Another episode of the Dr. Friday Radio Show is here! In this episode, Dr. Friday takes on the latest tax updates, answers callers questions, and talks over the following topics:
- Dr. Friday’s Tax Tips For the End of the Year
- Taxes for Married Couples
- Charitable Contributions for Married and Single People
- Cryptocurrency and Taxes
- Start Preparing for Tax Season
- What You Should Consider Before Selling Your Home
- RMD’s Are Back for 2021
- How To Know If You Are Paying Penalties and Interests
- Getting Back on Track With the IRS
and much more!
No, no, no, she’s not a medical doctor, but she can sure cure your tax problems or financial woes. She’s the How-To Girl. It’s the Dr. Friday show. If you have a question for Dr. Friday, call her now. 615-737-9986. So here’s your host, financial counselor, and tax consultant, Dr. Friday.
Dr. Friday 0:30
Good day. I’m Dr. Friday, and I’m here live in the studio. So if you want to join the show, if you’ve got a question, now’s the time to get on the line 615-737-9986. And I’ve got Will that’s on the road. And why don’t we go ahead and get him on the line? Hey, Will, what’s happening?
I enjoy your show. Question. Giving cash to dependents, how does the IRS know how much cash you’re giving your dependents unless they audit you?
Dr. Friday 1:06
Well, I think you answered your own question in all reality, unless you or your dependents or somebody that paid. And sometimes it can be wonky. I’ve had a gentleman that he had done something where he given a large chunk to his son, his son then turned around and purchase something.
And that person that he purchased from got audited, and it backtrack to the child and then the child said, “Well, my dad gave it to me,” kind of thing, nothing was illegal about it, it wasn’t going to change anything for his father’s taxes or his son’s taxes, really, because in theory, right now, you can give the most what a million dollars or something to your family just have to file a gift tax return, which was the only thing that wasn’t filed.
So in all honesty, it’s not a huge area that the IRS is usually looking for in the normal everyday working family, we would never be able to give that kind of money away. But theoretically 15,000 per child per parent or whatever. So if the child’s married, you could give 15 to him and 15 to his wife, or theoretically, if you have a wife and they can each give 15. But the only way that the IRS really knows is by auditing or back tracking through the someone else’s finances to get to that number.
Okay, I understand. I appreciate it.
Dr. Friday 2:21
No worries, thanks for the call. I appreciate it drive safe. Alrighty, we are here live in the studio. And that was a great question. Because you know, right now, a lot of times parents are often thinking about, you know, I mean, it’s estate planning, what should I do to help maybe a child is trying to buy a house, there are ways of helping and there are legal ways of just doing a gift tax return, it doesn’t cost really anything all the way down the line, unless you’re giving millions away but normal family, you want to give your daughter a $50,000 deposit for her home.
And you can do that, and you’ll have to probably write a gift letter anyways, because for finance purposes, at least, and then and then you would have to do a gift tax return. That is really all there is to it, there would be no taxes do the only time taxes if there are any taxes is to the person that is giving the money not the person receiving. And the only reason the person that gives the money would have to pay taxes, it would normally be because you took it out of a 401k or some form of a tax account that you hadn’t paid taxes on yet. That’s the only time that would normally trigger a taxable situation.
So if you’re thinking about doing something like that, not a hard thing to do, but you never know. Alright , I do want to start the show with something that a lot of you guys are gonna start receiving, they said they’re gonna be putting them in the mail in January, you’re going to receive two letters, if you have received one, it’s a letter from the IRS, it’s a 6419.
So don’t just immediately throw it away, because it says Internal Revenue Service on it. 6419, that’s going to tell us the person is preparing your taxes. That might be me, for many of you guys listening, advanced child tax credit payments, it’s going to tell us how much you received on that. And then the second is the letter 6475.
That was for the third stimulus, which was $1,400 per person, I need to have both of those letters. And this year, we’re not going to be trying to wing it a little bit.
If you don’t have those letters, you’re going to need to go online, register with the IRS and download those letters because otherwise we’re going to assume that you received and that you get the advanced tax credit for all the proper months and if you don’t have a child this year, and but you did last year and the IRS has been giving you advanced tax credits, just remember that is going to be taxable income to you.
That is not money that you’re going to be able to write off because you didn’t have a child to do in the first place. And I have many cases where they do every other year. I talk about this all the time. Divorce does make creative tax issues and this is one of those where, you know, every even year you get them every odd year he gets some or whatever the situation might be.
