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 New Year
- Real Estate Tips from Dr. Friday
- Meal Cost For Business is 100% Tax Deduction
- Capital Gains Tax for Married Couples
- Why You Should Start Preparing for Tax Season
- The Employee Retention Tax Credit
- The Advanced Child Credit
- Charitable Contributions for Married and Single People
- Cryptocurrency and Taxes
- RMD’s Are Back for 2021
- Getting Back on Track With the IRS
and much more!
Transcript
Announcer 0:01
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
Hey, I’m Dr. Friday, and the doctor is in the house. And hopefully, you guys are all staying nice and warm, because we have apparently a big cold front coming through. I’m gonna be quite honest, tonight, I plan to be going out. So I hope that it holds off until I get back because the Lion King is calling my name, my birthday present for my sister. And so we are going to go see it. So I’m hoping that it is still out there. And everyone’s able to do it safely and looking forward to it.
Dr. Friday 0:56
So besides that, I think it’s that time of the year when we get to chit-chat about finally my favorites. Finally, my favorite time of the year, is taxes, right? I’m probably one of the crazy people in the world that truly enjoys taxes, and I enjoy the challenges and the ability to try to do the best I can for my clients. And always I mean taxes are constantly changing, we have seen a ton of changes in the last year since 2020 2021. Now going into 2022.
Dr. Friday 1:28
So far, nothing in the first 15 days of the year, that’s been major, but hold your breath there, maybe don’t hold your breath, because I’m assuming there’ll be some more things to come. If you want to join the show. It’s easy if you’ve got questions, or if you’re listening and have some situations, maybe you sold some real estate and you’re looking to figure out how much money you’re going to owe, I can give you some basic information here give you some idea of how to calculate possibly, especially if it’s inherited or investment property impress property that you actually did do something along the lines of renting it out.
Dr. Friday 2:00
There are different types of calculation, we have recaptured depreciation along with the capital gains tax. So if you have a question, you can join the show. 615-737-9986 is my number here in the studio. And then obviously, if you want you can also email me at Friday@drfriday.com. Since what happened when you’re multitasking friday@drfriday.com if you’ve got some questions. I know I got a couple of questions last week that I didn’t actually answer on the radio. And sometimes some of the questions are too in-depth to actually take on to the radio.
Dr. Friday 2:46
But sometimes, there are some and again, a lot of people have sold real estate in the year 2021. And many of them it was either they sold real estate, their primary homes, and they brought those home for like 200,000 but sold them for nearly a million dollars. And in those cases, you do have situations where that’s going to create a situation where the capital gains and the waiver on your primary home are still going to leave some money possible for you to actually still have to pay taxes, right?
Dr. Friday 3:19
Because we had that 500 For married and 250,000 exclusions above what we paid. But if you’re a married couple and you paid 200 And you have the exclusion of five, but you sold it for a million, you still have $300,000 that capital gains tax will be required on and that is not that’s not petty cash my friend. So sometimes a lot of times people are thinking is this a good or bad thing?
Dr. Friday 3:43
All right, we’ve got Mike on the line. Let’s see what Mike can bring to my story here. Hey, Mike.
Caller 3:49
Hey, how are you doing?
Dr. Friday 3:50
I am doing awesome. Thanks for calling. What can I do for you?
Caller 3:54
Well, I was wondering, I sell a lot of stuff on eBay. And they hit me with a 1099 Last year, which is the first year I’ve ever had one, and I know I’ll get another one this year. But I was trying to find out like when I do my taxes when I’ll can I give to my tax man as far as I know, they take out a lot of fees and they take out some taxes or something I’m not sure.
Dr. Friday 4:23
They usually could pick up any kind of sales tax that might be required. And then of course there’s the shipping cost in some cases that you’ll be able to deduct and there may be a handling fee, depending on your situation if they’re doing the inventory or not. And the hardest thing with things like you’re doing Mike is I have a gentleman I don’t know if it’s exactly like yours, but he is a person that likes to go and he will pull parts or he’ll go to swap meets or garage sales. And he picks up things that he knows he can either fix or he can actually just turn around and flip on you know Amazon or on the Internet.
Dr. Friday 5:00
And so his cost basis is very hard. He’s usually paying cash, he’s accumulated these things for years, and not keeping track of all the receipts. And the problem is the IRS has kind of ruled on all of those, if you don’t have a receipt to show that you originally purchased it, then your basis is zero. And that’s where you know, and there are more people listening. That may not be your direct situation, Mike, but I have run into several people that’s come into my office, and that’s exactly what they’ve done. They’ve either cleaned out relatives, houses, things like that. But as you were saying, they now I think, is it 15,000? Or 10,000? Do you know Mike how much you can earn? And before they’ll start 1099 you?
Caller 5:41
About 10,000 or so many sales.
