Dr. Friday Radio Show – December 7, 2024

No, no, no, she’s not a medical doctor, but she can sure cure your tax problems or your 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, 737-WWTN. That’s 737-9986.

So here’s your host, financial counselor and tax consultant, Dr. Friday.

Warm Saturday, considering I’m inside.

Do not want to be outside in that bitter cold if I don’t have to be.

So enjoying the holiday time, getting ready to, I’m sure, have a couple parties and things like that in your guys’ neighborhood.

But right now we’re going to talk a little bit about preparing for 2024 taxes.

Hopefully everyone has filed their 23.

If not, you’re going to be late.

So probably preparing for 24 and then doing 24 and 23.

E-file is not available at this time.

They usually close it down until about January 18th, I believe.

It may be 20th.

I haven’t heard the date yet.

But at this point, if you wanted to file 21, 22, or 23, you would have to do it by mail.

Any year prior to that would have to be done by mail anyways.

But e-file is not available to anyone while they’re prepping for the new tax season, I guess we’ll call it.

So let’s talk about a little bit of a few things that we know we might want to consider.

Obviously, when we’re looking at our taxes, we’re also thinking about our tax brackets.

Anything that might have changed in the year of 2024, marriage, divorce, had a baby, a child that may have turned 17 in the year of this 2024, because that would change your child credits.

All those kinds of interesting things that you might have.

You need to make a little bit of a list so you can try to figure out what you have and where you’re going to go with it.

But we are lucky here.

Wayne has already jumped on from the borough.

So let’s go ahead and get Wayne on the phone.

Hey, Wayne, what’s going on?

Hey, Dr. Friday.

How are you today?

Awesome.

How about yourself?

Just fine.

I have a quick question.

We are a service company.

We do kitchen cabinets and service installations.

The reason I was calling is we are starting to look at selling cabinets.

as individual do-it-yourselfers buying them from us instead of us having them installed.

Now, in the past, we did not have to collect sales tax because it was an installed item and it was part of an exemption because of it being an installed item on a contract.

But I wanted to ask you about that.

When we start looking at paying sales tax in the state of Tennessee, is that a quarterly payment due every quarter?

Is that every, I mean, is it, how does it work when you’re paying sales tax?

Absolutely. Normally you have two options. If you’re going to have, just depends on how much you do in retail sales, but if it’s more than $1,500 a month, they’re going to put you on a monthly filing. Some months, maybe zero.

Some months may have taxes.

I find that usually is easier because the alternative is yearly once a year that you would file. And even though that’s seems like a nice idea, sometimes that can get a little cumbersome if you’ve actually got a fairly healthy bill coming out. So I would sign up for a monthly and that’s the same. You already have the number because I’m assuming you buy wholesale. Your wholesale number is also your sales tax number. You may have always filed a zero annual report because you didn’t have any retail to have to report. But now you’ll have to take that on. But yes, your thoughts are correct. A hundred percent actually, because a lot of times people forget that if you’re selling and it’s not attached or not installed with a contract, if someone, if I go to Home Depot, buy the cabinets and ask you to install, I have to pay sales tax on those cabinets. If I go to you and say, I want these cabinets and you, you purchase them and then install them, then they’re part of our property taxes, not part of sales tax.

So yeah, Wayne, you’re on the right track. To give you one other real quick thing, we’re an S-Corp. And as such, we are actually an installer service group through the Big Blue and the Big Orange here in town. And so we have been for over 18 years. Now, because we’re starting this as a selling side of our company, we’ve done that for two years now, on contract, installed everything we sell. But when we start talking about doing it when we’re collecting sales tax, should I break this off into a separate checking account and anything that’s sold diy can be under a separate collecting and storage of the monies until the payments are made what are your what are your thoughts there it may make it easier so that way because as you know on business licenses you guys would be more um consumer to consumer kind of situation where uh this is going to be more of a retail situation somebody has to come by and pick up just pick up the cabinets you may still install on some of them, but some people may just buy them and have their contractor install them or, or whatever. Um, I mean, you may want to make a DBA. It could still be a DBA under your S corp, but you may have, um, a retail division here, you know, as lack of a better term, uh, that would then track and, and you could even get a separate sales tax number theoretically if you wanted to.

And that way, all the sales going in and out would be tracked for the retail division that are sold that way and all your um consumer i don’t know what the proper term is but the ones that are installed directly uh either through um contract of some sort those would run through your standard where you’re at today that way you’d have two divisions that you could track and even to see if it’s worth your headache of doing the retail it may or may not be in the big picture there may not be enough profit to even be dealing with that i don’t know you know i don’t know enough about your industry but it’d be good and that and that’s that’s the that’s the situation we’re in too being able to break it down and track where sales are going and where they’re coming from. And we have automatically, we have our service separated from our company’s actual sales of installed product.

