Welcome to another episode of the Dr. Friday Radio Show! In this episode, tax expert Dr. Friday answers callers’ tax questions and covers various topics, including:
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 0:25
This is the Dr. Friday show. Hopefully, we’re hearing here. And we are ready to talk about my favorite subject taxes. If you would like to do something more on taxes, this is the show you want to talk about it’s tax season, we are already starting taxes.
Dr. Friday 0:44
Remember, e file will not happen until the 24th, which is right around the corner here. It’s the 21st A few more days we’ll be able to E-file going directly through that. And so if you have started to receive your documents, don’t rush to the fiddle finish line because I’ve already had a couple of people that have come in. And they thought all I have is a W-2, we can get this done, I can go ahead and get filed. And sure enough, on the two days, the people I’m talking about had something more that happened.
Dr. Friday 1:14
And it was enough to make it where we changed their taxes. The good news is we had an E filed them yet. So we did not have to physically amend the taxes. But we were able to get them corrected before we filed anything else. So again, if you have a question or you want to do something with your taxes now is the time that you can concentrate, make sure you have everything again, we can’t file them, even if you go to h&r block or any of those either people they do not have a faster door than anyone else.
Dr. Friday 1:49
The difference is some of them have services where they’ll give you advances on your estimated refund. I’m going to say this, be careful. I know some of you guys do this every year, and you don’t care if you have to pay a couple extra $100. Because you’re getting a couple of $1,000 some cases six $7,000.
Dr. Friday 2:09
And you rather pay that money today and walk out the door with 3500 in your pocket and wait for the difference in refunds. But you know, if for some reason they’ve already basically come down last year was the first year this year, they’re going to do the same thing. They’re going to slow refunds to individuals with earned income credit for children, they’re trying to confirm that the person claiming the child is the proper parent. And therefore they already said those refunds aren’t going to be coming out until almost late mid to late February.
Dr. Friday 2:36
So you may get the money today. But remember the interest on those loans, if for some reason they give you too much. It’s not where it’s going to be guess what the interest is, like 20 Some percent, that’s ridiculous. Besides, if you’ve already paid a fee to get the money early, then you’re going to pay a penalty for either getting money that you shouldn’t have, or they’re going to keep more of it. Because if it goes past the 330 days, then you have to pay another fee or a percentage.
Dr. Friday 3:03
So again, you know, any of these loans sometimes it seems like a great idea, right? Seems like oh, this is a perfect idea, I’m gonna get my money now I can go out I can put a down payment on a new car, or whatever it is, or pay for your rent or whatever it might be you’re doing with this. Keep in mind that the next step to that is somebody’s not going to give you money for free, right? I mean, that doesn’t make any sense. Why would anyone want to give someone else money unless there’s an advantage? I mean, a business, I’m not talking about an individual trying to help somebody.
Dr. Friday 3:35
But the advantage of having somebody else do something with it. So you want to make sure that that is not the case. You want to make sure that if you’re borrowing money, you know exactly how much and it better be saving you money if you’re going to take in that money and pay off a debt that’s higher than the debt you just created. That’s great.
Dr. Friday 3:56
Okay, so maybe you saved me money by doing it this way. But don’t get brought into it because sometimes, I mean, it’s bad enough in some cases they pay three $400 for the simplest of tax returns to be prepared. But on top of that they’re hitting a man people walk in with five and $600 bills from h&r block and they physically have a W-2 a couple of children. And that is it. They have earned income credit they do this whole they try to sell you guys on this whole audit proof situation and you know, go from there, but that’s not important as far as when it’s going through that situation. Okay. So in my personal opinion, you need to make sure that you’re paying someone that is not going to take every dollar that you might have but two that have been here for 20-plus years, and it doesn’t I have nothing against h&r block or Jackson Hewitt because I have good friends that work for both of those companies. And if those companies are where or what you want to do, that’s fine.
Dr. Friday 4:54
Sometimes they’re easy. They’re right around the block. They’re right in Walmart, so they’re easy for you to be able to deal with them in place, but don’t get sold on some of the products, right? If you only have a W-2, and you have two or three children, or something like that getting or talking into the audit proof package, or the package where they say, well, we’ll help you if you get audited. That’s silly, absolutely silly, the odds of you being audited are almost nothing unless those are not your children, then your odds are pretty good that the IRS, especially under some of their current situations, where they’re really trying to make sure the parents, the child, so you don’t want grandparents claiming children for earned income credit, or one parent that wasn’t taking care of the children claiming the children for earned income credit and the other parent, because they either don’t qualify, they make too much money, and they’re not legally married, or they’re divorced, they allow the other one, but the tax law is pretty clear, you have to be providing more than 50% support for those children. So and they have to be living with you for earned income, they have to be your children, they have to be living with you.