And so since the IRS based this on 2020, which was the year possibly you took the child, or maybe it isn’t, but yet, you’re gonna be able to claim the children in 2021. If the children are not listed on your tax return, you’re not going to be able to deduct that advanced tax credit, therefore, it will be income to you.
The IRS did not do that, like a stimulus situation where Oh, well, they gave me money that wasn’t entitled to theoretically, you probably should have returned it. But in all honesty, there was no place. And no rules really put out there. Advanced tax credit for children is a pretty straightforward situation, and that one will become taxable.
So again, make sure that you retain these letters. Because entering incorrect events, tax credits or impact will delay tax returns. We have people today that haven’t received I’m sure I’ll get some calls even haven’t received their refunds yet. And or they, the IRS changed their tax return. And they said they never received the stimulus money. But the IRS is saying that you did.
So it’s very important that you get a copy of again, letter 6419 is for the advanced child and 6475 is for the stimulus, you need to get those letters. And if you don’t, in January received those letters, you need to be able to go online and pull your transcripts because they will show how much money has been paid to you and where the IRS is showing that money coming in.
So if you’re saying you didn’t get it. They’re saying you did. And let’s be honest, it’s never easy to argue that point with the IRS. So we need to make sure we’ve got that covered. So if you have questions, you can certainly join the show 615-737-9986, taking your phone calls talking about my favorite subject. For some of you that may have never heard me on the radio before.
My name is Dr. Friday Burke, I’m an enrolled agent licensed by the Internal Revenue Service to do taxes and representation, which basically is all I do, I basically deal with people that maybe you haven’t filed taxes in a number of years, maybe you have, but you have some tax collection issues. And you want to talk about offer and compromise payment plans, we have a couple options out there non collectible, but you got to deal with the IRS, it’s not just going to take care of itself.
And sometimes I even get it where the children are getting involved. Because plain and simple. My dad or mom maybe didn’t file taxes for a number of years, the IRS has assessed them because of something that’s happened. And now they’re getting love letters.
And you know, they’re going to have to pay and as much as I love the idea of being able to get all those waived and say you won’t have to pay it, the fact is not always the case. I mean, I’ve got a case right now where a daughter has found out about her dad, and we’ve gotten the payments, now we’re dealing with the penalties.
And you know, you would think well, hey, this particular person, you know, wasn’t necessarily all capable of dealing with this. So, you know, but the IRS doesn’t always see it that way. And it’s gonna take a while for maybe they’ll the waive some of the penalties, were hoping they will. But you need to get on top of it, don’t just assume it’s going to go away, if you know that your parents have some sort of tax issue, you’re going to want to get on top of that and help them out.
Because you don’t want to be dealing with it when maybe you don’t have associate if your parent is incapacitated, unable to really communicate all timers, those kinds of things, it can make it very difficult for you to help them.
So again, if you’ve got family, friends, maybe you know someone that needs a little help, that’s what we do. I’m an enrolled agent licensed by the IRS to do this. So you know if you need someone or someplace to start, and keep in mind, I’m local. So I’m not one of those big guys that you’re going to call you hear their phone numbers all the time.
I had a case the other day where the guy got the phone number off the radio, and he called them and this guy was out of California, and he doesn’t return the phone calls. But yet he collected the first $2,500. And the sad part of that conversation is this gentleman probably shouldn’t have even had to pay that much. But he owed the government 25,000 And this guy, what did you know?
I think it was 7000 to do the representation. And, you know, you need to know what kind of representation you’re going to get. What are they going to complete for you? How are they going to represent you? Because it’s not just that simple, where you can turn around say, oh, yeah, you know what, I’ve got this and we’re just gonna make this all go away.
And you know, before they even look at your transcripts before they even get anything else. They always want to collect money up front. And to me, if you don’t know what the resolution is going to be, you should not be paying somebody. They can’t just start without knowing what they’re going to do and they got file taxes, are they going to, you know, do an offer and compromise Do you even qualify for an offer and compromise? These are the kind of questions you need to be asking. Alright, why don’t we hit Alan real quick. Not physically. Hey, Alan, it’s Friday.
Hi, Friday. First time caller, longtime listener, appreciate your show. I had emailed you earlier in the week with a question regarding the gifting of property land to a child. So I want to get a little bit more information. It’s three acres. So I think my understanding is the federal gift tax maximum is 15,000, for this year, so if the property is worth more than that, is gifting, still the best option or?