And so we have already set this up as two different accounts for that. I’m just wondering if I start collecting sales tax, would it make sense to set a set of books for that income and outgo?

I would at least set up a taxable account. You may even have one that you use for payroll taxes and business tax and franchise excise tax. If you have one, I would use that for the sales tax collection, moving that 9.25 or 9.75, I don’t know where you’re at, into the tax account, which we do with a lot of our clients. That way, the money that’s actually in your general operating is not tax money. It’s already taken out. But other than that, I think it sounds like you’re already tracking your sales by category, which is probably the most important part of that conversation so that way you can see what is being done wholesale, what is being done retail, what’s being collected with sales tax, what’s full installation, because it sounds like you have multiple sources of income. Well, thank you very much. That’s the best anyone’s ever had to actually give me the information. I’ve asked my own CPA and they’ve had to get back with me on different things. So that was really a great answer and I appreciate your time. Thanks, Wayne. I appreciate you listening. All right, let’s go to Evan and Thompson Station, see if I can help. Hey, sweetheart, What can I do for you?

Hi, Dr. Friday.

I hope you’re well.

I am.

Hey, my mother-in-law is no longer able to drive, and she wants to give us her car.

The car retails probably for over $20,000.

And I’m wondering, is there a tax implication if we accept it as a gift or if there’s some kind of cutoff amount we should offer to buy it for?

Obviously, we don’t want it to be considered income, but at the same time, I understand that the DMV and the state and the IRS would like to get their share if that’s possible.

Yes, this is an easy one, Evan.

One, sorry that she can’t drive, but it’s a wonderful gift that she’s giving you.

Yeah, it’s great.

So she could sign over the car.

Theoretically, we have right now, I believe it’s $18,000 gifting tax.

It could be $16,000.

I need to cheat and look that up really quick.

The value of what we can give in gifting before we file a gift tax return.

But are you married?

Yes, I am.

Wonderful.

It’s my wife’s mother.

Okay, so the wife’s mother could basically gift you and the wife the car, which means 30,000 or more. I want to say it’s 16, but I’m sorry. I didn’t know that number right off the top of my head, but it’s so $20,000. Theoretically, she gifts it both to you guys.

She’s got $30,000 at least that she can use in gifting, no gift tax return, no taxes to her, no taxes to you. Boom. It’s a wonderful gift and it keeps on giving. Okay. Is there any kind of, is there documentation that she has to sign that she’s gifting us this car?

You know, it probably wouldn’t hurt because the biggest thing is you’re going to have to go to the DMV and show that it was gifted and at what value.

So I would probably pull up a fair value at whatever the value might be, like a CarMax or something, right?

Just take it in there and see if they can give you a value so they don’t think that you’re trying to short.

Because the only thing you’re going to pay in taxes is the sales tax to the state.

Because when she gives it to you, you’re going to retitle it at the value. And a lot of people will tell you value it at $1,000, but that’s not really the case, right? I mean, I’m just saying, so I would do a fair value on it because when you insure the car and everything else, it’s going to be insured at whatever value would be the insurance company and everyone says it is.

So whatever that is, I would go down with the DMV, get a letter of gifting.

Then it’s going to be put into your name when it transfers over.

As far as I know, that’s like considered a sale to the state.

So that’s where the money will be done.

Not the federal government, not normal taxes.

Mama won’t have to worry about anything.

But you guys will pay the sales tax, which is about 7% on 20.

So about $1,400 in tax, if I’m guessing.

Okay.

So the letter of gifting is available from the DMV or do I draft one up and have my mother-in-law sign it?

I would just draft one up.

I don’t believe you could Google the DMV to see if there’s anything.

Because on the back of the title, she’s going to sign it over to you.

You know, on the back of the free title.

She’s going to sign it over to you guys.

So at that point, she’s done her job.

And I would just have a letter showing that it was gifted to you at whatever that value is.

If it’s, you know, and I would try to get fair.

I mean, it may have a wholesale, but, you know, depending on the number of miles and everything else, like I said, normally CarMax or some of those places will give you one online.

You know, just fill it all in.

It gives you online what it is.

Okay, great.

You’ve been so helpful, Dr. Friday, and I so much appreciate you.

Thank you.

Talk to you later, sweetie.

Okay, thanks.

Thanks.

All right.

Those were both awesome questions, guys.

I have to appreciate it because sometimes I don’t always know what I need to be worried.

I wish I knew exactly what the gift, and I want to say it’s $17,000 this year, but I will find that out after we take this next break.