Dr. Friday 5:49
Oh, okay. So there you go. Yeah, I know, they changed that a couple of years ago. Again, this is, in my opinion, this is the step towards everyone was listening to the Build Back Better the infrastructure bill. And one of the big things in there is where they’re talking about trying to get people that have more than $600 in the bank, or someone telling them that they deposit. I think this is another way that the IRS is trying to encourage people like Amazon eBay to tell them if there are people in there that actually have businesses because they’re figuring if I do it, I’m doing it once or twice a year I cleaned out, I’ve dealt with a couple of things on there.
Dr. Friday 6:28
If you’re doing it all the time, then it’s really a business even though it might be your personal assets that you’ve just been eliminating over the last couple of years. So it’s very confusing, Mike. But anyway, you can eat Amazon and eBay will give you a list of all their expenses. And then, obviously, if you have any receipts for anything that you’ve purchased to put in there, that would be something else you want to provide to your accountant.
Caller 6:53
Okay, all right. Well, thanks for your help.
Dr. Friday 6:55
Thank you very much. All right. Let’s get Nancy in Colombia. Hey, Nance.
Caller 6:59
Yes, my daughter wants to pay off her mortgage, and she wants me to let her have $90,000 on her inheritance. I have two other children who are aware of the situation. And I just want to know what the tax consequences are?
Dr. Friday 7:20
Well, the good news, I guess, would be as if Nancy, you have those funds in a bank account where you’re only either earning interest if they’re in stock, and the bottom line is you’re going to pay all the taxes. Okay? So wherever that money is, if you have to take it out of an IRA or a stock portfolio, to get to cash, there may be capital gains or ordinary cash, it’s encountered.
Dr. Friday 7:45
Okay, then there’s really nothing you need to file an inherit a gift tax return a 70709, I think it is or 706 gift tax return and it will list her. And you would I mean, you have $1,000,000.11 million dollars, actually, that you could give away right now under the current taxes. So probably not going to be a big thing to worry about. But you will whoever do your taxes needs to do the gift tax return which is the 706 Sorry, 706 tax referred for gift return.
Caller 8:23
Okay. I appreciate the information and know it but it has to be filed.
Dr. Friday 8:33
Right? You do need to file that because that way then two things happen. One, of course, it does come out of your lifetime estate which is fine. But if anything ever came up and auditor something she would have documentation that that was properly provided to her right? Because 90,000 going in your bank and then paying that off to your mortgage company. Not likely to cause but you never know any kind of unique or unusual events sometimes can cause the IRS to come asking at least the question, where did you get the money.
Caller 9:00
Yeah, they sent a revocable trust at the present time.
Dr. Friday 9:05
The house or the money?
Caller 9:07
The money.
Dr. Friday 9:08
Okay. Yeah, but you’re in control of that. Because think, Gosh, you’re still alive. Yeah. I know. We have the good news that you’re here and you’re able to Yes, and that’s fine. I mean, mine’s also in a revocable trust, as well until I pass away. Right. But yeah, there is nothing wrong with it. And then you can even document within the estate papers or in the trust that she got this advance so that way, God forbid the day you’re no longer here and the trust kicks in. She doesn’t still get the exact same amount, you know that that’s already been coming.
Caller 9:45
It’ll come out. They will come out before she gets anything.
Dr. Friday 9:50
Exactly, exactly. And that way everyone still gets a fair shake, but it’s uh, I mean, I’ll be honest, I’m not too sure why I mean, if your money is invested in again, I don’t I’m not an investment. But most of us are making four to 5% minimum on our investments in most people’s mortgages today, if you’ve had any mortgage is two to four. So, you know, you could actually be making money on that money versus paying off a mortgage, but I’m not her financial planner or yours. And I’m not even a financial planner. So I will say that you know, I’m not a big keen person for paying off mortgages because you usually can grow your money faster than the interest charged. But if this is her once, and you have the ability to help her out, I guess it will make no difference in life.
Caller 10:35
Yeah, well, that’s help set the case. So I appreciate the information.
Dr. Friday 10:40
No problem, sweetheart. Thank you very much for calling. Alrighty, thanks. So if you have other questions, you can join the show as well at 615-737-9986. Take your call, talk about my favorite subject. And those are the kinds of things that do come up. I mean, come on in real life, we have these situations where, you know, there is you know, the other side of giving money away from your estate, there’s nothing wrong with gifting money to your children, let me clarify this.
Dr. Friday 11:15
But depending on the size of your estate, if it’s large enough, it’s not going to big deal, because there’s going to be no look back, because you won’t qualify for Medicare, if your estate is smaller, and all your assets are like in a house or something, and therefore you don’t have a lot of cash than giving your house or giving away assets. Remember, there is a five-year look back. So if somebody ends up in a Medicare situation, you can end up losing and having to pay tax on that as the person that received that gift. That probably doesn’t apply in the recent phone call that we had going to guess.
