HDF 322 Lecture 10 Outline of Last Lecture I Taxes and Financial Planning Outline of Current Lecture II Indexing of Taxes III Not Taxable Income IV Taxable Income V Scholarships and Fellowships VI Completing Federal Tax Return VII Capital Gains Losses VIII Selling Your Home IX Deductions Current Lecture I Indexing of Taxes diff tax brackets and SD go up every year sometimes personal exemptions may stay for a whle bc IRS round DOWN to the nearest 50 we have certain things that are indexed good bc allows you to get increase in income without going up in next tax bracket for margins more taxes so NOW you have indexes II Not Taxable Income a Gifts that you get but the gift GIVERS are taxed any work benefits or child support and loans III Taxable Income These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute a Disability income benefits it all depends on WHO pays the premium if YOU pay premium those dollars were already paid taxes on from income so benefits aren t taxed but if a 3rd party pays or buys disability income then that employer 3rd party wrote that off as deduction on business so the quote never had taxes so you have to pay taxes on disability payments so disability income payments the QUESTION IS WHO PAYS IF YOU DO NO TAX IF 3RD PARTY PAYS THEN BENEFITS TAXED IV Scholarships and Fellowships this law cam in early 90s if you receive money you MAY have to report for taxable income you are allowed to deduct DIRECT expenses from income see above if computer was required you can write it off but if you have buy a certain clicker calc you take scholarship income subtract from tuition book supplies you cant go home to visit unless you travel for field trip LINE 7 that s where you put it after you deduct all of the expenses and you write SCHLOR V Completing Federal Tax Return a A 9 step process outlined in the TEXTBOOK VI Capital Gains Losses CAPITAL GAIN LOSS profit loss received from sale after costs to buy and sell a where you make profit purchase price is less than selling HOLDING PERIOD b SHORT TERM held 1 year or less taxed at the MTR of taxpayer c LONG TERM Held over 1 year you don t get to use it you lose it anytime you take a loss they will give you a loss of 3 000 ever year but no more than that in any 1 year so if you have 10 000 you may ride off 3 000 in LINE 13 use to show losses VII Selling Your Home in 1997 gave us a law called it a universal exclusion gave married couples up to a half a million dollars exemption on a profit on a house and gave singles of a million allowed you to sell principal residence needed to live in at least 2 of aggregate of 5 years and then you go to exclude this amount IN CAPITAL GAINS aggregate of 5 bc maybe you move away and come back and sell ityou can use it over and over can be used every 2 years if that s how you move if you take a beating you CANNOT deduct a loss it s a personal asset not personal assets can be deducted only INVESTMENTS can be capital gain losses VIII Deductions All done on the income sheet explained more in next lecture