From the Financial Hotline
By: Financial Hotline
Winter 2019 (Vol. 36, No. 4)
Q: Is there a higher threshold for Seniors for whether you have to file an income tax return?
A: Yes. Taxpayers who are 65 and older are allowed an income of $1,600 more ($2,600 married filing jointly and both spouses are 65 or older) before they need to file an income tax return. In other words, older taxpayers age 65 and older with income of $13,600 ($26,600 married filing jointly) or less may not need to file a tax return.
Q: I lost my job and was out of work for most of last year. Do I have to report the unemployment compensation and union payments I received?
A: Unemployment compensation you receive under the unemployment compensation laws of the United States or of a state is considered taxable income and must be reported on your federal tax return. You should receive Form 1099-G, Certain Government Payments (Info Copy Only), showing the amount you were paid and any federal income tax you elected to have withheld. You must also include benefits from regular union dues paid to you as an unemployed member of a union in your income. However, other rules apply if you contribute to a special union fund and your contributions are not deductible. If this applies to you, only include in income the amount you received from the fund that is more than your contributions.
Q: Is severance pay taxable?
A: Yes. Severance pay is taxable. Payments for any accumulated vacation or sick time are also taxable. You should ensure that enough taxes are withheld from these payments or make estimated tax payments to avoid a big bill at tax time. Public assistance and SNAP (formerly known as food stamps) are not taxable.
Q: I had a lot of expenses while I was searching for my new job this past year. Are these costs deductible?
A: For tax years 2018-2025, you are no longer able to deduct certain expenses such as travel, resume preparation, and outplacement agency fees incurred while looking for a new job. In prior years, job-seekers were able to deduct these expense-even if they did not get a new job. Moving costs for a new job at least 50 miles away from your home were also deductible; but for tax years 2018-2025, job-related moving expenses are not deductible.
Q: I am interested in doing a 1031 Exchange. Are there any new changes I should know about?
A: Effective January 1, 2018, exchanges of personal or intangible property such as machinery, equipment, vehicles, artwork, collectibles, patents, and other intellectual property generally do not qualify for non-recognition of gain or loss as like-kind exchanges. However, certain exchanges of mutual ditch, reservoir or irrigation stock are still eligible.
Like-kind exchange treatment now applies only to exchanges of real property (real estate) that is held for use in a trade or business or investment. Real property includes land and generally anything built on or attached to it. An exchange of real property held primarily for sale still does not qualify as a like-kind exchange. A transition rule in the new law allows like-kind treatment for some exchanges of personal or intangible property.
Properties are of like-kind if they’re of the same nature or character, even if they differ in grade or quality. Improved real property is generally of like-kind to unimproved real property. For example, an apartment building would generally be of like-kind to unimproved land. However, real property in the United States is not of like-kind to real property outside the U.S.
A like-kind exchange is reported on Form 8824, Like- Kind Exchanges, which taxpayers must file with their tax return for the year the taxpayer transfers property as part of a like-kind exchange. This form helps a taxpayer figure the amount of gain deferred as a result of the like-kind exchange, as well as the basis of the like-kind property received if cash or property that isn’t of like kind is involved in the exchange.