Dr. Friday 11:49
But I have had clients or situations in here where individuals as they get older, want to make sure their kids are taken care of and they give a lot of their assets away. But the problem with that is if you get sick and you end up in a nursing home or something like that, and you don’t have the assets to pay for it, they can go back and get those assets from your children.
Dr. Friday 12:10
Because you know, if you give your money away five years before you end up in Medicare, that money is actually Medicare’s money. So again, that’s the kind of situation we have, if you want to join the show, I’m going to take a quick break, so give you time to jump in 615-737-9986. We’re gonna take a quick break. When we get back we’ll talk more about taxes and maybe a couple of the tax changes that you need to know about so you can save some tax dollars. We’ll be right back. All righty, we are back here live in the studio, if you’ve got a question, all you have to do is pick up the phone 615-737-9986.
Dr. Friday 13:00
And Paul was good enough to give us a call. What can I do for you, Paul?
Caller 13:05
Oh, yes, ma’am. I had a piece of property farmhouse and 5.77 acres that I bought in 1999. And our recently sold the farmhouse and nine-tenths of an acre 499,000. I originally paid 55,000 for everything. But I’m building a new house on the remaining property that I had, I took taken all the money that I acquired from selling the old farmhouse and put it into the new house. Plus, I had to borrow…
Dr. Friday 13:36
Do you live in the old farmhouse? Was that your house?
Caller 13:40
Yeah, that was my house. I’m still living there. I sold it. But I’m renting the house until my new house is finished.
Dr. Friday 13:46
Okay, so you had that one as your primary home. So in theory, you lived in that home two out of five years, you divided it off. So you won’t have any basis necessary in the other house at the moment. But you would be without a problem given there wouldn’t be any capital gains on the sale of this house. If you’re single if you’re married, I mean, be better even but to have a $250,000 exclusion above what you paid for that property. The fact that you divided it doesn’t try the fact that you still are entitled to that exclusion. So yeah, you’re perfect. Even though you’re reinvesting which isn’t required under the new tax law, you wouldn’t have to worry about any capital gains on the sale of that home. Awesome.
Caller 14:30
Thank you so much for your help. I really appreciate it.
Dr. Friday 14:32
No worries. Good luck. Thanks. Let’s hit Donald in Tennessee, Mr. Donald, what’s happening in life?
Caller 14:42
Going good. I just won some money in a poker tournament. And I gave half of it to my brother. And how would I do the taxes on it?
Dr. Friday 14:53
You should have paid the taxes before you give him bro some money. Okay, but now okay. So, Donald, it’s just like gambling of any sort, right? And lottery tickets going to Vegas are all the same thing. So you would have whatever the original amount you might be able to put onto your schedule A as far as deep. Are you a professional gambler? Meaning do you go more than once? Have you lost money on gambling?
Caller 15:16
Oh, yeah.
Dr. Friday 15:18
So you can only take losses up to what you earned. But yeah, 2106 does allow on the itemized inside Donald to take and put that in, but it’s not dollar for dollar. So I’m just gonna say how much give me a ballpark and you don’t have to be exact. But is it like in the 10s of 1000s? Couple 100,000? Do you know where are we at?
Caller 15:38
300,000.
Dr. Friday 15:39
Okay, so obviously, that’s going to put you in a completely different tax bracket. And unless your brother is going to pick up part of it, and you’re going to pick up the part. Not that you really do that, because you’d have to 1099. And you would actually have to pick up whatever the difference between your losses, and you could take losses up to 300,000. If you’ve lost that much this year, your gain of 300. And then you’re looking at are you married or single?
Caller 16:03
Married.
Dr. Friday 16:04
Okay, so you’d be looking at 300,000 being about the 24% tax bracket. In so and then that’s assuming I don’t know what income you have. But that’s rough, you know, assuming that there’ll be some other income, possibly. But you know, so you’re going to want to take roughly a quarter of that money and set aside for good old Uncle Sam, less whatever losses you might have had if you’ve got some big losses, that would be nice, but you might have lost as much as you got.
Caller 16:32
No, not this year again. Last year. Actually, it’s actually last year.
Dr. Friday 16:37
Yeah, 2021. This happened, I’m assuming. But I mean, that’s an assumption, you could have earned money this year. But anyway, so you’re gonna want to go back and track, and if you are a person that likes to play the games, there’s nothing wrong with it. But make sure you’re tracking the money you’re taking to the games, you know, so that way I lose it. You have that. And I mean, I doubt this is the first time you’ve had winnings if you’ve been doing it for a while. But that’s just for other listeners as well. If you are like right now, there’s a lot of people playing the sports apps for gambling, you know, and there are people who are doing very well with it. But you do need to track it just like Donald but hopefully, that helps you, but you’re probably looking at a quarter of that roughly going to Uncle Sam.
Caller 17:16
Sounds about right. You’re about right.