And I will let you know the exact dollar amount, because if the car appraises for $17,000 or $18,000, then you’ll be way within the dollar amount that she can gift to the two of you.

And that way you’ll have it with what you want.

But again, I know the state’s going to have you probably retitle it for the dollar amount that it was gifted to you.

So that’s where the tax will come in.

All right.

So if you want to join the show, maybe you’ve got a question or a situation, 615-737-9986 is the number here in the studio.

615-737-9986 is the number here in the studio.

You can join us if you’ve got a question or maybe you’ve inherited something or you’re getting ready to buy or sell.

I had one that came in the office this last week and she was basically, she had put a name down and she had to buy this property.

And so she’s going to be flipping it. So she had some capital gains for short term. We’ll talk a little bit more about how that works. But when we get back with the Dr. Friday show, we’ll be right back.

All righty, we are back here live in studio.

And it looks like the phone lines are coming through.

I did want to jump on real quick.

Gifting in 2020, 2014 is $18,000 per person.

So if you want to give your grandchildren or your children, you can give $18,000 without filing a gift.

And in 2025, it pops up to $19,000.

So it’s putting that out there.

All right, let’s talk to Dallas in the borough.

Hey, Dallas.

Hey, how are you doing?

I am well.

How about yourself?

I’m doing great.

I just wanted to give a little information about the car being gifted to a daughter, son, or actually relative.

There is a state form you can download from the state of Tennessee, and you can fill that out.

And if it goes to a family member, which I have done this even to cousins, there is no sales tax.

Oh, wonderful.

Yeah, see, I have never done that, so I just assume.

As long as it says family member, and like I said, I’ve done it to all three of my sons, and I’ve done it to a couple of my cousins.

I’ve given them cars, and as long as you fill it out, it’s a state that they can download it off of the web.

Fill that out, take it into the county court clerk, hand it over with the title, and the county court clerk usually fills everything out.

You just sign, and then there’s no sales tax.

Oh, that’s awesome.

When you say the state, are you talking about like Tennessee Department of Revenue?

Do you know?

Tennessee, yes.

Tennessee uh on the state of Tennessee when you because if you go in and buy one from somebody and you take the title in you’re going to have to pay a tax on the value exactly that’s what I was thinking he would still have to pay but you’re saying there’s a form out there on the state site that he can use to transfer to family members right I just did one two days ago to one of my that’s awesome all right Evan we’re going to look that up for you and see thank you for telling us Dallas. Thanks. Appreciate that. Thanks. All right. Have a good day. Thank you. Hey, Ron in Manchester, you may be adding to this conversation, but I appreciate any help. So, hey, Ron, what’s happening?

Yes. The guy from Murfreesboro just told you the same thing I was going to tell you.

Yeah. Transfer. That’s awesome, guys. I seriously appreciate that. I’m going to look it up and that way, Evan, if you want to call my office or whatever, we can see if we can find that form.

But thank you, because I was thinking he was going to have to pay the sales tax, even if he got the car for free.

So I did not realize we had something in the state that allows him to train or, you know, the transfer within family members.

So, Ron, thank you for listening and participating. I appreciate it.

Thank you. Bye now. Bye. All right. Let’s see if Mark can have a question for us.

Hey, Mark, what’s happening? Doing good. I’m doing well.

I have a question about I’m 60 years old, and I’m looking towards what Social Security is going to do to me.

I work as an independent contractor, and I get paid a 1099 every year.

But I drive enough miles to do my – I’m a courier, and I drive enough miles to cover basically my income where it doesn’t look like I make any money.

Right.

From a progressive standpoint, how does that affect my Social Security if I keep doing this until, say, 70?

How long have you, Mark, how long have you been doing that? I mean, if you’re 60 years old, did you have, quote, a regular job at some point in the last 20 years? Or have you been doing this for a long time?

Yeah, I’ve just been doing this for seven years, but I have a pension, and it’s not as much as if I would have been kept working a regular job, but I’ve been doing this for seven, but I’ve got basically 30 years of other jobs that I’ve done.

Right. Well, they look at 10 years over the last, or I should say 40 quarters, which is 10 years, and they’re going to take the highest out of the last 30 years. So you’re not going to really get into Social Security at the earliest would be 62 or 63 if you decide to take early Social Security. If you’re waiting till your actual Social Security, I think is like almost 67 if you take it without, you know, early.

So that the biggest question will be is out of the last 30 years, will you have 10 years?

I think you will because most you’re going to have is 14 years doing this.

You’d still have had 20 or whatever years or whatever that 16 years of working a real job.