Dr. Friday 6:02
So and it can be grandchildren, it can be, you know, foster children or adopted children, but they have to be living with you. And if you’re not the caregiver of those children, then you should not be claiming them and getting earned income credit. Finance simple. Okay, so we’ve got that one squared away. If you want to join the show, you can 615-737-9986. Take your phone calls live here. So if you have some questions, maybe you’re working on your own taxes, or you’re trying to figure out, if you have a tax situation I did, what I would have thought was a very simple tax return this morning for one of my clients.
Dr. Friday 6:43
And this gentleman actually ends up owing quite a bit of money because he has two sources of income and unfortunately, going through a possible divorce. So the way the whole numbers worked out you know, with several $1,000, possibly due to the IRS, you need to make sure if those kinds of situations are coming up in your life if there’s the possibility of divorce if there are children. So right now, you may be claiming married and one, and you’re fine because you have the children and you have everything going on.
Dr. Friday 7:15
But if for some reason, you’re going to end up the divorce, there’s no guarantee you’re going to be able to claim those children every year. And now you’re not going to have possibly a spouse that’s on your tax return that either doesn’t make as much or doesn’t work at all. So you’re changing your numbers very important to be able to get into that information. All right, let’s go to the phones. Joanna in Clarksville, thank you for calling. What can I do for you? Sorry for the barking dogs in the background, but I’ve got a new puppy.
Dr. Friday 7:48
Hi. How are you, Anna?
Hello. Nice to meet you, I believe. Are you Australian?
Dr. Friday 8:00
I am a hybrid; I would like to tell you I will live was about 18. And now I’m here, and it’s been more than 18 years. So yes, I have.
You’re welcome to call me upon me then because I’m from England.
Dr. Friday 8:14
Ah, yes. There you go. What can I do?
We paid off our primary home this year, this year in November. And by the end of November, we bought ourselves another house as a second home. How is that gonna affect my taxes? Because I’ve kind of had well, we didn’t actually purchase it till December 27. So there are not many taxes because we haven’t even paid a payment yet on the house. So I wouldn’t think that what house would be affected with interest, you know how you claim your interest?
Dr. Friday 8:56
So, come down to the quick question would as you can claim, your second home, your first and your second home can be considered because they’re both yours as long as they’re not rentals, then you can use the interest. The question will be under the current tax law. Will there be enough interest with just the one home I don’t know if you were itemizing in the past and I don’t know the value of the home I’d have to have more than $26,000 combination of property taxes, sales tax in the state of Tennessee, as well as mortgage interest and charitable contributions? If those all add up with the new home, they won’t be for 2022 but in 2023, you’ll have practically an entire year. You may be able to itemize that interest it will just depend on if it’s high enough.
Okay. And if I can follow up, we are hoping to rent it out for a year. We’ve never done this before. We honestly don’t know what we’re doing, to be honest.
Dr. Friday 9:57
That becomes a rental. Then there’s Schedule II, The passive income schedule that we have to file. And then the interests will fall onto that to offset any income that you made along with depreciation, any utilities, Hoa health insurance, whatever property taxes.
Right, and your regularly check for any sort of text search. You can do that, Kenny?
Dr. Friday 10:22
Yes, yes. Any of your normal ones? I would hope so. Yes. All right.
Well, thank you, and lovely chatting with you.
Dr. Friday 10:30
Very good chatting with you as well. And thank you for listening. I appreciate it.
Oh, I love it. I wouldn’t miss it. Have a great day.
Dr. Friday 10:37
Thank you, sweetie. Bye, bye. All right, this is the Dr. Friday show. And we are chit-chatting about all my favorite subjects, at least hope some of you guys, I really appreciate the almost 1314 years of listening. In some cases, we’re going to take our first break here in just a minute. So if you like to join the show, it is really easy. You can always use another name.
Dr. Friday 10:56
We don’t really care about whose name shows up. Just you know if you’ve got a question because a lot of times people don’t realize, but it’s not as easy to make a phone call to a radio station as people like to think so sometimes when you’re asking questions. I’m amazed at how many people say oh, yeah, I heard this question asked, I always want to know the answer kind of thing. So if you have a question 615-737-9986. And we’re gonna be right back after this break. Here live. With the Dr. Friday show, the doctor is in the office.