Dr. Friday 17:20
No problem, buddy. Thanks for calling. Thank you. Bye. All right.
Dr. Friday 17:26
So if you want to join the show, or if you’ve got a question, all you have to do is pick up the phone at 615-737-9986. Take your calls. Okay, so I did tell you before the break, we are going to talk about a couple of things, probably one of the biggest changes for my entrepreneurs this year.
Dr. Friday 17:46
So if you’re in business, and you see clients, which I know in some businesses are saying, well, we can’t see clients, but many of us still see clients, and you take someone out for a meal. Right now the meal cost is 100% tax deduction. As you know, it’s used to be 50%, your meal wasn’t a tax deduction.
Dr. Friday 18:05
Well, right now, for the 21 and 22, tax year 100% meal deduction, they’re really trying to help small business owners use restaurants and things like that to you know, to be able to deduct it. So just putting that out there that if you have any kind of legitimate meals and entertainment for your business, you will get a 100% deduction versus the standard or the normal 50% deduction that we were getting before. And we also want to touch a little bit on the employee retention tax credit. I don’t know if there are enough people out there that are pushing that this is something for anyone that has employees other than yourself, if you’re the owner, you’re not going to qualify.
Dr. Friday 18:48
And this is for people with employees, not 1099 individuals, okay, so if those are the situations you have there if you need to know more about or you can Google employee retention tax credit, but almost all of you in Tennessee, unless your business just did awesomely, and you kept hiring and hiring but let’s be honest, most of us had a downturn for a couple of months in 2020 because of the mandate to shut down even restaurants and everyone else so if you have something like that you need more questions or more answers, you know my number at the office or email me and I’ll be more than glad to send you some more information.
Dr. Friday 19:26
All right before the break. Let’s have Bo in my town Spring Hill. Hey, Bo. Hey, how are you doing?
Caller 19:31
Awesome. I started collecting Social Security. I’m 67 and a half or 66 and a half sorry, but I’m still working full time. So I started in September of last year to offset it. I started putting 40% of my current salary in my 401k to kind of offset the additional money. I’m going to retire this year But I’m still putting 40% in, I don’t want to put too much, and then end up getting in trouble because I retire before the end of the year. And I’m over, is it prorated during the year? Or how do I figure it out?
Dr. Friday 20:14
How much maximum for the 401k?
Caller 20:17
Yeah, like, is that like, if I retire in July? Can I still take the maximum for that year?
Dr. Friday 20:23
Yes. The only time will be is if you’re a higher earner in the business, you know, and then sometimes they have to prorate because the amount that everyone has contributed, people at the higher income sometimes will end up getting a small amount, but the maximum per year, it’s not per month or per an income. So you can give the maximum, which is I don’t know, was it 20, some $1,000, something like that.
Caller 20:47
It’s like 25, or something that.
Dr. Friday 20:49
And you get an extra kick. Yeah. So there’s something if you’re over the age of 50, you get additional But bottom line, it’s like 25, or something like you said, and you can give all of that in before you retire. There’s no reason.
Caller 21:03
Yeah, that’s what I hope because I want to really hit the 401k hard before I actually call it quits. So yeah.
Dr. Friday 21:12
That system ballots, I mean, not to say, but I love the system that you did me, a lot of times people will come to me and say, Well, I’m burnt, if you hit the age of Social Security, you should take the Social Security. That’s my advice. I’m not a financial planner, this is my own personal advice because I don’t think longevity in my family at least is going to be something that’s happened, right?
Dr. Friday 21:32
So by what you’re doing is basically, Okay, I’m gonna get my social security, but then I’m gonna turn around and put this in a tax-deferred account, in essence, which you can’t do if you weren’t working. But if you’re working, you can maximize the socio probably won’t be dollar for dollar, but it’s going to be a close match, that you’ll be able to at least defer a ton of money into your 401k and not really have any hardship in your personal budget. It’s a great way of having some tax-deferred savings. You know, I mean, in my opinion, so I’ve talked to more than one person and crunching those numbers, what you’re doing, I think is a great plan. Maybe it’s because that’s exactly what I would do. So I’m in agreement, Val, but it’s a good plan.
Caller 22:12
Awesome. Thank you so much. Appreciate it.
Dr. Friday 22:14
No problem. Thank you, buddy. Bye-bye. Alright, and for any of you again, I want to clarify just in case people think because I know today, I am not a financial planner, I am an EA licensed by the Internal Revenue Service did your taxes and representation and I never have worked for the Internal Revenue Service. I’ve always worked for the people as a representation between you and the IRS. I’m like Superman, alright, I stand between you and the IRS. Not really Superman, but you know what I’m talking about guys.
