Tax Tips

As a parent with college-bound children, you are or will soon be concerned with either setting up a financial plan to fund for future college costs, or, if your children are already college age, with paying for current or imminent tuition, etc. bills. We’d like to address both of these concerns by suggesting several approaches that seek to take maximum advantage of tax benefits to minimize your expenses. (Please note that the following suggestions are strictly related to tax benefits. You may have non-tax-related concerns that make the suggestions inappropriate.) Planning for college expenses. In many cases, transferring ownership of

If you’re self-employed and work out of an office in your home, you should know about the strict rules that govern whether you can deduct your home office expenses. You may deduct your home office expenses if you meet any of the three tests described below: the separate structure test, the place for meeting patients, clients or customers test, or the principal place of business test. You may also deduct the expenses of certain storage space if you qualify under the rules described further below. If you do qualify, you compute your home office deductions on Form 8829, and report

You might be able to dispose of appreciated property without being taxed on the gain by exchanging it rather than selling it. You can defer tax on your gain through the “like-kind” exchange rules. A like-kind exchange is any exchange (1) of property held for investment or for productive use in your trade or business for (2) like-kind investment property or trade or business property. For these purposes, “like-kind” is very broadly defined. As long as the exchange is real estate (land and/or buildings) for real estate, or personally (non-real estate) for personally, it should qualify. However, exchanges of some

How Social Security benefits are taxed depends on your other income. In the worst case scenario, 85% of your benefits would be taxed. (This doesn’t mean you pay 85% of your benefits back to the government in taxes—merely that you would include 85% of them in your income subject to your regular tax rates.) To determine how much of your benefits are taxed, you must first determine your other income, including, for this purpose, tax-exempt interest. Add to that the income of your spouse, if you file jointly. To this add half of the Social Security benefits you and your

This month’s Tax Tip expands on last month’s Stock Option discussion to address Incentive stock options (ISO) in more detail. For the purposes of this discussion, let’s assume the ISO gives you the right to buy 1,000 shares of the company’s stock at its fair market value at the time of the ISO’s grant (expected to be about $100 per share) for a five-year period following the grant. The grant of the ISO to you will not be taxable. Nor will your later exercise of the ISO (except that it may make you subject to the alternative minimum tax, see

More and more employers are granting stock options to employees as part of their compensation packages. From the tax standpoint, there are two kinds of options—statutory and nonstatutory. “Incentive Stock Options,” or ISOs, as they are commonly known, are statutory options, because they are specifically provided for in the Internal Revenue Code and are subject to numerous qualification requirements. Options that don’t meet these requirements are nonstatutory options, also known as nonqualified options. Both kinds of options have tax advantages, but there are quite a few differences between them. Here’s some basic information on the taxation of compensatory stock options