Dr. Friday 11:30
And if you want to join the show, you can 615-737-9986 take your calls, we will cover a couple of the basic things that you need to know of course from some of the important things for going into your tax preparation for 2022. We have the married filing jointly, or married filing jointly and surviving spouse either way, 25,900, head of house 19,400 This is your standard deduction, you always hear me trying to say well to itemize, you must exceed these dollars amounts.
Dr. Friday 12:09
So if you’re your head of household, you have to have more than 19,400, and a single individual with 12,950 married filing separately the exact same dollar amount 12,950. And then if you have a dependents standard deduction, if they’re under a blind, whichever, about $1,400. And if you’re over the age of 65, you have 1750. These are what you’re going to have. So if you are a married couple under the age of 65, you have to either to itemize you have to come up with more than $25,900. And that would be made up of in some cases, medical but to be honest medical also has some exclusions, which you have to take the first 10% of your adjusted gross income.
Dr. Friday 12:55
So in many cases, there’s not much medical kicking in, then you have the state of the assault tax, which is basically state property taxes in our state. And so we would have your property taxes if you have multiple properties, all property taxes, and sales tax in the state of Tennessee. And that can only be $10,000. No matter if you’re single or married $10,000 the most that can be then you actually go into the next, which is your mortgage interest, which we are talking about.
Dr. Friday 13:24
But now if you have a home that you’ve refinanced after 2920, let’s just say the end of 2018 versus 2019. And it’s over the mortgage is more than $750,000, you cannot take 100% of that mortgage. So if you have a million-dollar home or a million-dollar mortgage, you may have to take a percentage to break it down, and find out how much the mortgage was for a home at 750,000. Then you have also charitable contributions. So all of that is what you make up to see if you are actually taking the standard, or if you’re itemizing, and so it’s very important to understand where those numbers Alright, let’s hit Alan real quick. Well, I’ve got you multitasking there. Let’s hit Alan in Smyrna. Hey Alan.
How you doing? I am checking on a form that I got from the IRS I just now took out social security at 66 and a half I’m full time employed and got a tax form for the earnings last year on my social security income. Will what I pay for in taxes for the Social Security income be based on my total earnings of Social Security Plus my my regular income or how does that…
Dr. Friday 14:53
Social security is basically is an other income so you don’t pay self-employment Medicare so secure but you will pay ordinary income tax up to 85%. So take the full number. And again, I don’t know what your I’m not sure how much money you made, but there is what’s called the provisional tax code, which they take half of the Social Security and then they add all your other earnings. Are you single or married?
Dr. Friday 15:21
So if you are married, basically take half of that social security and everything else. If all of it that half plus all the other income adds up to more than 45,000, they’re going to take 85% of the Social Security and make it taxable. So you might as well just take whatever’s on that paper that they’re showing you figure out what 85% and multiply it by your rate, the that 22% 12% 24% I don’t know what rate you’re in. But that’s what you’re going to be paying and you might want to have money start coming out of your Social Security, they will withhold.
Okay, so just hypothetical, let’s just say that my normal work income was 100,000. And social security was, I don’t know, 60. So they’re gonna take 85% 51
Dr. Friday 16:16
Yeah, I’ll say out of that scenario, $51,000 would be taxable income. So you would have your wages of 100 plus 51, and Social Security, you’ll be paying tax on $151,000. Based on that scenario,
Okay. Very good. I appreciate the help.
Dr. Friday 16:37
No worries. Thanks for calling. I appreciate it. Oh, all righty. So we got that going. And then I need to get back to my other screen. We have someone else there. Let’s talk to Rosie in Nashville. That is the name of my new puppy girl. And it’s a beautiful name. Hey, Rosie.
Hey, this is fan girl. Rosie, love your show. Love you. Quick question that 1099k, I sold some sounds tickets. And I have since read multiple times that all that gig income is not going to be taxed this year. Well, the 1099Ks still be taxable.
Dr. Friday 17:15
And well, if you receive, if you physically received a 10 99k, then you will have to, you’ll have to report it. And then you will either report against that the cost of the sound tickets if this is what that had to do with. Because at that point, you will have to make that and most likely you’re a file that as a hobby, which means you’re just going to report it as other income. Because if you don’t report if you did receive a 10 99k and you don’t report it, you’re gonna get a love letter and the IRS is automatically going to change saying you understated your income.
