Ask JK

Scammers posing as a grandchild get grandparents to send money to them on the ruse that the grandchild has been hospitalized, is in legal trouble, or has been detained in a foreign country. However, b...

A cash liquidating distribution are funds distributed to a shareholder when a corporation is partially or fully liquidated. The distribution represents a return of an investor’s capital, so it’s n...

You may contribute funds from an IRA to a Qualified Longevity Annuity Contract (QLAC), up to the lesser of 25% of your IRA (including any QLAC) or the dollar limit applicable for the year. The origina...

Condolences on the death of your spouse. Because you were married for all of 2020, you may file as married filing jointly. If you e-file, simply follow software instructions. If you file a paper retur...

Required minimum distributions were waived for 2020. Anyone who did not take a distribution is fine; no special filing is required....

You may have a capital gain on the sale of land adjacent to your home. Whether or not a mortgage is involved does not impact gain or loss for federal income tax purposes. However, you may be able to u...

Yes. However, if the distribution from a qualified retirement plan or IRA is a “coronavirus-related distribution,” then no 10% penalty applies for anyone under age 59½. What’s more, a coronavir...

If the amount of the underpayment is more than $1,000, you can avoid penalties if you’ve paid at least 90% of the tax liability for the year or 100% of 2019’s tax liability (110% if your adjusted ...

No. Gambling winnings must be reported as income, but gambling losses are deductible only as an itemized deduction. There is no dollar limit on the write off but it’s limited to the extent of the ga...

The nonbusiness energy credit, which is for adding insulation and certain other energy improvements to a principal residence, has been extended through 2020. The credit for solar and certain other ren...

If the CD is in a tax-deferred or tax-free account, such as an IRA or Roth IRA, interest on the CD is not currently taxed; the rollover of the CD when it matures is not a taxable event. If the CD is i...

There are only 2 ways to put money into a Roth IRA: (1) an annual contribution, which must be based on earned income and can only be made up to a set dollar amount annually; and (2) a conversion from ...

Probably not. An IRA contribution can be based only on earned income. A fellowship or grant type of payment is different from income for services provided. Grant recipients at the NIH are not consider...

The favorable rule allowing debt forgiveness on a principal residence mortgage up to $2 million expired at the end of 2013. It could be extended, but given the resurgence in the housing market, it may...

Yes. Even though there is an age limit for making deductible IRA contributions, there is no age limit for making a conversion from a traditional IRA to a Roth IRA. There is no need to have earned inco...

The IRS says: “For the year of the account owner’s death, use the RMD the account owner would have received. For the year following the owner’s death, the RMD will depend on the identity of the ...

The special capital gain rates are supposed to allow taxpayers to pay less tax on these gains than on ordinary income. Thus, the special 28% capital gains rate for collectibles applies for taxpayers i...

Yes. The deductions for mortgage interest and real estate taxes are separate items. Claiming one has no impact on claiming the other. The only limitation on the deduction for property taxes is the app...

If you take a deduction for a bond premium, you must reduce the basis of the bond by this amount. If you sell the bond before maturity, you’ll have a capital gain if the selling price exceeds your b...

Check with the plan administrator of your current employer to see whether the plan allows you to postpone RMDs until you retire. (This assumes you don’t own more than 5% of the company.) If the plan...

There is no tax deduction for gifts directly to or on behalf of individuals. Just be glad in knowing you saved your daughter future interest costs and enabled her to start off debt free....

You cannot deduct the cost of early education. However, the grandchild’s parent may be eligible for a dependent care credit (assuming you gave the funds to the parent who then paid the tuition). Pre...

You have no income tax liability, but depending upon the size of the remaining balance you may face federal gift tax issues. Your son has no tax liability; your generosity in paying off his mortgage i...

Home improvements for medical reasons are tax deductible, but only to the extent that they do not increase the value of the home. Consult with a realtor to make this determination. Note: Improvements ...

Deductible medical expenses include the cost of treatment for the purpose of affecting any structure or function of the body. While the IRS has not ruled on your specific condition, having a medical d...

The tax law gives the custodial parent the right to claim the exemption for a child as long as the child does not provide more than half of his/her own support. However, that parent can waive the righ...

The fee can be deductible as an itemized medical expense (in excess of 7.5% of adjusted gross income if your mother is 65 or older) as long as entry into the facility is on the direction or suggestion...

Each spouse who has a policy can take the deduction up to the dollar limit for his/her age. Thus, if both spouses are age 71 and they each pay premiums in 2015 of at least $4,750, they can deduct $9,5...

Yes, but you need to consider how to make the child a beneficiary. Being a minor means the child can’t inherit the account outright; you’ll need to name a custodian who manages the account until t...

Yes. Exchange traded funds, or ETFs, are essentially stock, and the wash sale rules apply to stock as well as mutual fund shares and bonds. Thus, a loss on the sale of an EFT cannot be recognized if y...

No. This lump-sum death payment is tax free....

A capital loss must be applied in a set order at a set time. In the year in which it is realized, it offsets capital gains and, if there is any excess loss, up to $3,000 of ordinary income (such as sa...

If the CD is in a tax-deferred or tax-free account, such as an IRA or Roth IRA, interest on the CD is not currently taxed; the rollover of the CD when it matures is not a taxable event. If the CD is i...

Uniform Transfers to Minors Act (UTMA) accounts are owned by a minor, even though a parent or other adult acts as custodian. Once the minor reaches the age of majority (18 in most states), the funds b...

The above-the-line deduction for tuition and fees for higher education can be claimed by a taxpayer only for him/herself, spouse, or dependent. If your grandchild is your dependent, then you qualify f...

Probably not. An IRA contribution can be based only on earned income. A fellowship or grant type of payment is different from income for services provided. Grant recipients at the NIH are not consider...

No. The value of employer-paid health insurance for an employee, spouse, and dependent is a tax-free fringe benefit. However, under the Affordable Care Act, employers (other than small employers curre...

While Medicare does not cover the cost of long-term care services, they may qualify as a deductible medical expense. Since your spouse is chronically ill and requires personal care services, the cost ...

Capital losses can be carried forward only to offset capital gains (and up to $3,000 of ordinary income) in future years. The capital losses of a deceased spouse can be used on the final joint return,...

The favorable rule allowing debt forgiveness on a principal residence mortgage up to $2 million expired at the end of 2013. It could be extended, but given the resurgence in the housing market, it may...