Dr. Friday 10:35
I mean, you want to get it into the child’s name, you only have two options, gifting mean, you could gift it at your basis. So whatever you paid or inherited that property, you can gift them you do a KIPP gift tax return, and the child will inherit the land or basically be able to take the land at that point. And then they’ll deal with any capital gains or development or whatever else that might come of it. That’s probably the most fast and efficient way. Otherwise, obviously, inheritance is a great way, but we have to pass away to achieve that one. Or they could buy it at current price. But I’m assuming since you’re wanting to land,
yet, for the first option, it’s a it’s several acres, and I’m only given him three. So what I paid for it was a set amount for the total acreage. So I don’t know if I can manage it, if part of the acres are more suitable, and part of it, it’s in a flood zone and part of its, you know, at a creek or whatever, do I have the luxury to say, okay, the three acres I’m giving them are worth this much. And maybe the other part of the property’s worth in a different amounts, meaning that I can just take, you know, we’ll say 20 acres divided by $200,000. And say there, there three is worth the same amount. I definitely want to be fair, but you know.
Dr. Friday 12:00
I think you’d have to use a business of some sort. So you would have to say, Hey, I based this on three acres or an acre that sold like mine in the same area for this dollar amount using costs. That would be the best thing to do my opinion.
Alrighty, in your email response said even if there are gift taxes, they would owe those. Okay, I would pay that.
Dr. Friday 12:29
Yeah, there’s any gift taxed. Again, I just based on the unless it’s commercial property that’s selling for a couple million. I don’t think you have any gift tax situation. You just need to do a 706 you know, gift tax return if it goes over 15. Sure.
Alrighty. Well, I very much appreciate information that will take care of it. Have a good day.
Dr. Friday 12:49
All right. Let’s see it. Charles. Yes, Charles real quick. Hey, Charles.
Hey, how are you doing today?
Dr. Friday 12:57
I’m doing awesome. What can I do for you on this wonderful, gloomy Saturday?
Man, you got that right. I’ve got a question for you. Earlier this year, I started dabbling into cryptocurrency a little bit. And I guess long story short is probably worth half of what totally total I invested are put into it. What can I expect this coming tax season?
Dr. Friday 13:27
Well, what it’s worth isn’t really the question because that’s just like my portfolio may go up or down no matter what the question is, every time you buy and sell, you create a taxable situation.
So if you went out there and you just bought Bitcoin at the wrong time using this as an example, and you put in 10,000 now it’s only worth 5000 But you haven’t sold it yet, then there’s been no taxable situation.
But if you went in you purchased it and then you sold and then you went bought like bass or Litecoin or equipment, you know, I mean, you went and changed all different every time you sold that coin to another coin or another type of cryptocurrency, then you created taxable wins or losses, and you need to document those.
I bought like various different coins probably as far as the eight of them total. Now, I’ve never sold any of them. No.
Dr. Friday 14:22
Unless by December 31, you want to sell them, then you can claim the loss on your tax return. But otherwise, it’s just like all of our other portfolio. It’s just sitting there waiting for us to either decide to sell and take a loss or hold and hope that the price goes up and we can sell it for a profit.
Right okay. I understand
Dr. Friday 14:42
So nothing really happened yet.
Well, that’s what I was trying to debate on whether just to go ahead and sell it and cut my losses and take a tax break on it or just hold on to it. I didn’t know financially.
Dr. Friday 14:54
It’s probably a little tight. My expertise and I’ll be honest, I’m one of those people that is a constant believer if I hold, it’s eventually going to come back, I can honestly tell you, that’s probably not the best theory for everybody in the world. But I think all of us, you know, depending on different currencies, I do own some as well. But right now, I’ve just invested into different ones.
And I’m just holding, you know, I mean, I don’t know what’s going to happen, but it’s really no, no one does, I don’t think so at this point, I’m suggesting holding, but then don’t hold, you know, if you want to just get out of crypto or get out of whatever you have it in and go buy something that’s doing better. We all know, downright, this second, so maybe it’s a good time to buy, but I don’t think it’s a great time to sell personally. But I’m not a financial planner.
Because seems like everything that I’ve bought, has gone down in value. And I’m just it’s just a learning experience for me right now.
Dr. Friday 15:52
But, you know, timing is everything, and everything has kind of gone, you know, down right this second. So, again, if it’s the housing market. Yeah, exactly. And I would be the last person to tell you, I know how to read this market period.
So, you know, that’s why I just pretty much sit hold and hope that the majority of whatever I invest into, well turn around and you know recoup. But otherwise, you take the loss if you’ve got gains, otherwise, you can only take a $3,000 loss. But you can’t offset other gains with your loss. So something to think about.