Correct. That’s how I was thinking. But I was just making sure whether, like, well, 1099, it still is good for the gig economy or
Dr. Friday 17:59
No, I mean, they move that out to 2023. So it may not come. So the mandate that they had for 2022 under the secured act of 2.0. They moved it into 2023. They pushed it. So we may not be seen in many cases, a lot of us that were worried I mean, myself included for some my clients. We may not see that money until next year.
Okay, cool. So if I get one report, if not, then…
Dr. Friday 18:29
Exactly that is the way we’re working. Because again, in most of those cases, it’s it’s not really income. But explaining the IRS may be a different conversation.
Correct. And I can’t really do anything with them. Internet, or time or anything, right. did not really get this correct. Yeah. Not worth it. Just straight tickets. Okay, cool. Thank you.
Dr. Friday 18:53
No worries. Thank you. Happy new. All right. Happy New Years. Thanks. So is it really? Do we have a second Rosie? Okay, let’s go to Rosie in Nashville.
Hi, thank you for taking my call. I love your show. Quick question going through divorce. I think it’s going to be piling on next month. I will owe him about $70,000 For his part of the equity in the home. I don’t currently plan to sell the home. But wondering if I can take that out of my IRA, transfer it to his Ira without taking the 20% tax penalty. And Tim percent hit because I’m still much retirement age. He is currently retired. Any idea how that might work?
Dr. Friday 19:37
Yeah. So if you can convince him to do that, that would, that’d be great. Because if you take it out, you have to pay taxes, right? But you can during the divorce, you can actually do a direct custodial custodial transfer because of divorce and not have to pay taxes or any penalties or anything. He can then leave it in there and let it grow for a period of time or he could cash it out and pay his own tax. Well, so if that is something he is a lawyer is agreed to, I would say yes, do that. Because otherwise, I mean, you know, between you, me and the rest of the radio listening audience, he might actually have a higher tax bill with doing it that way, then if he had gotten it as equity in the house,
yes, I figure we may have to adjust that amount a little bit to compensate for that, just to make sure he didn’t take more of a hit than he did. So. Okay,
Dr. Friday 20:27
Okay, is that called a certain thing? I believe it’s considered I mean, it’s called the transfer. I’m not too sure. Custodial is the people that handle it. So that’s not the proper term. But it is. I mean, I know it happens a lot in divorce, where people share their retirement because you are living together, you both grow together a lot of times anyways. So your, the person that you have the 401 k or IRA with will know exactly what you’re talking about, unfortunately, not my expertise. But yes, and he just has to have an IRA that you can transfer it into.
Perfect. And he does. Thank you so much. Again, I love your show. Thanks for what you do.
Dr. Friday 21:06
Thank you so much. Appreciate it. That was very unusual. I have a puppy dog named Rosie. And then I had two wonderful women called Rosie all calling me, it’s like my world is overcome with Rosie’s. Alright. So that being said, if you want to join the show, you can 615-737-9986. I always love it when some of you guys are actually, I mean, you think about it, because that’s what the show, as far as I’m concerned, one of the things I hope that we do is try to bring things to the front. So people think about some of the decisions before they just go and do something.
Dr. Friday 21:42
Because sometimes it’s a matter of saving money. Sometimes it’s easier. Because just like Rosie was thinking, I mean, hey, I have the money in my retirement, I either give it to him from home, or I give it to him from the retirement, it’s either way, you’re going to have to take care of it. So why not just split it through retirement leaving the equity in the home. And then when she actually sells the house, he or she has to pay him a little bit more to compensate for the current taxes. If she waits for a while, she’ll rebuild up the equity in the home possibly, and be able to get that money out free because equity in the house usually, at least up to 250,000 as a single person 500 as a married, we get as our primary exclusion on home sales.
Dr. Friday 22:23
So there you go, not a bad thing to think about at least and see if it’s something that will work well in your scenario and make sure it goes perfectly for everybody else. So let’s see if we can you know, the time clock is pretty close. Why don’t we take a quick break, and then we’ll come back and we’ll hit will in Nashville. That way, we have plenty of time for his call. If you want to join the show again. 615-737-9986. And we’ll be right back after this commercial break.