And I don’t mean that’s not a real job, but I mean, you’re paying zero tax right now because you’re pretty much zeroing out your income.

So you’re not paying into Social Security with this current job.

No, I understand that. But what I guess what I’m wondering is how will my current job affect?

Let’s say I started drawing at 62.

Is there income restrictions?

When does the income restriction kick in or stop on Social Security?

At 62, it’s called early Social Security.

You can earn a little over $21,000, and you don’t have to worry about paying anything back.

But if you earn, which sounds like you aren’t actually, I mean, your tax return, because of all the miles you’re putting on at 65 cents a mile, you’re pretty much zeroing out your earnings by the wear and tear on your vehicle.

So if that’s the case, you could go on early Social Security and probably not worry about how much you earn.

But you could earn $20,000, a little over $20,000, and not worry about affecting your Social Security.

Okay.

So otherwise, I mean, I’m not saying I’m going to start one up because I’ve already kind of looked up, and it will be substantially better the longer I wait.

But what I haven’t been able to get a straight answer on was how my income right now, because it basically gets zeroed out every year.

Yes, it’s not helping you, so it’s not going to grow your Social Security.

But no, but it’s also not going to affect my pension once I start taking it.

That is correct. I mean, it’s having a zero effect one way or the other.

They’re going to go back to the years that you were making when you were paying into Social Security from a W-2, most likely.

And that’s the years they’re going to pull from.

So you’re not going to have a better or worse situation.

It’s just going to be, they’re just going to go back to the other years because these years are going to have zero effect.

Yeah.

I was more worried about how, if I could, I could, theoretically, I could do this for a long, as long as I’m able to drive.

Right.

And if I can draw, whatever age I decide to start drawing my Social Security, I don’t want, I didn’t know what the age was that income didn’t affect.

your social security. 67, it mostly, depending that this is one of those weird years, but let’s just say between 66 and 67. But since you’re a few years older than me, my year is 67. I’m going to guess 67 will be when you can be in full social security and make all the money you want and not affect payback. You still have to pay taxes on social security, but not affect the payback where if you go into early social security, your earnings, your actual profit, let me clarify, your profit can’t be more than $20,000 or thereabouts.

So it doesn’t sound like that’s a fact.

So you can continue being a courier and start Social Security when you’re of the age, even early Social Security, and have a zero effect on your benefits.

That was my main question.

I do appreciate it very much.

You have a good day.

No worries.

Thanks, Mark.

All right.

So we’re going to keep going here.

So if you’ve got questions, 615-737-9986, 615-737-9986, where I’ll take your calls talking about taxes or other situations that you might have coming.

And there is, it is on the Tennessee Department of Revenue or Tennessee Department of Revenue website.

Evan, again, I’m jumping back to you on that gifting because everyone was good enough.

I didn’t know that. I didn’t know that we had some sort of waiver that you could use. So it sounds like your mother or your wife’s mother can give you that car, not worry about federal tax. We don’t have a state tax. And now you don’t even have to worry about sales tax, the gift that just keeps on giving. So that’s awesome. So I don’t even know, I’m assuming you need to have a value on the car, but that may or may not be on that form. So you’ll have to look that up and see what you come up with. But that was very helpful listeners. I appreciate that.

All right. So we’re going to keep going. I was telling you about a client that came in my office last week and she ended up with a situation where she had put a contract on a new build and then found her dream house and she tried to get out of the new build, but they said no. And she had already put money down on it. So she’s going to have to buy the house and then turn around. She’s going to sell it. But her biggest concern was at her income. How much will she end up paying in capital gains?

And the mortgage person told us she was going to pay 40, excuse me, 40% capital gains.

And she’s making, you know, her, she’s, she’s, she’s retired.

So we’re not to say, but she’s not making three or $400,000 a year at this point in her life.

And the gains on this is like 25.

So my point being on this whole thing is we need, if we’re talking about capital gains, let’s make sure, especially if you’re a financial person and you’re talking real estate or something, You don’t want to really terrify the person, tell them they’re going to be paying 40% capital gains tax when our highest bracket is 37.

But again, she would have had to make $250,000 or something.

She’s making like $30,000 capital gains on this house sale.

So just make sure you check with your tax person when the time comes and you’re dealing with these questions.

We’re going to try to get Tim in real quick, hopefully before the break.

Hey, Tim, what’s happening?

Whoops.

There we are.

Good job.

tim what can i do for you tim you there in the borough uh yes i am all right yes um so i’ve had my house 20 years it’s my only house it’s gonna we’re looking at selling and it’ll be like i just wonder am i gonna have to pay capital gains on on whatever the profit is simple math is this whatever you purchase the house for, I’m going to use generic numbers just so you can understand, but let’s say you purchase the house for $200,000 and we have an exclusion. Are you married, Tim?