Oh, I’m sorry, one more question. The child tax credit, the best more or less than the checks the government has been giving? Can we expect any, I guess, surprises concerning that as far as income goes, or?
Dr. Friday 16:45
Well, I mean, there’s an income max, I think it’s 150, for married couple and 75, for single. Other than that, you don’t qualify for the advance. But at this point, I mean, you still qualify for some of the child tax credit, but you won’t qualify for the 3000 or the 30, whatever, increase but but if you’re getting it now, unless you’ve had a really good year compared to 2020, which could happen, then yes, there could be some payback.
That’s reason I don’t like my clients getting it because a lot of my clients are self employed. And we don’t always have control of our income.
So you know, but other than that, again, not knowing your income or your situation, my suggestion would be is, if you’re not sure, if you’re close to it, I just told a lot of my clients and they couldn’t stop the IRS from sending them just put it in a savings account.
So if we needed the money, it was sitting there not something that they I was going to have to tell them. Hey, and you also owe another $3,600, because you got half of your child tax credit in advance and you didn’t qualify.
Okay, all right. All right. Thanks for your help.
Dr. Friday 17:53
Thanks. Alright, let’s go ahead and take a quick break here. We’ll be right back with the Dr. Friday show. All righty, we are back here live in studio.
And we are taking your calls, if you have something to say 615-737-9986, taking your calls, talking about my favorite subject, which is taxes, trying to make sure that we actually have our taxes in order, maybe preparing a little bit about mean, not necessarily totally audit proof.
But you know, there’s a lot of things people can do that would actually pretend or protect them from doing or getting themselves into situations where maybe they should be a little bit more documentation. You know, I mean, it’s really important that we have documentation and that you’re able to do what you need to do with it. versus male just winging it a little bit.
You know, like, a lot of times people will come in and they’ll say, Hey, I did this, or I did that. And you’re sitting there trying to figure out what exactly was being thought because you knew that you were going to have to report, you know, a situation or not.
So the part of that is you just want to make sure that you have what you need, and you know what you need. So that’s one of the things you want to have when you have someone that’s working with you for doing your bookkeeping or your taxes.
Part of that is is also having someone to talk to and say, Hey, what happens if I do this? What happens if I do that? What do I need in documentation? I had a gentleman come in one of my clients, actually that had gotten his own PPP money. And if there’s anyone out there that may have done this same thing.
I think we’re going to have to try to figure out we need to hire an attorney. But this gentleman had a situation where he went to an individual to help him get his PPP money, but this industry I’m not too sure how he did, but basically provided fraudulent documentation then got the money from the government.
And then my client actually turned around and gave this person 40% of the money that this gentleman had collected. That’s fraud, guys, just so anyone listening is thinking that in any way that was a right thing to do. To be quite honest, I didn’t think anybody would actually be charging much.
And if it was, it would have been a reasonable fee for what somebody might have had to do and paperwork to get PPP or PPP forgiveness, I can understand there was documentation required time issued. So I’m not saying you couldn’t, or shouldn’t have been billed or charged for that, but not 40% or 50%. Of what you got that person that was excessive.
So it’d be interesting to see, because it wouldn’t have been allowed for the PPP forgiveness, you can’t pay that fee out and be used. So anyways, if anyone else is running into that situation, not necessarily.
Well, if you have something you can share on the radio, great, but it’d be great if someone actually had some headway. And you can call my office on Monday, that would be helpful, because I’ve not ran into this until now. And I’m sure there’s more people out there needing that information. Okay, let’s hit Terry in Tennessee. Hey, Terry.
I was wondering about we have some land that’s going to be sold in Pacific trust fund. And it couldn’t be sold until the last person in terms of tax price of the land in order to pay taxes on.
Dr. Friday 21:40
Okay, so I think my phone kicked out just a little bit, Terry, but you’re saying that there was some land in a trust, and that you guys had to wait to sell it until the last person in the trust passed away? Is that what I heard?
Dr. Friday 21:54
Okay. And so it has that I mean, so at this point you guys have the trust is now gone to the beneficiaries and you guys are selling?
Right. The price for that land. Because I know we’ve done this before, with a character for you paid for the price of the land when that person died, what they paid for you had to pay just bad about not? What was over that amount, say they’ve sold for 10,000. And you got 15? Go ahead to pay back that 5000.
