Capital Gains, Kids, Common Law!
Frequently Asked Tax Questions!
Q: We have been living together for a while. We bicker, are not married. How should we file?
A: Grace and Frankie, interesting question! Only a handful of states, including Rhode Island, still recognize some form of common-law marriage. Thus, if you meet the state requirements you can file a joint return for Rhode Island AND the IRS. There is no simple test for common-law marriage. The guidelines include intent, length of cohabitation and the way you present yourself to the public. (In fact, filing jointly is itself considered evidence of your intent.) While it is a self-assessment, be careful — if you end up divorcing, then the court will examine whether you in fact met the criteria. (Take Note
Q: My son, Amadeus, such a prodigy! Tax benefit for his composition lessons?
A: Why yes, Miss Moztaht. Until your toddler reaches age 13, as long as both you and Mr M each have sufficient “earned income”, you may take a small “child and dependent care credit” for Wolfy’s lessons. Summer day camps count as well You must report the name and EIN/SSN for providers of the services.
Q: Me again. Now Wolfy, he also TAUGHT music lessons. How do I report HIS earnings? Isn’t he still a dependent?
A: If he earned more than $12,200 he must file a tax return — or if he made ANY amount and had $ withheld and you want the money back. YOU should claim him as a dependent AND he must check the box that he is claimed as a dependent on another’s return, on HIS return.
Q: How do I defer capital gains on the sale of my home?
A:TB12, those rules went away for most filers in the 90’s! Since that time, as long as you meet the rules for primary residence and do not exceed $500,000 in profit ($250,000 for single filers), NO WORRIES. Oh — you PAID $20,000,000 for your home? In that case, or if your home is an owner occupied rental contact Rich!
