From the Financial Hotline
By: Financial Hotline
Summer 2023 (Vol. 41, No. 2)
Q: I am a teacher. Are there any tax breaks I can claim for 2023?
A: Teachers can still deduct unreimbursed expenses such as classroom supplies, training, and travel to reduce 2023 income tax liability even if you don’t itemize. The educator expense deduction allows eligible educators to deduct up to $300 of unreimbursed educator expenses in 2023. If two eligible educators are married and file a joint return, they may deduct up to $600 but not more than $300 each.
You must be a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide for at least 900 hours during a school year in a school that provides elementary or secondary education as determined under state law. You can deduct costs of books, supplies, computer equipment and software, classroom equipment and supplementary materials used in the classroom. Expenses for participation in professional development courses are also deductible, and athletic supplies qualify if used for health or physical education courses. Teachers and other educators can also take advantage of education tax breaks for their own ongoing educational pursuits.
Q: I am getting married in September. How do I prepare for the next tax season?
A: If a name changes through marriage, it is important to report that change to the Social Security Administration. The name on a person’s tax return must match what is on file at the SSA. If it doesn’t, it could delay any tax refund. To update information, file Form SS-5, Application for a Social Security Card. It is available on SSA.gov, by calling 800-772-1213 or at a local SSA office. If you have a change of address, the IRS needs to know. To do that, send the IRS Form 8822, Change of Address.
Newly married couples may need to give their employers a new Form W-4, Employee’s Withholding Certificate, within 10 days. If both spouses work, they may move into a higher tax bracket or be affected by the 0.9% additional Medicare tax. They can use the Tax Withholding Estimator on IRS.gov to help complete a new Form W-4.
After you say, “I do,” you’ll have two filing status options to choose from: married filing jointly or married filing separately. While married filing jointly is usually more beneficial, it’s beneficial to figure the tax both ways to find out which works best. Remember, if a couple is married as of December 31, the law says they’re married for the whole year for tax purposes.
Q: Due to a change in jobs, my wife and I must sell our home that we just purchased a year ago. For tax purposes, since it is our primary residence, do we qualify for any exclusion of gain?
A: The basic rule is if you own and occupy the home for two of the past five years, you don’t have to pay any income tax on up to $250,000 of the gain from the sale of your principal home if you’re single, or up to $500,000 if you’re married and file a joint return. However, you may still qualify for a partial exclusion if you have a good excuse for selling the property. The IRS accepts a wide range of circumstances which could include a change in your place of employment, health problems that require a move, a death in the family, marriage, divorce, or a change in family size.
However, no matter how good your excuse is for not complying with all the requirements, you’ll get only a partial exclusion—not the whole $250,000/$500,000. The amount is ordinarily based on the percentage of the two years that you fulfilled the requirements. For example, if you own and occupy a home for one year (50% of two years) and have not excluded gain on another home in that time, you may exclude 50% of the regular maximum amount—up to $125,000 of gain for a single taxpayer and $250,000 for married couples. The percentage may be figured by using days or months.
Q: My parent’s home was damaged in a major storm What is the first step to get disaster relief aid?
A: Visit FEMA.gov to view a current list of declared disasters. Anyone who suffers damage in a Presidentially declared disaster can register for assistance by calling the FEMA registration line, 1-800-621-3362 from 7am to 11pm Eastern Standard Time. She can also apply for disaster assistance at DisasterAssistance.gov or download the FEMA mobile app.