Dr. Friday 22:59
All righty, we are back here live in the studio and you can join us if you want at 615-737-9986. And we have well that was waiting through the break. And I appreciate that, sweetheart, I am all yours. Well, what can I do for you?
Hey, good, good afternoon, Dr. Claude a. truly a blessing. I trust you advice. I have a quit situation that I have a disability, which I get disability for. Okay. And, and I have three kids, I’m married. And I just I don’t do any dogs. I mean, if I deduct anything, it’s like the mortgage insurance, the mortgage.
And so, but my mother passed away in September and last man, my brother and sister a couple of pieces of property one the rental piece of property and the other one’s our childhood home that we’re getting ready to sell once it gets through probate on March 6. So what we’re trying to do that what I’m trying to do is prepare for this coming, you know, year, I don’t want to get lose my Medicare, you know,
Dr. Friday 24:21
Well, I will tell you, you do need to talk to an attorney. Because if you are on Medicare and Social Security or disability, this can affect those things. They can make you use that money and then you have to get back on disability which is almost it’s a very difficult thing to do the first time I’m pretty sure it’s not something you want to try to do twice. So I will tell you you’re going to need because they may decide to set up a disability trust in which the money goes into and then you can use it for your care, but it can’t be used for everything but did you know the NFL I mean, your mother and father left you a wonderful gift, don’t get me wrong. But at the same time, they’ve made things a bit more difficult for someone in your situation, because you have children or a wife or whatever, but by leaving into your name, it’s, it’s now going to become a problem.
Dr. Friday 25:21
For one, your, your Medicare theoretically could go up, and your disability could get cancelled or delayed. I don’t, I’m not an expert. But I have had some people that have had this situation. And they’ve actually basically told them, you make too much money to qualify for disability, because you have this influx, I don’t know how much money we’re talking. The case I had, they had about $75,000 is what it was being inherited, and the attorney that we sent them to set it up and they were able to preserve both things.
Dr. Friday 25:55
But there are limitations of what the money but the money could be used to help the children and the wife and different things like that. So I would definitely it’s not a tax question. But I would definitely consider you calling an attorney that works with disabilities and see if you need to do something before it clears probate and now it’s in your name and, theoretically, nailed the disability or Medicare could do a look back at that money is theirs.
Well, I don’t want doing anything to deceive the right.
Dr. Friday 26:29
Yeah, exactly. But there are things in play that you can do that maybe preserve your way of life.
We have a probate attorney who says we can rent the property out and we can sell the property, but the funds are going to be held and to that date, you know, and thought tax was working against, you know, you know, making too much money or looked at as a problem because I was able to somehow come into some money even though I’ve got cancer.
Dr. Friday 27:01
And always, unfortunately, those things don’t. But again, what you want to have in if you don’t know, a probate attorney may not be the right person. But you might want to see if you can find someone that does do, but it’s called the disability trust. And that’s where you really want these funds to go so that it can be used for your care for your lifestyle, different ways to help. And I don’t know if there’s anyone listening that might be able to help well, because this is a little outside my expertise.
Dr. Friday 27:31
But if you’re not the first that has gotten this kind of situation, but the only time I ever had it was with one client and they were able to preserve everything and get it all going in the right direction is all I can tell you, but they did use a trust to do that. So hopefully, that helps a little bit well, but I would be careful. And I would definitely talk to someone before you get through probate.
Well, God bless you. Thank you for your time.
Dr. Friday 27:55
Okay, thanks. Well, appreciate it. Let’s talk to my boy Melton; I know who this guy is. Hey, Melton.
Hey, Dr. Friday, how are you today?
Dr. Friday 28:03
I am doing awesome. How’s my boy?
I’m doing well. Happy Saturday to you.
Dr. Friday 28:10
Happy Saturday to you too.
Hey, look, I got a question. And I got several people listening to this answer. So get ready. This is one that I don’t think it’s gonna throw you but it’s through all of us. Is there? Here’s the question, is there a time one should never ever earn income to stay out of a tax bracket, for example. Let’s say the person is retired. And here’s a chance for them, let’s say to have CDs and CDs that they earn income on, it’s going to put them in a tax bracket. So they say I’m not going to do to CDs because it’s going to put me in a tax bracket, I’m going to earn more money, so I’m not going to do it. The other situation is I’m retired, the person got a chance to go and do substitute teaching, which is going to earn income, put them in another tax bracket. So they say I’m not going to teach I’m not going to do any of that. Because it’s going to put me in another tax bracket. What I said to them and we all had a disagreement is even if you go and make money, let’s say you went and make $6,000 a year. And Uncle Sam took 3000 of it. You did earn $3,000 If you did that, but if you’re doing body language I mean if you’re doing body labor, such as going in and getting up every morning going to work that way you that’s a different thing because you you also earn an income but you also putting in the work labor to do it, versus if you were earning it on CD. So we all sit around and wait no your answer. Is there a good time one should not earn income in order to stay out of a tax bracket?