Dr. Friday 22:43
So that way you have a shield that will help you try to figure out what exactly they’re wanting without all the threats. And sometimes it can be overwhelming for individuals that have IRS issues. But that being said, a lot of times on the IRS on the subjects, you know, taxes, financial planning, they do go hand in hand. In fact, I work with a lot of financial planners, because when someone’s doing a financial plan for somebody, sooner or later it’s going to affect their taxes. And what you want to be able to do is tell your person okay, you know what, this is probably going to cause you another five or $10,000 in taxes.
Dr. Friday 23:21
Here’s where the money is going to come from, or here’s how we’re going to save it so that the person doesn’t end up in my office all upset because they now owe five or 10,000 more dollars and they weren’t prepared for it. So good financial planners prepare that people other people sometimes just do the transactions, it may have been a good decision but without your client understanding that sometimes you’re leaving them a bit confused. Alright, so if you want to join the show, you can 615-737-9986.
Dr. Friday 23:54
And we’re going to take a quick break here in a second and we’re gonna be talking more to you if you have questions about taxes. We are in tax season guys January 24. The IRS opens up for e-file. We are already preparing and moving forward I will tell you our tax software is not yet able to print out without putting a do not file across a lot of the pages. But we are ready to move in as far as getting everything put into the system but January 24 is the big due day. Employers have till January 31. Actually, the first week of February is pretty much to get w two so that’s when we’ll really get busy. So if you’ve got a question you can call us at 615-737-9986 And we’ll be right back with the Dr. Friday show.
Dr. Friday 24:45
We are back here live in the studio. And you can join us if you want. Here is your last static sweetheart. There we go. 615-737-9986 taking your calls, and we’ve got Mark from Kentucky. Hey, Mark, what’s happening? This call what? It gets a great answer. Actually, it is very nippy out there. All right, what can I do for you?
Caller 25:20
Trying to figure out how to give away a farm to my sister without tax implications?
Dr. Friday 25:27
I mean, it’s $1,000. Yeah, it was several $1,000. I’ve been told I had to pay the difference on the 16,000 exemption gift, the difference than that. So you can sell it to her for your basis, we can give property for our basis to the other. So whatever you own this farm for, you can gift the tour. And you can do that. And then the first 15,000, you wouldn’t report on the gift tax return, the rest of it would go on a gift tax return, you then would do it as a wash sale, in essence, and one of the questions is did you sell it to a family member? And the answer would be yes. And then you know, you can that way she would basically be maintaining the same basis that you had. And that way, then when she sells it or whatever happens, she would be the one responsible for the tax versus you.
Caller 26:20
Okay, well, it sounds pretty simple, then from what I’ve been told.
Dr. Friday 26:23
It is relatively simple. Yeah. If you want to email me, I can send you a good attorney here. I don’t have one necessarily in Kentucky that can handle it. You’re just going to want to basically a quick claim it but you’re going to want documentation because obviously is there a mortgage or anything on this property?
Dr. Friday 26:39
No. Okay, good. So that way, then you can just quick claim the property between each other, but you’re going to want to have the release of your name, put it in her name, so that way, you know, nothing comes back at you later in life or whatever, you know, just to the titles and the right names, but it’s not that complicated under the current unless this property is worth more than $11 million. Yeah, I am assuming it’s not, but that could be me. Yep. Then the cool, then that’s all you have to worry about. I mean, just if you have questions, email me, I continue in turn, they can walk you through it.
Caller 27:17
Okay, thank you very much.
Dr. Friday 27:19
Thank you very much, Mark. Appreciate it. All right. Well, thank you, Mark. We had a caller that came on was a real estate agent watching out for when it comes to taxes, and they are really successful at real estate. Oh, caller. What should a real estate agent Oh, I’m sorry, live videos, it helps if I read and talk at the same time. Now there’s no way. Phil Valentine always kind of did that.
Dr. Friday 27:42
Anyways, the question is what should a real estate agent watch out for when they’re becoming in taxes when they’re getting to be very successful in real estate? Well, one is paying quarterly, okay. All of us in the self-employed world have to pay estimated taxes, I don’t care what you will hear on the streets. The tax law specifically says after your first year of business you need to start paying quarterly is also a great way for us to stay out of trouble with the IRS.
Dr. Friday 28:09
The second thing is maximizing your expenses. I have some people in the real estate market that do a lot of marketing for Zillow and things like that. Some of them have people that work underneath them which we can pay them as subcontractors. Miles isn’t as popular in some real estate places as others, some people are doing a lot more virtually. Then you also have a curse your real estate tax your all your real estate fees from office fees, and all those different situations.
Dr. Friday 28:37
But those are the big things, you just want to track all of your expenses. And I would definitely keep some sort of documentation on it. So when you renew or you take continuing education courses, or you buy your ENL, any of those situations, if you’re a real estate agent, and this goes for just about anyone in the service-based business, your expenses are going to be somewhat minimal.