Dr. Friday 22:38
Right, but this sounds like it was a possibility. And I don’t know for sure, Terry. I don’t know for sure. But I’m just saying was this a grantor trust where the money went in, and therefore you had to step up in basis.
Because if you’re unable to have access to it, I’m assuming you’re a beneficiary or your wife or family member, you’re calling for whatever is a beneficiary of the trust. Okay, and as far as the value of your basis would have been at the time the last person passed.
I mean, when you guys became able to sell the land? Yeah, it would be the price, that would be the basis price. And then if you sell it for more than you would have capital gains sell for less, you’d have capital loss
Oh, I’d have to pay off that capital.
Dr. Friday 23:26
Right, you would have to pay and depending again, on how much it can go up the maximum capital gains taxes 34 33.8. 23.8, goodness gracious, 23.8.
There’s no way to buy more property without money.
Dr. Friday 23:45
Right. And that’s a great suggestion. Terry, the 1031 exchange would be available to you. Yes.
But you still have to pay once you sell it anyway.
Dr. Friday 23:55
Sooner or later, will be sold. But, you know, it’ll be pushed down the line. And who knows right now a lot of people are not doing I’ve had several investors not use the 1031 because they feel that the capital gains rate is lower today than it will be 10 years from now. I’m not sure if that’s true or not, but just okay. No problem. Thank you, Terry, very much for calling. All right, let’s go to Hendersonville and hit Tyler.
Alright, thanks for your show. Dr. Friday. It’s great.
Dr. Friday 24:27
Thanks for calling.
I was wondering if there’s any way to put rental income into a tax sheltered account?
Dr. Friday 24:36
Um, well, I guess it would be two questions in that one. And I’m thinking for right now, again, depending on your income bracket, it’s one of the lower passive, you know, it’s one of the lower tax brackets at the moment.
So, is this money being used for Trust Fund of some sort now developing or what is your thought? I mean, take it a step further. What is your thought with doing that, I mean, besides having to pay tax on the capital gains, I mean, on the of the income.
I had to take some of my IRA out and use it for a down payment on a house and I didn’t get cash three places until it was too late. Pass the 60 day window. So as look looking to get that amount back into a sheltered account, but you can’t put it in an IRA.
Dr. Friday 25:26
Correct. And do you actually Tyler, do you work? Are you retired? Or somewhere between there?
Yeah, I don’t have any active or regular regular income.
Dr. Friday 25:37
Alright, so now that to my knowledge, there is not a place where you can move and reinvest the original capital that you took out of the IRA put back in, which is why a lot of my clients, which is late to tell you, Tyler, so it doesn’t really help in this conversation. But there is what’s called a self directed IRA, I’m sure you know of it, and you could have used the money that direction to invest in and then that way, you wouldn’t have never taken it out. But that’s here, their it’s their gun. So that doesn’t help in your scenario. Sorry.
But there’s no way to put money into a self directed IRA?
Dr. Friday 26:12
No way to put it back in without earnings, without or without actual earnings, not passive income.
Okay, well, thank you.
Dr. Friday 26:22
Appreciate Tyler. Thanks. It’s a great question, actually. Alright, let’s go ahead and hit our second break. And when we come back, we’ll take more of your calls, and talk a little bit about some of the tax advantages that might be out there.
If you want to join the show. 615-737-9986. Righty, we are back. rocking it during that music is awesome. And the videos is busy trying to get the phone line. So this is awesome. Awesome. Alright, so if you want to join the show, it’s easy enough to do 615-737-9986. Loveidious, do you want to go ahead and hit number one there. Hello. Whoever’s breathing in the mic. They had a question. Have the IRS on leins and needs to phone in and look at something does that sound like anyone from Tennessee?
That sounds like Lee.
Dr. Friday 27:32
Lee. Oh, my goodness. Loveidious is just testing me today. Lee, this is Friday, what can I do for you?
Yes. I’ve got some IRS liens. And I was told that they had 10 years to collect. Currently, I mean, currently on collectible. Now there’s these 10 years still running or not?
Dr. Friday 28:03
Well, there are periods during the uncollectible period that they will turn on and off the collection time. So not knowing how you get put in where you got put into non collectible.
I mean, after a while it will turn on the clock. But there are times when it’s turned off for them to evaluate if you do it, if you did any kind of offering compromise during that time, you know, not knowing your situation, there is what’s called a CSET date.
And my suggestion is anyone that’s trying to find out how long the IRS has to collect would be to call them or get your transcripts and find out what your see said date is that would tell you exactly when the IRS is calculating that you would no longer be in collections.