Yes, I am. Okay. So you get $500,000. So if you sold the house for $700,000, you’d pay a zero tax.

So whatever you purchase plus $500,000 gives you what your tax-free zone is. And also if you’ve in the house that long, you need to look at, did you read, did you got a kitchen? Did you got a bathroom? Did you put new hardwood floors? I don’t know. I’m just saying major repairs that may have increased the value of the home would, would increase in 20 years, you may have done something.

And in 20 years, you may not have, I don’t know. But that’s the question. So whatever you paid for any major repairs, and then 500,000, add that all together, that’s your basis. And then whatever you can sell it for. So if you could sell it for a million and you’ve got 700,000, you’re paying capital gains on $300,000. Super. Thank you for the simple explanation. No worries, Tim. I appreciate it. Thank you. All right. We’re going to have to take a quick break. Rick, if you can hold through this break, we will get right to you as soon as we come back from this commercial break. This is The Dr. Friday Show, and you can join us at 615-737-9986, 615-737-9986, and we’re going to be right back with the Dr. Friday Show.

All right, we are back here live in studio, and we’re going to head right to Rick in Hendersonville, waiting patiently through that commercial break.

Hey, Rick, what can I do for you?

How are you doing? I’m 69. I’ll be 70 next month. I’m still working. I’m married. I have a 401k. I’m contributing 9%. They’re doing a 4% match. How much can I set aside?

I mean, you want to maximize the 401k?

Yeah.

You know, tax wise, how much can I, will they allow me to put in?

I am 90.

Let’s see here.

I have a cheat sheet here.

I want to say, let’s see, 401ks, single guy.

You have the step up as well, which I believe is 7,000 plus the, it’s like 26.

So it’s like almost like $30,000 you can be putting in.

I’m going to get you the exact number here in one second.

So that’ll be on top of my regular income.

Right.

So it would be coming out of your income at this point.

I’m assuming that you have the original IRA Roth contributions, Calville educational.

Sorry, I’m cheating and trying to read educational deductions, employers.

And you’re in a 401k, correct?

Yes.

Okay.

But I also have a rollover IRA.

Do you do a backdoor or?

do you know what i’m saying what’s your income about 115 okay so you can put in 30 000 23 plus the additional seven for your age so 30 000 can come out of and then plus their match of four percent or whatever they’ll only match up to a certain dollar amount i’m sure um but then that would also kick you theoretically in a lower tax bracket you know because right now you’re in the 22 percent you know just with yours and if your wife works we’d have her income above so you would be saving quite a bit it does not work um okay so is that is that also the catch-up IRA and right that’s the 7,000 that’s the catch-up yes so when I’m 70 when I’m 73 I’m gonna have to start taking it out right not if you’re working at that same company so that never kicks in till i retire yep now if you have other retirements like if you work for someplace else and you have an ira or a 401k from some other company you have to take that rmd but not from the company that you’re still working at well i just have an ira a rollover ira from yeah the past right and so that one you would have RMDs, but the one that you’re contributing and still working at doesn’t come active until you’re retired. Well, it’s a significant amount in the rollover. I mean, I’m going to have to, am I going to, so they’re going to be taking it out of one and contribute, and we’re all contributing to the 401k at the same time I have to withdraw out of the rollover. Exactly, but that may be a good time to also think if at your age and income doing some conversions, meaning that you’ve already kind of have to take the money out. You can’t do a conversion on the RMD. That’s a mandate, but theoretically you could be contributing to a Roth at your income bracket. And I’m not a financial planner. Let me put that out there, Rick. You need to check this with a financial, but at your income being married, you’re basically at the top of the 12%, just jumping into the 22, but it may be smarter to be doing some conversion. So you’ve got some of that money in a Roth at this point versus having it all in a traditional or IRA 401k kind of situation. Well, I was going to ask you about that. I was going to put some other money I have set aside in a Roth, but I don’t even know how much can I do with a Roth? I believe you can do the 7,000 or I’m trying to see if it’s 65.