Dr. Friday 28:58
So if that’s the case, you’re going to have to make sure that you’re setting aside in my personal opinion from your original commission. Depending on what you’re considering successful anywhere between 20 and 30% should be set aside in a tax account, then the difference can come out at the end of the year. Once you file your taxes, you always want to have more than enough God forbid if you learn to live off a little extra then you can always have those retirement accounts.
Dr. Friday 29:23
But either way, you want to make sure that you are setting that aside in a separate account. Just like if it’s a paycheck, you don’t get gross paychecks, you’d get net paychecks. And that would be the same way you have to treat your commission checks. All right, let’s go to Bill in Tennessee before my next break. I got plenty of time actually. Hey Bill, what’s happening?
Caller 29:42
Yeah, thanks for taking my call. I had a question every year. I get a paper from my mortgage from my own motor home, but every year they send me…
Dr. Friday 29:55
1098 mortgage statement interest and all that.
Caller 29:58
What is that exactly? What am i supposed to do with that?
Dr. Friday 30:01
Well, since the new tax laws, not a whole bunch of my friends, I am still my clients when you work with me, I still tell them to say those with all their other important tax documentation, just so you have it before the tax change that we had back in 2018 are into 2017. You obviously could itemize with it, right.
Dr. Friday 30:22
I mean, you could take some of your mortgage interest and property taxes. But nowadays, if you’re single, you have more than 12,800 Before you itemize and a married couple more than 24,600 or something like that. So it’s very difficult to use it. But I would just set it aside where you set aside all of your other years.
Dr. Friday 30:41
Yeah, good, man. That’s, but there’s not a whole bunch this year, probably one of the only things that are above the line that we had a little last year as a single person and married that was $300 for cash contributions. This year. It’s 600 for married 300 for individuals, but other than everything else falls on that itemizing bill.
Caller 30:58
So they itemize and do more than what they give you?
Dr. Friday 31:03
Yeah, exactly. Which I mean, think about it. I have clients that sometimes come in, and they’re like, oh, man, I wish I could itemize. I used to always itemize, but the fact is, they’re giving you more money than you spent. So it’s kind of a good thing, right.
Caller 31:17
Is that the same is itemizing for like, give to the charities, the same thing.
Dr. Friday 31:23
Charities, well, if you give $300 If you’re single to charities and cash, you can take that above that’s that’s extra. And if you’re married, you can do $600. above those standard deductions, they will itemize those in addition.
Caller 31:38
Oh, well, I appreciate you. So thank you.
Dr. Friday 31:41
Hey, thank you, Bill, I think thanks for listening. Alright, guys. So again, I just want to reiterate for the situation is, again, if your last year, we had $300 cash contributions deductible above the standard deduction this year $300, for individuals $600 for married couples of cash, now this is not going to the goodwill and giving your clothes or, or household items, this has to be cash that was given to a charity.
Dr. Friday 32:12
But if you have it, make sure you track that above our other situations because, in all honesty, that’s going to give you a few more dollars, depending on your tax bracket, it will help more if you’re in the higher tax bracket than in the lower, but you know what, either way, it’s money in your pocket you did give to it. And for all of you that are 70 Plus, you know, let’s make this year’s agenda. If you’re going to give money to charity, let’s do something even better than you can do for people that are not yet 70.
Dr. Friday 32:41
But anyone that is 70 years and older, and you have what’s called a requirement when distribution or you take money from your IRA, there is the qualified charitable deduction, you can go have the administrator of your IRA, write a check to the charity, and then at the end of the year when you usually get your 1099 are for a distribution that is $1 for dollar deduction.
Dr. Friday 33:05
So if you give money to your church every year anyways, sit down and figure out how much and get a check for the whole thing, give it to the church. And instead of waiting and not being able to itemize it or only getting $300 or $600 of it, you could get all of it as a complete deduction. Again, these are only for individuals over the age of 70 who require minimum distributions from IRAs, 403, B’s 457, whatever those types of situations. So just put that out there.
Dr. Friday 33:38
And if you have a parent, so a lot of you guys are, are not quite at that age, but a lot of times you have parents and you help them out, please let them or talk to their financial planners, and ask them if your parents are doing that because that is one of the best. And in many cases most unused tax advantage for people that are already on fixed incomes, there’s not a lot of movement or a lot of crazy things you can do. But most of them are also very giving, you know, I mean, a lot of my clients, I’m happy to say are extremely giving.
Dr. Friday 34:10
And in that situation, if you’re going to give why not give it tax-free versus after tax it doesn’t hurt or help charity one way or the other. In fact, you might be able to give a little bit more because you don’t have to pay taxes. So that is your choice but again, qualified charitable deduction. And for all of us that have not quite hit that age, we have the 300 for single or 600 for married cash contribution deduction above the line. Alright, so we are getting to the last part of the show. This show is flying by live videos going fast. We are going to be able to take a few more phone calls. So if you’re sitting by and just questioning and sitting well it’s cold outside so hopefully you’re sitting in your house listening to this or if you’re in your car, you’ve got the heater going and stay nice and toasty.
