025
- Business
- Time of India
How food gifts are making paying taxes a little tastier
Thermal printing of receipts is now common in restaurants. The machines require no ink cartridges, are easy to use and portable. The only problem is for customers when, months later, they want to claim bills as expenses for tax purposes and find the printing has faded. Heating with hair dryers is said to resurrect legibility, but this is unsure and annoying to do when you're already frazzled with tax filing. #Pahalgam Terrorist Attack India stares at a 'water bomb' threat as it freezes Indus Treaty India readies short, mid & long-term Indus River plans Shehbaz Sharif calls India's stand "worn-out narrative" April 15 is the usual deadline for filing individual tax returns in the USA and food outlets sweeten the stress by offering generous deals. Shake Shack, for example, gave an extra burger for every purchase over $10.40, since tax returns are filed using Form 1040. At Krispy Kreme, anyone buying a dozen doughnuts could get a second dozen for just the cost of the sales tax. India's tax preparation season is just starting, so maybe food outlets here could consider similar deals. Taxation and food have an intimate history. In earlier times, actual food products were tithed to the authorities. The need to have these survive for storage was one of the factors driving technologies of food processing and preservation, like making milk into cheese and creating barrels for long-term storage. In Mark Lawrence Schrad's Vodka Politics , he explains how distilling became an easy way to concentrate the value of grains, which the Russian state then controlled through vodka taxes. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Villas For Sale in Dubai Might Surprise You Dubai villas | search ads Get Deals Undo For centuries, Japan was governed through the kokudaka system, where the value of land for taxation purposes was assessed by the weight (a koku was around five bushels) of rice it could produce. The real problems with food taxes arise in times of scarcity when the price rises due to taxes become intolerable to consumers. Smart governments would then reduce food taxes, yet they are such attractive sources of revenue that this often doesn't happen, leading to riots or, as with India's salt tax, potent political protests. Japan provides an example of how food and taxes can be linked in a positive way. As in all developed countries, there has been a massive move away from villages to cities which, coupled with declining population rates, leaves fewer people in rural areas to farm or fish — or pay taxes to support local administration. An easy solution is for the central government to pour money into rural projects, but these suffer from lack of real connections with local people and their needs. Japan's authorities also knew that many people still felt a strong connection with their villages, even when they were no longer there. Which is why, in 2007, Yoshihide Suga, then a minister, and later prime minister, announced the furusato nozei , or hometown tax scheme, under which taxpayers could get tax rebates by sending part of their income to a rural area. It was envisaged that people would choose their hometowns, but anyone could send it anywhere. Crucially, the money went to a specific place, not a general fund. To foster this direct connection, people from that place could send gifts, mostly of local food, to their benefactors. This was the element that really helped the scheme take off. Local food producers, who often had surplus food, were happy to give it away — this actually helped revive declining rural occupations. Websites came up showing where people could send their tax money and the delicious food they would get in return, like premium sake from Niigata, seafood from Hokkaido, tea from Shizuoka or honey from Kumamoto. This has become a rare example of a popular tax scheme, with revenues crossing one trillion yen in 2024. This success has caused criticisms, not least from urban areas losing revenue, but it also validates the theory of tax choice. This argues that people should get some say in where their money is used, and if they do, will then pay taxes more willingly. Furusato nozei 's food gifts give the benefits of tax choice tangible, and delicious, form.