If older, you will remain at 75, 75. You could put 7,500 and you could put 7,500 into your wife, even though she’s not working because you can contribute for your wife okay so i mean you have 15 000 there that you could put into a roth instead of maximizing your current doing it if i maximize my current 401k and put 30 000 in it if i did i don’t think i could do that much but if i did then i i couldn’t do any of this other stuff right well i’m saying maybe leave what you’re doing right now on the 401k side and maybe and again double check this with a real financial planner but maybe putting some of the the money that you have extra into a Roth that way it’s growing tax-free and and you don’t have to worry about doing anything with that and then you know you’re still contributing to the 401k and getting the match that’s a thought if I hypothetically maxed out my 401k like you’re saying can I also do the Roth or I don’t think so I think there is some limitations there. So I think you’d have to be careful on, I know you could probably put it in your, you might be able to contribute the 7,500 into your wife’s, but I don’t think they can do anything on yours. So maybe it would be better. And you may even have something at work where your 401k allows you to do a Roth contribution and or a traditional, because again, at your income bracket, it may be a good time to consider putting some more money towards a Roth versus deferring the taxes, the taxes are eventually going to go up in our lifetime, maybe not for the next four years, but the way they’re spending, sooner or later, they’re going to come back at us and having that money at a Roth, which grows tax-free, is a nice place to have it. I got you. But you think it’s $7,500 for the Roth? Yes, it says here, yes. And that would be instead of doing it in the 401k?

the 401k so it’s really 22.5 yeah and 75 wherever i want to put it right that’s kind of my thought i don’t know double check it with someone that does financial planning but from the tax standpoint i like the numbers okay but i can’t but okay all right thank you very much hey no problem if i can help more give me a holler thanks all right all right let’s uh hit alan um see if i can help him Hey, Alan.

Yeah, thank you for taking my call.

I really enjoy your show.

Thanks for listening.

And I’d like to, if you have a home you’ve had for over 10 years and you sell it for, let’s just say $200,000 and your payoff was $50,000 and you found another home for $100,000, would you be allowed to keep that $50,000?

Absolutely.

If you sold the home for $200,000, there’d be zero tax because as a single person, we have an exclusion of $250,000.

And it sounds like you actually did buy the home for $50,000 or something like that, just using the numbers roughly.

You would not have to reinvest into a home at all.

You could keep all the money, but you have to live someplace.

So at some point, you will have to pay rent or buy a house.

Okay.

Now, if you’re a bit on disability, would that make a difference?

um i don’t think so i’m not an i’m gonna put i’m not a disability expert i know there’s sometimes some earning potentials and you can only keep so much money in the bank i think right so um and i think it’s like three thousand some dollars i mean it’s pretty low so right my concern would be is if you if you sell your house and you now have a hundred grand that you can put and invest where they look for you to spend that before they give you back your disability and getting off this. I mean, you know, I would double check that with disability.

It seems like there should be an exclusion for selling your home, right?

You know, the government, sometimes there’s not.

Well, I appreciate your show and help us out.

Thank you, sir. I know. All right. Thanks. All right. We, um, just a heads up next, uh, next Saturday, we’re going to be having our traditional Christmas show where we give away, um, gift cards and just an appreciation to all of our listeners and clients that have been with me for this will be, uh, we’re coming up on 30 years and almost 15, 16 years on the radio. So, um, you know, it’s a big appreciation. Uh, it’s a long time to be in business and, uh, appreciate all of you guys listening and participating and using the services. So that’s what the show’s about.

So that’s next Saturday. So hopefully you guys can tune in and, uh, get a free, a few gift cards for different restaurants and different things that we have accumulated here. So, and also this year, or right now, we’re talking a little bit about taxes and just to make sure, because a couple of people were calling and the house thing is a whole different tax code than what some people think. So under the current tax code for primary homes, primary home is any home you’ve lived in for the last two out of last five years. So if you’d lived in it for 10 or 15, 20 years, no question. It’s your primary home. Um, if you’re married, there’s an exclusion of 500,000, assuming both you and your spouse lived in that home to the last five years, um, you get 500,000 plus whatever you paid for it. So, um, if you inherited the home, it would have been at the value you inherited the house. If you built the home, it would have been at the value that hopefully you know what you paid for to buy the, the, the land and build the home. Um, or if you’re fortunate enough to purchase the home, that’s the easiest way because we actually had a closing and we’re able to track that number. So whatever it was, and then you have to go back to the best of your ability. I realized, and I try to tell people even now, any major repairs you’re doing to your home today, maybe you put up a new fence or maybe you put in a pool or maybe you’ve rebuilt patios or changed all the windows. Maybe you’ve redid your kitchen. I know during COVID, a lot of people did some serious home improvements. You need to put all those receipts, scan them in some place or put them in a folder. So if, and when you decide to sell the house, it will add to some of the basis.

Now, if you just changed out a toilet or you just fix the wall or you painted the house, that’s not really improving the property. We’re talking about improvements, not just maintenance or repairs.

But if you improved it, which means basically increase the value of the home because you did it, then that would add to your basis. And then you add that along with that 500 or if you’re single, the 250,000, that becomes your current or your new basis.