Dr. Friday 35:00
Either way, if you have questions, you can join the show at 615-737-9986, I will let you guys know, you can also check me on the web at Dr. friday.com. I think our calendar is pretty close to full. So if you are not a returning client, we’re probably going to have a tough time getting some in. But we can do some referrals. So if you have a question, or you need some help, give us a call here in the studio at 615-737-9986. And we also are checking our email bags for anyone that might be a little bit shy on, you know, just asking those questions.
Dr. Friday 35:42
Again, I know how that is, guys, I was never very good at that. But we’ll get to some of your phone calls. Let’s go ahead and take a quick break. And then as you guys call in, we’ll get to those phone calls and make sure that we can get all of your answers. We’ll be right back with the Dr. Friday show. All right, we are back here live in the studio. And as I always love it, you guys call and that makes my show so much more exciting. So let’s go ahead and do well in Nashville. We’ll start with that one go-to Patricia afterward. Hey, well, hey, how are you? I am awesome. How about you?
Caller 36:22
I’m doing good. I have a question about a piece of property that I inherited from my mother. And then the property was sold. My stepdad was the primary residence there. Okay, and the way the rules stipulated the property was split between the two of us. So I’m wondering what’s the tax implications of that as a non-resident? Well, I was wondering if any of that was sheltered under the inheritance clause?
Dr. Friday 36:53
No. It’s not. So the bottom line is it is basically coming down to, you’re going to pay capital gains on your share the general, your father or stepfather, I’m sorry, he would actually be able to claim the residence because he lived there. But you would actually have to claim it, you will have to step up in basis, though. So you probably don’t have a whole bunch to worry about. So you know, I’m saying because you inherited it after your mom passed. So whatever the value of that home was 50% of it would be your basis.
Caller 37:32
Okay, so 50% of what the home was at the time of inheritance would be the basis for the sale.
Dr. Friday 37:37
Right, right. And if you turn around and pretty much immediately sold it, then your capital gains of zero, right. I mean, but if he’s still living in the house, is he still in the house?
Caller 37:50
No, we sold the house this year. But there was she passed in 2009. We were so years that the house sat on the market. That’s why I was curious.
Dr. Friday 37:59
Yes. So that’s where you know, the downside or the situation your case will be? Is that the difference? Right? So whatever it was worth the 2009 50% as your basis, whatever you sold it for this year, if it was more the difference between the two would be your capital gains. And your father-in-law or whatever, he’s gonna have a tax situation, too. Did he move out of that house? Or was he living it the whole time?
Caller 38:25
He was living in it the whole time.
Dr. Friday 38:27
Okay, all right. Then he’ll, he’ll have his basis, but he’ll also have the ability to claim residence in it, so he’ll probably be fine.
Caller 38:38
Okay, well, thanks. I’m just wondering how that would all work out under those circumstances.
Dr. Friday 38:42
Yeah. Now was it you didn’t sell because he was living in it? I mean, it was a lifetime estate situation or not, it was on the market just never sold for the price that we needed.
Caller 38:53
Well, the situation was the house was bought with a prenup with her. And as her will specified, he was allowed to live in the house until he decided to move, remarry, or see he passes away. So he decided to eventually remarry.
Dr. Friday 39:14
So, you had a stipulation. So honestly, you had a stipulation, which you were not able to sell it. So there is some tax law, we’d have to look it up. Exactly. I don’t want to misquote but you may actually still have a tax-free situation there. Okay. Yeah, that’s because the basis, that’s a time that you could have inherited even though you inherited it back in 2009, you were not in you didn’t have the availability to actually sell it because of the stipulation of the estate, right, so your step on the basis would have been at the time that you’re able to sell and that would have been recently and so you probably have and you’d want to document it, but you would probably have a step of it. The basis that would allow you to have zero capital gains.
Caller 40:03
Okay.
Dr. Friday 40:05
Okay, it’s a little bit different than most people they inherit after someone passes away. And then everything I’m saying, but they do have some stipulations in the tax law that covers your situation. You just want to make sure it’s documented properly, but I think you’ll be, I think you’ll be okay with not having to worry about too much tax. Okay, thank you. Thanks. Well, I appreciate you. Alright, let’s go to Patricia real quick. Hey, Patricia, what can I do for you?
Caller 40:31
Hi, I just wanted to let you know, I really enjoy your show. And you’re so smart. I really appreciate your knowledge. I would like for you to clarify about the 70. Plus, you were talking about charitable contributions. My husband and I also filed joint and he’s 64. But I just turned 70. So his contributions from his income count as well.
Dr. Friday 41:02
No, this would have to be only under you, Patricia. Anyone that is actually of the age of 70 or older. And if you have an Ira 401k, any of those retiring devices that are not a Roth, but a regular, and you want to start drawing from it, you could pay the charitable through that which would be a tax-free situation.