Okay, well, no offer and compromise has been done.
Dr. Friday 28:50
Okay. So but you’ve been in non collectible for a while. It sounds like maybe so I would just contact the IRS or if you have a website, you can sign up to irs.gov and pull your transcripts. And they would have your CSED.
You’re saying CSED?
Dr. Friday 29:09
CSED. Collection status. I should know that creation but it’s basically the collection status date.
Okay, all right. All righty. Thank you so greatly.
Dr. Friday 29:25
Thank you so much. All right. Let’s see Devin. Devin, my boy what’s happening?
Hey, how’s it going?
Dr. Friday 29:34
It’s going good here.
Good, good. I’ve got a I mean it’s kind of an interesting and very non romantic way to look at the tax implications on marriage. So me and my fiance we bought a house together this year, you know bought a car. Had a baby.
Have a been engaged the entire year with, you know, the plans to actually get married. And we just with the kid, the house and everything else haven’t, you know, gone through with it? It’s the end of the year and I don’t know, you know, is it better for us to just hurry up and get that done? So we can file married joint? Or, you know, how would we write off mortgage interest and the child tax credit? If we both filed single?
Dr. Friday 30:39
Well, one of you would file head of household. And by tax law, it’s directly the person making the highest income, but depending on who’s, I mean, since you both live together, I don’t know does your significant other work? Or is she taking care of the baby?
Yeah, we both work. I mean, it’ll be we’ll have to get our, you know, our totally, we make just about the same exact amount of money.
Dr. Friday 31:06
So one of you would claim how the household that way the child credit would be claimed. And it’s, there’s no marriage penalty on that particular one. So being single or married is fair.
And then you would also as far as the mortgage interest, depending on when you have it, keep in mind that as a single person, you only have to exceed the 12,800 or there abouts. For the standard deduction.
I actually head of household like 18,000, and then the single person would have like 12,000. So you may actually be in better shape not being married than being married.
Okay, cuz, yeah, no, I was listening. I heard that you were like, sometimes marriage isn’t great.
Dr. Friday 31:49
I’m not against marriage, just for all those listening, but the marriage tax penalty exist? And theoretically you may find out that, you know, being engaged the rest of your life and married filing separately, head of household for one and single on the other is a better tax advantage, not going to say that that’s going to last in your life, because normally sooner or later, people really like to be married if they’re living together. Um, so you know, but to be honest with you, Devin, I don’t think it’s going to probably hurt you not being married.
Okay, so then we’ll just we’ll wait it out and take it, you know, actually have a good fair amount.
Dr. Friday 32:27
Exactly. But I wouldn’t worry about having that because it’s likely you’re going to be better off being set to individuals than being a married couple.
Okay, and then, so, if, let’s say she was head of household, she would take the test the child tax credit, and then would I potentially take the mortgage right off? Or would she take it all?
Dr. Friday 32:50
Okay. Cool. I guess I’ll just fill out the forms and do the calculations and see, which, which way works out better.
Dr. Friday 33:00
That’s gonna be the best way to, you know, and again, it’s probably going to come down to whose names first on the mortgage statement? Is it yours or hers? You know, I mean, because the mortgage interest is gonna be turned in under that person. So that’s the kind of things you’re gonna be looking for.
Okay. All right, that that’ll work with Thank you very much for your help.
Dr. Friday 33:21
Hey, no worries. Thanks for listening. I appreciate it. All right, boss. I’m gonna go to Ron. Yes, Ron, and Gallatin. Thank you. Hello, Ron.
Hi, Dr. Friday, I’m looking at taking my minimum distribution, and applying it to a charity, but I’m not sure how that affects my tax. Is that something that was taken off as a charitable charitable deduction on the tax form? Or how does that work?
Dr. Friday 33:49
Yeah, so awesome. Actually, this is one of the good tax things. So for individuals listening, because Ron already knows this, if you have to take a required minimum distribution, there’s what’s called a qualified charitable deduction.
And what happens is, you’re going to call the custodian of your account, and you’re gonna say, hey, I want to give this to my church, whatever, and they’re gonna make the checkout to the church. And then you’re gonna either put in the tithing thing, or they’ll mail it, whichever way you guys work that out.
And then at the end of the year, when you filling out your 1099 R that you get from your usual retirement account, you know, if it’s from an IRA or 401k, whoever’s handling it, and then there’s a box that will show how much is charitable and theoretically, it’s $1 for dollar doesn’t show up as charity on your tax, it actually reduces the 1099 our taxable amount, dollar for dollar. So if you have 10,000 Let’s say you gave 5000 to the charity you will only be showing under the taxable amount, the 5000.