I had a woman that brought in Franklin 28 years ago, brought the house for $175,000. She redid the kitchen for like 50 and maybe put like 100 grand. So we have $275,000. She just sold it for $1.3 million. So $275,000 plus $250,000, you know, her basis is like $525,000 and she’s got $1.2 million or whatever.

So she has a very large capital gains and that will happen if you buy in the right areas and just live in the right.

But most time that exclusion will help cover most of your tax situation.

All right. We’re going to be right back with the show.

I am an enrolled agent licensed by the Internal Revenue Service to do taxes and representation.

I am Dr. Friday and you are listening to the Dr. Friday show.

And you can join us here at 615-737-9986, 615-737-9986.

We’re going to be at our last part of the show.

So if you’ve got a question, now would be the time to call.

We’ll be right back.

All righty, we are back with the final part of the show.

So again, if you have any questions, you can join us live at 615-737-9986, 615-737-9986.

9, 9, 8, 6. Seem to get a lot more people on the crypto side. Bitcoin, lithium, cryptocurrency, whatever you want to recall, you know, is taxable. So really need to make sure. I know a lot of you guys think that if you go into the whole crypto world, that somehow that’s going to make it where you don’t have to worry about paying taxes or dealing with any of it. It is considered property.

It is a virtual currency and is taxed the same way as any other asset, for example, gold or stock.

Taxes will be due.

So I’m not too sure otherwise, just to tell you, I mean, there is a lot of people and now the IRS is finding ways of tracking.

There’s several court cases right now out there where people are saying they didn’t have the tracking.

They didn’t know it.

They’re using estimating.

It’s not going to fly.

they’re going to lose in the IRS. If you don’t know your basis, the IRS has already ruled, the courts have already ruled, your basis is zero. So if you can’t prove, and this is the problem with some of the crypto versus some of the others, because what happens, you take US dollars and you convert it into some currency, be it Bitcoin or any of them, and you change that to cryptocurrency, and then you buy lithium, or you buy some other type of currency, and you change it from that one to that one. And some of my clients, they’ve been doing this for 15 years and getting it through gaming. So they never purchased anything. They want it by doing different things through the world of gaming that changes things big time, because now you have a situation where basically you’ve got, you know, a million dollars of some or a million cryptocurrency, depending on what type it is, um, in there cause you’ve been doing this, but you have no basis. So you’re now using it and buying things within the internet. And I had, you know, gentlemen, um, that physically retired, um, because of what he had earned through the, the cryptocurrency. And of course, a few years ago, went down, it’s going up, it’s going down, but it’s very important to understand that if you’re using the money and there’s a paper trail, I mean, how are you paying your rent? How are you eating?

Do you have a car? How are you paying your Petro? All of that is going to come back at some point and it’s going to track back at you. So you must, I mean, my suggestion is I like to sleep at night.

I’m not a person that wants to try to figure out how to outsmart the internal revenue service. Don’t really think it’s even going to succeed very well from my standpoint, knowing what I know. So I think your best bet is to set up a good wallet, try to backtrack into this information and start accumulating the tracking that you need, because if you don’t have that at some point, if you get audited, they’re going to say zero. And now you’ve got, you know, hundreds of thousands of dollars in cryptocurrency that you did not have before. And that’s going to be very expensive on tax dollars.

So just putting that out there for you, kind of important to know. We do have the EV, right? The for up to $7,500 under the new qualified plug-in EV or fuel-celled electric vehicles. $4,000 for used EVs. The inflation rate of 2022, it will go up. There is some qualifications. Married couples, less than $300. Head of household, less than $225. Single filer, less than $150. All of those are important. So you want to make sure that if you are looking to buy a new car, um, that you have the ability to, um, consider if you want to do it as an electric vehicle. I’m not too sure guys, I will be quite honest with you. I think in Tennessee, when we get these cold fronts, my understanding is that the electric cars do not hold charge when, or as well at when it’s really cold outside. And so if you think you have, I don’t know, an hour’s worth of travel, and then you get this cold front and it’s like 20 minutes, are you going to get stuck and have to sit for two hours for the car to charge up? I’m not really that keen on that particular aspect, just being honest with you. I don’t want my car to tell me when I have to stop. I kind of want to just fill up the petrol and keep moving. So that’s obviously a personal opinion. I am sure there are people that, I mean, I think some of the cars are really cool. My sister-in-law owns a Tesla. It’s gorgeous. Um, but again, I don’t know in, uh, in Tennessee, if it’s, if we’re really set up that they’re in California where there’s a lot more, um, advantages, there’s a lot more chargers, you know, when she goes to work, she can plug her car. And when she, she goes home, she hasn’t played.