Dr. Friday 29:48
Well, I’m 100% with the thought is no because the highest tax bracket in the United States for federal tax is 37%. So I would still want walk away with a very big chunk of my own earnings, even if it kicked me into that highest tax bracket, which would make you basically at $550,000 for a married couple. So no, I don’t think I would actually ever have a problem. And personally, I think using your brains or using your body doesn’t hurt them in, there’s a reason to get out of bed every day, there’s a reason to get dressed and move and go do something. I think if you don’t use it, you could lose it. So if you have an opportunity to go to work and do something you enjoy, I’m not saying just doing it because you’re doing it. But if it’s something that you enjoy, and it’s something you can do throughout your life, I am a firm advocate, even if it’s not creating a lot of extra money in your pocket, it is helping you mentally and physically in my personal opinion. And but the tax the tax question is never stop earning money just because you have to pay taxes, we do not have a 100% tax code.
I like to say hey, perfect, I’d that’s the way I felt. But I was getting back and forth disagreement with that, because I’m thinking hey, even if you go, you know, I have people who could go to work want to work and they really, really want to work but they’re so worried about is going to put me in another tax bracket. So I’m just not going to do it because I don’t want to pay the money. But I think you’re earning you’re still earning. And they say yeah, it’s definitely it’s not the full amount, but you’re still earning. Right. And even with CDs you’re earning and
Dr. Friday 31:30
Yeah, absolutely silly not to do it.
Well, they all said they’re gonna agree with whatever you say is gonna go so I think you just you just clear it up a whole lot of brainstem.
Dr. Friday 31:41
There you go. All right. Melton, always love your wife later. Thanks. Okay. Thank you.
Dr. Friday 31:47
Dr. Friday 31:47
Alright, let’s get Dylan in Lebanon. Hey, Dylan.
Hey, so I just had a quick question I’m pointing to I’ve always used TurboTax just like the free edition to file my taxes. I don’t make too much money or anything. I just wanted to know, is that like the right way to go about it? Or is there like, another way that I could do to like, maximize my return or anything like that?
Dr. Friday 32:10
Well, Dylan, are you on a W-2?
Dr. Friday 32:14
Okay. So at this age, I mean, unless you if you own a house, I doubt your mortgage is high enough to offset at least I hope you don’t have a mortgage big enough to offset standard deductions. points, so Okay, well, that’s even better. In some ways. You’re still I mean, you’re 22. So in answer, your question is not allowed to maximize. I mean, seriously, the only thing you could do is you could theoretically give $300 to charity and write that off the standard deduction, you could put money in savings. If you have, if you have the opportunity to do an IRA or a 401. K, I would suggest, because almost for every dollar you save, you can almost get $1 on your tax return for credit. It’s called the savers.
Dr. Friday 32:56
Assuming, Dylan, I’m assuming that you aren’t making $40,000 or $50,000 a year, that can be a wrong assumption. But if you’re 22, just got to college and you’re only making 30 35,000. There is what’s called the Savers credit for a single guy. If you’re making more than that, well save anyways, you just won’t get as good a tax credit. But there’s not a no an answer. I mean, I would do it for free, too, if I could. I mean, there’s nothing out there in the tax code that you probably are leaving off of the tax return that you would not be able to continue to take. Cool.
Thank you so much. That’s all I was wondering.
Dr. Friday 33:30
Perfect. Thanks for listening. I appreciate it. All right, really quick. Let’s hit Lisa in Nashville. Hello, Elise.
Hello, how are you?
Dr. Friday 33:39
I am good. What can I do to help? If anything?
I’ve got a question about 1098 T that I received from my son’s college. Perfect. Yes. And we claimed like we have a 529. So I’ve been paying his tuition from the money right from the 529. So is there a cap that you can claim like on your taxes or what are the like he got a 1098 For his part, and then I got a 1098 for some boy, I had reimbursed myself for what I had paid out of pocket.