Caller 41:24
Right. But I do I have to file separately because we file jointly.
Dr. Friday 41:28
Oh, no, no, because each form comes under our names, right? I mean, he’s done shows under him, your 1099 1099 are would be under you, and you would be able to claim it because of your age.
Caller 41:39
Okay, great. That’s all I needed. Thank you. Keep going. Thank you,
Dr. Friday 41:43
Thank you. Alright, Lisa in Clarksville.
Caller 41:47
Hi, thanks. Thanks for taking my question. So we went on a trip that was work-related. But we stayed for two and a half weeks because I have family in the area, we went to Florida. So the meeting itself required really Tuesday’s two nights of stay. But we rented a house for two and a half weeks. What part of that house is tax deductible If any?
Dr. Friday 42:13
I don’t think you know the answer. But I will tell you, it’s for a period of time. So the two and a half days of whatever it was for new or doing business, you can divide the stay of two weeks by, you know, 1/7 or whatever. And that would be the expense of that. That trip is for business purposes.
Caller 42:32
All right, thank you.
Dr. Friday 42:34
No problem, sweetheart. Thanks. Alright, is it Bret?
Caller 42:41
Hey, question. I’m ever retirement age 63. working for a company to get a pension, consider and draw on my social security as well. I’m wanting to start a business. And then it’s another if I could pay myself the minimum that I could while drawing Social Security until I reach age 65 and then start paying myself a bigger salary.
Dr. Friday 43:03
Yeah, I think if you’re 63 Now is your full retirement actually. 66. Yeah, 65. Or something. I don’t hold myself to that. But I think I know by the time I get to at 67, I think my sister who’s 65 right now will be full retirement 66 and a half. I don’t know anyways, whatever. The only way you could do that is a C Corp. You could start up a C Corp, it will be double-taxed for a period of time. But you can control your salary and it would not affect your social security.
Caller 43:32
So I could just put the money back into the company. And then when I reach that I could start drawing out whatever I wanted to.
Dr. Friday 43:38
Exactly.
Caller 43:39
Okay. Very good. Thank you.
Dr. Friday 43:42
Thank you. All right. That was a bit of a quick thing there. I want to make sure I didn’t have anyone left on the line. By the time I hit my time out. We’re just about ready to hit that time out. So let’s go ahead and do the big old Indian here, which is basically how can you reach me the easiest way to reach me 615-367-0819. And that’s going to come Monday morning, give me a holler.
Dr. Friday 44:07
And we can and we are open this Monday. We also can talk about you know, obviously tax planning tax. If you have issues with the IRS, maybe have some unfiled tax returns, maybe you’re getting a lot of love letters. Maybe you’re just trying to figure out how to do a payment plan. And we can help with all that as an EA that is what I do all the time. And you can give us a call again at 615-367-0819. Sometimes it’s easier than trying to call a radio show, definitely.
Dr. Friday 44:38
Or if you can’t get ahold of me it is getting to be our busy season. You can always email friday@drfriday.com, again. That’s just like the day of the week. That is my email. And if you want to figure out who I am, maybe that’s the first time you’ve ever heard us on the radio. You’re not too sure where you’re at.
Dr. Friday 45:00
You know who this crazy person is, you can go to drfriday.com Find out more about me, we’ve been doing this for over 20 years, I’ve been on the radio now for almost 12 years. And so we, you know, we’re, we’re pretty set here in this area. So we’re not one of those companies that you’re going to call and they’re going to give you somebody in Texas or, or in California to handle your IRS issues.
Dr. Friday 45:21
We are local, we’re in Brentwood, you’ll be able to come in and talk to us and make sure that what the situation is cannot be resolved with an offer and compromise, is it impossible to get you in a lower payment plan? You know, I mean, it’s always great to have those ads that say we can settle for 10 cents on the dollar.
Dr. Friday 45:38
But you know, I’ve had too many people in the last 20 years walk in my door and have to tell them the straight out facts, there are certain things that are going to apply. And then other times, we’ve been able to settle hundreds of 1000s of dollars for five and $6,000. It’s not the same for every single person, there isn’t a trick or a game. It’s a very simple mathematical situation. And we can walk you through that. So again, you can reach us at 615-367-0819.
Dr. Friday 46:06
Or you can email friday@drfriday.com. Or check us out on the web. Our calendar is there, there may still be a few days open. If you want to set up an appointment at drfriday.com. You can click on the appointment, and we’ll be there to help you. I’m hoping you guys are going to stay nice and warm today and make sure you’re not doing anything too crazy. If it gets as nasty as they keep telling us it’s going to be let’s just hope that it doesn’t and it passes over just with a nice cold spell. Otherwise, I hope you guys have an awesome Saturday. And as we like to say in Australia, call you later.