Alright, so I wouldn’t be able to claim that as a charitable contribution in addition to reducing it.
Dr. Friday 34:57
No, no, you won’t be able to do both. but this is better than a charitable contribution because charity, you only actually get a percentage of your taxable income.
This is a total dollar for dollar reduction. Sorry, charity, but give $10,000 In your in the 20% tax bracket, you really only save $2,000 in tax dollars by giving 10 to a charity. Assuming you can itemize this, you’re gonna say $5,000 reducing your income by $5,000. In this scenario that your real life that makes sense. You’re on those Thank you. No worries. Thanks, man. I really appreciate it. Alright, let’s go to James and Pulaski. Hey, James.
Hello. Got a question. I’m a Vietnam veteran compensation. Probably put back a couple 100,000 bucks in just cash. And then maybe an IRS. I think it’s a couple of hours. And if not, then I was thinking any of it probably never. We’ll never turn this over to my adult children. Is that taxable to material to the children because compensation is not taxable.
Dr. Friday 36:12
So the money, the cold cash, obviously, that’s not taxable because you’ve already paid tax because you’ve been able to save it. The money that’s in a regular standard, traditional, whatever proper term you want to use IRA, that will be taxable income to your children. If it’s an IRA, it will not.
Okay, because, pardon something else. But if the cash was given straight to the children would be adult children, nearly 40. But it would not be taxable to them, right?
Dr. Friday 36:43
That is correct, right. I mean, cash because we’ve already paid tax, you’ve accumulated the cash unless it’s sitting in a bank with a little interest. And I say very little, because they’re not paying US interest.
As much as $4.21 a month in my checking account.
Dr. Friday 36:59
I know it’s very disappointing, it does not encourage any of us to want to save money in the bank.
But it would be what the the money it actually made.
Dr. Friday 37:11
Well, theoretically, you deferred it in a traditional IRA, you never pay tax at all. So it’s taxable, 100% ordinary income rate. So you don’t have to pay tax on 200 grand.
Even though it was part of it was a compensation, VA compensation money. That would was not taxable, to me, but it would be once it went in,
Dr. Friday 37:31
Well, if you put it I mean, theoretically, you could not put money into an IRA that was coming from a non taxable pension, because it wasn’t earned income.
So if you’ve got after tax contributions, you may want to make sure that’s tracked so that way, you know, with you and your financial guy, because when your children inherit, they would not have to pay tax only on the growth of that particular money. But if they don’t have documentation, it’s going to come out as total, you know, contribution in in taxable income out.
Okay, that sounds good to me.
Dr. Friday 38:03
Alright, boss, thanks.
I appreciate it. Thank you.
Dr. Friday 38:07
Hey, no problem. Appreciate you. Thanks. Alright, well, I’ll take a quick break here live videos and then we come back. We’ll hit Charles, Vic and Joe, when we get right back with the Dr. Friday show. We are back here live in studio for the final part. Take a deep breath that boys been running hard. Alright, so we’re gonna hit Vic. Alright, let’s hit Vic. Hey, Vic, what can I do for you?
Yeah, Dr. Friday, I got a quick question here. I purchased a home seven years ago, and I’m looking to sell it this year. I’m not going to be liable for capital gains.
Dr. Friday 38:45
Was this your primary home, Vic?
Dr. Friday 38:48
Okay. And so you’ve lived it two out of the last five years as well as are you going to sell? Are you married or single?
Dr. Friday 38:57
You can sell you have tax exclusion for 250,000 above what you paid for it. And I have to say that nowadays because some people are selling their homes for a lot more. You know, I mean, it used to be that was a good thing. So if you bought it for two, and you sell it for 450, there’ll be zero tax.
Okay. Yeah, just a couple of weeks ago tell caller about it, I’m able to sell it for more than 250 others, what are the tax brackets there that.
Dr. Friday 39:23
Then you’re gonna be looking at including your ordinary income, the first up to 250 above that, including your ordinary would be at the 15%. I’m sorry, the first 200 would be 15%. And then you jump into 18.8 until you get to like 450. So that would be including your ordinary. Okay.
Okay, so, so real quick. So the 15% would be 200,000 above the 250 plus my income, correct?
Dr. Friday 39:53
So yes, exactly above the 250 plus your income and then anything above that up to another two, you know, 200,000 Total There would be 15%, then you jump into the 18.8 up until you get to about 450. Again, that would be anything above the 250 plus your salary or other income.