Dr. Friday 34:16
But how does that you have done that too. So for people that are listening, what she has is a 529 plan, which means throughout this child’s life or family, grandparents, whatever have she has built up some money. So now the kids in college and she’s using that money to pay the college 100%. Great plan, perfect planning. And so the 1098 doesn’t do as much because you basically are going to claim the 529 nice about the 529 It covers housing and other things where the you may still apply for the lifetime tax credit or the whole credit on your tax return, which is up to $2,500 on the first 10,000 basically.
Dr. Friday 34:57
So you have two sides. One You’re going to put in his tuition, which is what’s showing up on the 1098. And then you’re also going to add in room board, tutoring computers, whatever else it might have taken to get baby boy or girl into college and through the first year of whatever year you’re in. So then that will offset your 529. Is that kind of answering? Now? I’m assuming you’re claiming this child as your dependent still? Yes. Okay. It makes it easier is only as they say that, because when you don’t have mom as a dependent, it makes it harder for the 529 to wash through without becoming taxable income.
Yeah. So you were so much a Lifetime Learning Credit? was like $2,500, I think.
Dr. Friday 35:43
Up to 10,000. Yeah, for the first $10,000. But yes, you should have the lifetime and or the hope, credit, depending on what year they’re in.
Okay, so it will be 2500 each year.
Dr. Friday 35:54
Up to each year, yes, each year. So we only claim one year at a time, right? Up to four years lifetime could theoretically if it wasn’t claimed, in the first four years because maybe you qualified for other or you didn’t qualify because it was on a full ride. You can use that in the master’s program as well.
Dr. Friday 36:11
Okay, if the child goes to the master’s program, or whatever, okay, that sounds good. All right. Thank you for calling. Talk to you soon. Thank you. All right. We’re gonna take a quick break here. This will be our last break. So if you’ve got a call or question and you’re not too sure, this is the time to call 615-737-9986. We’ll be right back.
Dr. Friday 36:48
We are back here live in studio for the last though eight minutes or so. And we’re gonna go right to the phone line, because I’ve got a couple of people waiting and don’t want to make them wait any longer. We have to let Travis in Winchester. Hey, Travis. Can you hear me? I can hear you perfect. What can I do for you?
I’m 33 year old I just paid off my house last year, which was a milestone in my life so far. I just want to say I love the show. I appreciate everything you do. I question for you, I’m going to confer an investment property, you know, either a rental or possibly, you know, an Airbnb property where, you know, buy a house with, you know, five acres or whatever and kind of turned into like a campground slash fantasy getaway? What how would I go about doing that? The most benefit me and when it comes to taxes? Would it be like a traditional mortgage on the property? Or is there something special you can do if it’s an actual rental property that you’re investing in?
Dr. Friday 37:59
Well, I will tell you that they’re going to basically if it will be considered a rental property, because you’ve already got your primary home, we can only have one primary, you could possibly considered a second home. But that would depend on how far away it is from your primary, which if you’re going to do an Airbnb or anything where until you don’t want it too far away, because you have to get to it or have someone help manage it.
Dr. Friday 38:20
So you know, I would I would set it up in an LLC, if you’re doing it yourself a single member LLC to give yourself some limited liability protection in case something happened out there, you don’t want to lose your primary home because of somebody doing something silly on a rental property. And then, you know, obviously, you could even use your primary as possibly I know, you’ve paid it off, which is totally impressive at 33. But pay you know use that collateral, so you don’t have to put real cash down on the second home possibly, or very much and use that more, use more of the money in the property to develop it and do what you need.
Dr. Friday 38:54
But yeah, at this point, you’re just going to set up a second like it’s going to be a business or rental is a business either being campgrounds, whatever, you know. So that would be the the secret to doing it. And if you need you know, help with Financials, you know, getting things prepped for the bank or whatever, give our office a call, we can help you out.
I really appreciate it when you say us my primary residence is kind of collateral for like what, uh, what are you referring to technically,
Dr. Friday 39:23
I’m saying that you have equity in the home that you just paid off. And I know you don’t want to necessarily take it, but you could use that equity as security to get a second loan for the property for the five acres that you’re thinking of buying. So it may be a way of not having to come up with as much cash depending on your income and your cash availability. There are ways of using one property as equity for another property.
Okay, yeah, I really appreciate that. And that would benefit me in the long run for taxes.
Dr. Friday 39:53
Absolutely. In the big picture. Yes, sir. Sounds good.
