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Fox Business Network’s Tracy Byrnes and Wealth Health, LLC Managing Director Rich Coppa answer more tax questions on dependents and what to do if yo...
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As tax day approaches that many people still aren't sure about how to report some of those tricky -- situations and their returns.
So we brought back -- -- experts to help you.
Joining me again this week Fox Business network's Tracie burns and wealth health managing director rich copper.
So we pick up from last week who died about dependence and Michael writes in -- -- -- of my daughter is in college.
She is on a scholarship but I'd give her money for general living expenses is she still my dependent.
Can I claim hurt and now we've gotten.
It's the this the books into wish it sound like they're paid for.
But.
I had a son who get a scholarship I know I still had to write checks.
I acting -- title I think it's pretty clear that he could still take care spending and our agents up but I think.
-- -- dove into the book she's she should be okay.
Yeah I think I think he -- so -- independent I think the issue here is like Tracy said as she under 24 years old which is an important piece of the equation.
And then for what embassy warning for well over twenty -- there's there's a child -- and then there's a qualified relative -- so I think what we're looking as a child dependency.
Test here and if she's 124 and that the taxpayer provide more than 50%.
Of the support and the key issue here I think is the fact that you know we have a scholarship the scholarship.
Doesn't count towards to support so.
-- -- -- doesn't now though so so in this case sounds like dad is supporting.
The daughters living expense right that's enough if it's more than 50% exactly and she's -- 44.
So much she's in law school -- medical school or some place.
Then she he should be okay and -- -- it becomes -- he's supporting her there as well and you know against you and I both know they're not in times as much as we like to think they take a lot of vacations.
So -- she still comes home and he still supports our.
Probably 100%.
When she's home.
And that's meals and of that the deserve red value to.
The bedroom the -- users and things like that.
Yeah I think it's it's important to recognize -- there is the child really lives home you know when they return from school then that's viewed as you know where she lives and therefore.
It's part of the support.
Given outlook let me throw -- is a hearing here -- might have a part time job.
Well I was gonna say -- -- a part time job we always say got to run the numbers because in this case which he might be able to do is if she does have income she may want to take herself.
As a dependent and take a look at what the standard deduction is and then maybe -- even apply for an American opportunity credit which is.
Perhaps -- parent won't qualify if he -- -- as -- dependents so you really do have to run the numbers in this case of you know what.
America what is -- that's -- -- -- the education credits thank you it's that's silly thing American opportunity that's got to college credit -- regards alright.
Credit police student can take college credible would have -- Spain for college and -- she's not a scholarship.
Now whoever's name -- can take the credit it it's been about eight million students it's still out there it but whoever pays the bills in theory can take the credit of course you know.
You can chance for the tuition to your child and your child pay it and then get the credit and -- to do a lot of stuff -- work out what do Rich's point yeah around numbers.
Yeah I mean the parent may not be eligible for the credit is my point does seem like they're a commodity -- phased out whereas -- that order has you know some income.
Whereby she qualifies for the credit standard deduction and the liability on her return alone might be better than if she were to put he put on to the parents return.
All right halted a question and -- said I sold my house last year for a loss.
I -- is I'd paid lest another.
What I paid for a -- -- what I paid for how to white deduct the loss from.
Can you please -- drinking Krajicek.
The only way -- deduct that loss.
Got -- he could deduct that lost half of America would be -- -- -- this -- yeah I mean obviously -- -- -- not I shouldn't say obviously that is not everyone but personal residence.
Qualified personal residence as a language is called it's where you live and and that's a personal home.
There is no deduction.
For the loss on your home its investment you made it went down in value unfortunately Tracy said.
You got to eat the loss -- but -- But I get a loss if Friday -- on.
-- stock.
But the best investment this is not meant that according to the IRS taxes on investments you and I it's a fantastic one right even -- you -- -- -- -- don't forget that -- want to.
-- -- Well but you don't but you don't get a loss on personal residence right and just -- -- just if it were you know the way they view as if it were rental property which was an investment property OK then you have different rules and if it's an investment property can take a loss on and it goes back to that principle personal growth small -- language yes all right Don Simpson a note she says I sold my home.
We're gonna short sale I got a ten -- nine from the bank for the difference between what I owed on the mortgage of what the bank received.
Is it taxables is a 1099 -- sounds like there's some sort of reporting requirement.
Well on the short sell you you would think that there is reporting requirement for this and you know what what's happened is there's a new rule a since a -- -- -- 2007 to 2012.
Yes you can file a form it's called -- 982.
And what it is is it allows you to not include -- -- -- if again we're using the words who qualified personal residence if it's your home.
You can not include that income on your return for the short sale.
Again this has to be what they call acquisition indebtedness which means it has to be debt that you've incurred.
For purchasing that home -- makings of -- not revised that later on if the refi was made to.
Refinance the acquisition indebtedness that that the original debt.
For buying that homer substantially improving that home.
Then that short sale that.
Extra income that would otherwise be include -- is not if you file this 1982.
When you dissent.
Up.
But again this is going away like people need to be aware that this right now is supposed to and it's hit its debt cancellation rate this stuff that yeah there are dead march gonna say you know the pay that because of the short -- We're sounded sure forget the part that you really don't oh right that's shows up on your 1099 in theory that's to be taxed as ordinary income.
But the law was changed to say you don't have to if it was your print -- -- -- to give some relief just to the end of this year right.
Just to poll just -- -- this is a results 1012 exactly this is a result of you know poor real estate market whereby you know I think we're trying to incense.
Some of the mortgage lenders to you know allow for short -- -- it's a question says I -- about sixty miles a day delivering papers five days a week.
Cannot be -- both the mileage that I drive on the car.
-- drive on the job as well as to car repair expenses -- -- over 3000 dollars in repairs and tires.
Your business your business takes some deductions using these to be schedule C deductions for him.
So we -- -- amounts you can take the -- and -- in theory could take depreciation on the.
-- as well.
Both what can you take the IRS didn't think so as standard the standard what I don't -- -- even knew what it is twenties until tomorrow well no I mean this year taxi -- one half the year it's 51 cents and you've heard the second half of the year to -- always been observed and -- its mileage the mileage that I 55 point 5% but -- really I don't think you can do both I think either choose to -- the mileage deduction.
-- you look at what your actual repairs and expenses were you look at this purely.
He really should look at this yearly images using this example of would succeed sixty miles a day.
Five days a week on the mileage at fifty cents just for ease of math it's -- -- -- -- 500 dollars.
So that my my cowboy way then -- the cost that -- incurred for repairs but it remembered include gas and that right because we have high gas prices right now.
You can include inspections and things like all the here's you have to put into that car so you really have -- again but we're here.
-- that this applies the mileage deduction is so much easier.
Because you don't have to prove anything other than to miles.
Well but the other part otherwise you -- have all the records all the receipts of how much you spent retired some -- -- -- for gas.
Have a shoe box full of of data.
Strip seemed like these are just think the 5050 cents B data yeah I'm gonna have to -- second half of the year.
But you really gotta you gotta run I think it's you know I mean money on the table for the -- --