We don’t really have any of that set up for that kind of situation. So it’s really important that you, you know, just think about that because, you know, putting it all in and going EV sounds great, but it’s kind of like doing solar.

There is still some solar credits out there.

And educational credits.

Now, I will tell you this.

Educational credits, that is when it comes on a 10, 90, 80.

Let’s say you have a 18, 19, 20 or whatever, and they’re in college.

I have had two returns in the last couple weeks where the people doing their taxes did not realize that they could qualify for college credits.

Their income was fine, and they were able to realize could qualify for it. So they had left, you know, $2,500 off their tax return. That was well worth amending and going after. So one of those things you want to make sure you’re maximizing all your tax credits. Sometimes it doesn’t work if you’re, if you, I mean, there are limitations to college credits, like many of the tax credits we have. So making sure that you have maximized those credits is one thing. And then if you can’t, well, you know, at least you looked into it and you know, you took everything that you could do. That was the important part of that. So, um, and then of, of course we’re getting to the end of the year. So get ready to, uh, think about right now, again, Roth conversion. If it’s something that you want to do, you don’t have much time, but it’s a couple of weeks left. If you want to convert, um, now’s a good time to probably consider that if your income wasn’t as high as you thought it would be or something, it’s a tax advantage to doing it.

Also, contributing money to an IRA or Roth, you do have until tax day, April 15th, to do that.

So sometimes it’s best to wait.

I know financial planners and people are always like, sooner you do it, faster it grows.

And I’m not disagreeing with that.

But I have had more than one person where we’ve had penalties because of it, because they contributed money.

And then they weren’t qualified to do that and become a problem for doing it.

So it’s really one of those situations where you want to be very quick at making sure that you understand how that works with the situation you’re in.

So just making sure that if you put money in and you weren’t qualified, there is a penalty that you have.

All right, let’s see if Dallas can get his question in really quick.

Hey, Dallas, what you have?

Yes, I talked to you years ago and I got some information on the dependents you can claim.

And I want to make sure that’s still good.

If I’ve got a child that’s 27, he’s been out of work a year and a half, but he’s living in my house, I can still claim him as a dependent.

Is that correct?

As long as you’re providing 50% of his care and providing a roof over his head.

Yep, I am.

Yeah.

It sounds like.

I just want to make sure that was still in effect.

Yes, still in effect.

He is still a dependent, even if you’re hoping that won’t be always the case.

Oh, yeah.

It’s time to get to work.

There you go.

Good question, though.

Thanks, Dallas.

Thank you very much.

No problem.

All right.

Well, we are pretty much at the end of the show here.

So let’s get the vital information out.

If you are a tax client and you haven’t yet made an appointment, you should go to drfriday.com.

The calendar is out there.

If you don’t see a time or a date, me or Chris, then you can give us an office a call.

We’ll see if we can find, we hold back some times for our clients.

So again, go to drfriday.com and you can click on calendar and you can make your appointment, making sure that you’re all set up.

Usually most of my guys, you guys all know pretty much when you’re going to do it, what time.

It’s always been the same every year.

If you’ve got questions and you just want to have a quick answer, I try my best because sometimes if you can get the answer before you make the mistake and hey, you listen to the show today, you’ll see not only me, but a lot of my listeners actually listen and they’ve got some of the answers I don’t, which is always appreciated because no one can know everything.

um so um if you have a question feel free to email friday at dr friday.com friday at dr friday.com friday is my first name just for some new listeners a lot of times you guys know that but new listeners they hear the name friday and they think dr friday it must be her last name but it is not my last name is actually burke but dr friday sounds a little better on it have a phd in economics. So, um, last is, uh, if you want to give us a call in the office Monday morning, 615-367-0819.

Again, a heads up next Saturday is our big Christmas show where we’ll be giving away appreciation to all of our listeners and clients. So, uh, feel free to give us a call. And I didn’t, uh, I didn’t hit anything on Lolita, um, uh, roasters, Lolita roasters. Um, again, I have the coffee. It’s something I’ve been giving out this week. They gave me my packages, beautiful boxes, big bag of coffee, and it is delicious. So if you’ve got a business or maybe you’re in real estate or something like me, and you’re looking for something, go to lolitaroasters.com. Take a look at their website. They do custom roasts for all businesses. Like I said, they did mine and it’s a dark roast. So far, so good. Everyone seems to love it and it’s working well. All right. So we’ve got a few seconds here give us a call at 615-367-0819 is the number directly in the studio or friday at drfriday.com try to stay warm enjoy the holidays and as we say in australia call you later