I appreciate it. I’m gonna give you I’m gonna give your office a call. Thank you for your time.
Dr. Friday 40:01
No worries. Thanks, Travis. All right, let’s hit the last call. Let’s see if we get Lizabeth from Columbia in before the end. Hey, Elizabeth, what can I do for you?
Yes, ma’am. My husband and I are both on Social Security disability, and I am in the process of inheriting money from my family. Oh, my question is, is there anybody I need to talk to concern in the US? Is it going to have anything to do with the Social Security Disability?
Dr. Friday 40:30
That you are? How old are you?
61. My husband is 63.
Dr. Friday 40:39
So you’re too young for what they call real social security, right? When you guys hit 66, and whatever, 67 depending on your birth date, then you could go on actual social security, and then inheriting won’t be a big deal. But if you ended up inheriting the money prior to that your disability can be affected by inheritance, because the purpose you went on to disability partly was because you couldn’t support yourself because of the disability you have. So they then go look back, and they’ll say, Well, if she inherits $100,000, then now she’s got enough money to support herself for three years. I don’t know what the numbers are, I’m just using basic information. So anyways, so you need to call to an attorney. And again, I don’t I’m not an attorney, and I don’t necessarily have one that I can think of right off top my head that would deal with that. I know. I know, Russ Cook.
Dr. Friday 41:34
The his firm does a lot of different ones. But I’m not sure if that’s his expertise. But I do know, they set up what’s called a disability trust. And if your inheritance thing goes into the trust, it then preserves it for your lifetime to be able to be used to better your life and to give you things like I mean, I have a client that has a disability trust, where we bought wheelchairs and beds, and, you know, and some food and supplies, things that aren’t aren’t part of their everyday availability.
Dr. Friday 42:04
So you need an attorney to talk to you it’s not a tax question. But I would definitely do that. Because if you are going to inherit, it may be better for your family. I don’t know if anyone’s already passed away, or if it’s just a conversation that someone might pass away. But if this is the case, for anyone listening, that is on disability, you might want to talk and see if there’s a way of setting up the trust, and then the estate feeds the trust.
Dr. Friday 42:27
And that way, it doesn’t affect your disability. Right now, at least as far as I understand it again, you need to talk to an attorney lisabeth to make sure all things are correct. And that there’s you know, that there’s nothing you’re doing that’s going to knock out your Social Security, that’s the biggest concern.
Right, because our Social Security, we’re on such low income with so security, we don’t even have to file taxes. Absolutely, we’ll be inheritant enough money, you know, that it’s gonna probably gonna matter.
Dr. Friday 42:58
Well, that’s the that’s the concern. And so you either going to end up going off so disability because you have to live off the earnings from your inheritance, which, again, not saying that that’s an ideal situation, but there, I would definitely speak to the attorney to find out if there’s any way around that before, you know, before the state or federal come back and say, Well, you inherited so you no longer getting this and that that would be a bad feeling. Okay.
So disability attorney, would you recommend?
Dr. Friday 43:29
If you know a disability attorney? Yes. If not, I would talk to an estate attorney.
Thank you, ma’am. Have a wonderful day.
Dr. Friday 43:36
Thank you. You too.
Dr. Friday 43:38
All right, we’re gonna wind down the show here. So if you have tax questions, and you need help, you can always email my office at Friday@drfriday.com. You can also call our office Monday morning at 615-367-0819. If you have no idea who I am or if you’re looking for a tax organizer or any basic information, you can also check us out on the web at drfriday.com. Again, drfriday.com. Remember tax season is here. We can e-file till first and next week, and they will be getting those taxes filed, it’s still going to take 21 days is what they’re telling us up to 21 days to get your refund.
Dr. Friday 44:27
And if you owe money, you know your best bet is to file your taxes. You can either send in a payment plan or go online after you’ve received the love letter and then you can do a payment plan. But if you owe money from the past, most likely they’re going to keep any future refunds. And with more and more revenue officers coming on board you are going to want to deal with your past tax.
Dr. Friday 44:48
I mean, come on. I’m not here to scare you or anything but the fact is more people working for the IRS will be good news for some of us because we can get right. We can get resolution but and other cases, we may need to get people organized. All right again. So if you’ve got questions or you know someone that might need assistance by an enrolled agent, you can have them call me at 615-367-0819 I hope you guys have an awesome time this Saturday, the weather’s pretty awesome out there and start preparing your tax paperwork because you know it caught you later.