Weekly Tax Brief

Are scholarships tax-free or taxable?

Details: Published: 30 July 2020 30 July 2020

If your child has been awarded a scholarship, congratulations! But be aware that there may be tax implications. Scholarships and fellowships are generally tax-free for students at elementary, middle and high schools, as well as those attending college, graduate school or accredited vocational schools. It doesn’t matter if the scholarship makes a direct payment to the student or reduces tuition. However, certain conditions must be met. A scholarship is tax-free if it’s used to pay for: Tuition and fees required to attend the school, and fees, books, supplies and equipment required of students. Room and board, travel, research and clerical help don’t qualify. Contact us to learn more.

Businesses: Get ready for the new Form 1099-NEC

Details: Published: 27 July 2020 27 July 2020

There’s a new IRS form for business taxpayers who pay or receive nonemployee compensation. Beginning with tax year 2020, payers must complete Form 1099-NEC, Nonemployee Compensation, to report any payment of $600 or more to a payee. (Prior to 2020, Form 1099-MISC was filed to report payments of at least $600 in a calendar year for services performed in a business by someone who isn’t treated as an employee.)

Take advantage of a “stepped-up basis” when you inherit property

Details: Published: 23 July 2020 23 July 2020

If you’re planning your estate, or you’ve inherited assets, you may be unsure of the “cost” (or “basis”) for tax purposes. Under the fair market value basis rules (also known as the “step-up and step-down” rules), an heir receives a basis in inherited property equal to its date-of-death value. For example, if your grandfather bought stock in 1935 for $500 and it’s worth $5 million at his death, the basis is stepped up to $5 million in the hands of your grandfather’s heirs — and all of that gain escapes federal income tax forever. A “step-down” occurs if someone dies owning property that has declined in value. Contact us for tax assistance when estate planning or after inheriting assets.

Conduct a “paycheck checkup” to make sure your withholding is adequate

Details: Published: 15 July 2020 15 July 2020

A big tax bill or a large refund may mean you don’t have the correct amount of tax withheld from your paycheck. Here’s how to avoid this next year.

Some people are required to return Economic Impact Payments that were sent erroneously

Details: Published: 09 July 2020 09 July 2020

Economic Impact Payments (EIPs) are being sent to eligible individuals in response to the financial impact caused by COVID-19. However, the IRS says some payments were sent erroneously and should be returned.

If you’re selling your home, don’t forget about taxes

Details: Published: 01 July 2020 01 July 2020

Traditionally, spring and summer are popular times for selling a home. Unfortunately, the COVID-19 crisis has resulted in a slowdown in sales. Still, many people are selling this year. If you’re one of them, it’s a good time to review the tax implications. Contact us with questions.

Rioting damage at your business? You may be able to claim casualty loss deductions

Details: Published: 12 June 2020 12 June 2020

The recent riots around the country have resulted in many storefronts, office buildings and business properties being destroyed. In the case of stores and businesses with inventory, looters stole products after ransacking property. A commercial insurance property policy should generally cover some, or all, of the losses. But a business may also be able to claim casualty property loss or theft deductions on its tax return. Contact us for more information about your situation.

Seniors: Can you deduct Medicare premiums?

Details: Published: 09 June 2020 09 June 2020

If you’re age 65 and older, and you have basic Medicare insurance, you may need to pay additional premiums to get the level of coverage you want. The premiums can be costly, especially if you’re married and both you and your spouse are paying them. But there may be a silver lining: You may qualify for a tax break for paying the premiums. However, it can be difficult to qualify to claim medical expenses on your tax return. For 2020, you can deduct medical expenses only if you itemize deductions and only to the extent that total qualifying expenses exceeded 7.5% of adjusted gross income. Contact us if you want more information about deducting medical expenses, including Medicare premiums.

Business meal deductions: The current rules amid proposed changes

Details: Published: 04 June 2020 04 June 2020

One tax break that President Trump has proposed to help restaurants and entertainment venues is an increase in business meal and entertainment deductions. We’ll let you know if a law passes that enhances deductions. In the meantime, let’s review the rules. Before the pandemic hit, many businesses spent money “wining and dining” customers, employees and others. Under current law, entertainment expe nses aren’t deductible. However, you can deduct 50% of the cost of business-related food and beverages, if you meet certain requirements. If you buy food and beverages at an entertainment event, you can deduct 50% of the cost, but only if business was conducted right before, during or afterwards.

Student loan interest: Can you deduct it on your tax return?

Details: Published: 02 June 2020 02 June 2020

Many taxpayers with student loans have been hard hit by the economic impact of COVID-19. The CARES Act contains some help. It allows borrowers with federal student loans to stop making monthly payments until Sept. 30, 2020. If you do make student loan payments, you may be able to deduct the interest on your tax return, depending on your income and subject to certain requirements. The maximum amount of student loan interest you can deduct each year is $2,500. For 2020, the deduction is phased out for married taxpayers filing jointly with adjusted gross income (AGI) between $140,000-$170,000 ($70,000-$85,000 for single filers). The deduction is unavailable for taxpayers with AGIs above that.

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