Okay, I think that answered the question. I appreciate it. Thanks so much for all your
Dr. Friday 40:17
No problem. Thanks, Mike. Okey, dokey. Let’s see it looks like we’ve got Charles Charles in Lebanon.
Hey, Dr. Friday, I really enjoyed your show.
Dr. Friday 40:30
I have a question about, and I live in the area here. I’ve been married for 30 years filing jointly. But I’m about ready to pull the trigger within a couple of days of purchasing a home and second home in Florida. My question is, you talked about this guy a couple of segments ago about filing separately. I’m wondering since we’ve we filed joint reefer 30 years? And if we purchase a second home in Florida, is there any taxes? How should we manage that is there should we file separately in one house and my wife’s name and the other one in mine?
Dr. Friday 41:19
Not too sure. I mean, you still have the same exclusion. So you have 250 Each of you, right. So if you’re, I have a case where one of my clients wife does live full time in Florida, and he goes back and forth. But he basically spends more than six months a year here because his business is here. So in his case, he works here. And then he spends weekends and vacations down there. But she basically stays there all the time now. So in that case, they have two primary homes first, and second, that would be her primary because she’s now it’s been over two years that she’s been pretty much living full time. And he still has the here. So there’ll be 250 exclusion, no matter how you look at it, you have 250 Each of you. So you can put one on her on the other depending after you get through the two years. Or, you know, you have 500 if you both filed jointly.
Should we tax that kind of data? Should we keep our taxes jointly, or?
Dr. Friday 42:15
You can keep your taxes jointly, that doesn’t change the fact that primary home because then the tax form? It asks specifically when you’re looking for the exclusion? Did you live in that home for two out of five years? Did your spouse live in the home for two and five years? And that’s where you would say yes and or no to those questions.
So you can stay filing jointly, and still have a primary each of you live in two different places, as long as you can justify and prove that it’s a little hard nowadays, it’s easier because people work remote directly. Someone can live in Florida and still be full time employee here in Tennessee. You know.
That’s what I’m expecting. I’m expecting that she’s gonna stay down there. So I’ll stay up here. Yeah, we will use both houses.
Dr. Friday 42:58
Okay. Yeah, that would be I mean, there’s nothing wrong with that, Charles, I would say stay jointly, and then just when it comes time, and when you sell one of them, you can determine that exclusion. Okay.
Okay. Thank you.
Dr. Friday 43:10
Cool. All right, let’s hit Joe, really quick, Joe talk fast.
So I converted too much about an IRA to a Roth. So it’s going to screw with my Social Security. And I heard you talking about giving some money to a church with some appreciated property. And I’m trying to figure out well, and also have like, maybe $50,000. The remainder loss, you know, where that can, I can only take out $3,000 a year.
Dr. Friday 43:44
Right? That won’t help you for taking too much out of the on a Roth conversion, you still have the 3000 the charitable deduction would help you. I would say you probably need to talk to a financial or give me a call on Monday, we can crunch some numbers to see how much it would save you. But that would be your only alternative would be the charitable deduction. The 3000 would make a big enough difference in my opinion.
Yeah, it wouldn’t know. But anyway. Yeah, well, anything helps, right?
Dr. Friday 44:11
I mean, every dollar helps truly and not be you know, but if, if you you convert it to much your answer is going to be possibly giving some appreciated property that you want, you know, won’t have to pay tax on
how much do you think that’s going to affect my Social Security? increase my income by about 50 $60,000
Dr. Friday 44:30
Well, you can only pay tax of 85% of your social security but I would say all 85% I mean, whatever you’ve took $10,000 8500 of that would be taxable.
So how long will I have to do without social security? Because I don’t mean I didn’t get in I didn’t put any money in my pocket. I mean, you know what I have coming in every month.
Dr. Friday 44:49
Joe if you want you can give me a call Monday I’m the show’s ending. So I’m unfortunately have to get off the but give me a call boss and I will be more than glad to crunch a few numbers. All right?
Thanks a lot.
Dr. Friday 45:00
Thanks, boss. All right, we are this is the Dr. Friday show. We’re winding down the show here. So we’re going to have to make sure you guys have contact information. My phone number is 615-367-0819. You can check me out on the web at Drfriday.com. And you can always email I do my best to get back with you firstname.lastname@example.org. Hope you guys are enjoying this Saturday. Hope you have a wonderful holiday season. And again my phone number 615-367-0819 and email email@example.com. Call you later