Tax Experts Answer Your Most Pressing Tax Questions
Filing your taxes can get complicated depending on your unique circumstances, and not everyone has access to an accountant or other tax professional.
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To help our readers get the tax help they need, I asked tax experts to answer several of our reader-submitted questions. These questions cover everything from paying taxes in retirement and whom you can claim as a dependent to whether or not you need to pay taxes on a gift.
Find out the answers to some of your most pressing tax questions.
Do you have to pay taxes on Social Security disability payments?
"Social Security benefits, including disability payments, may be 0% taxable, up to 50% taxable or up to 85% taxable, depending on the level of combined income," said Eric Bronnenkant, CFP, CPA, head of tax at Betterment.
"The IRS has a worksheet on page 7 in Pub 915 to determine the portion subject to tax. Unfortunately, the thresholds to determine taxability are not adjusted for inflation -- which is known as a stealth tax -- and married couples can pay tax on up to 85% of their benefits when their combined income exceeds $44,000."
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If you take the standard deduction, can you still take the charity deduction?
"The charitable contribution deduction for non-itemizers expired and was not extended in 2022," Bronnenkant said. "For people ages 70.5 or older, they can donate up to $100,000 per year from their IRA as a QCD (qualified charitable distribution) tax-free. This is true whether the taxpayer takes the standard deduction or itemizes."
Can my wife file separately even if we live at the same address?
"Married filing separately is permissible while living at the same address," Bronnenkant said. "While there are some rare exceptions, filing separately frequently results in a higher combined tax liability."
I am on Social Security as my sole income, and I receive $1,100 per month. My out-of-pocket and other medical bills were about $30,000 in 2022. Do I need to file a tax return? And if so, should I take the standard deduction?
"The IRS states, 'Generally, if Social Security benefits were your only income, your benefits are not taxable and you probably do not need to file a federal income tax return,'" Bronnenkant said. "However, if you elected to have any withholding taken out of your benefit, you would be required to file a tax return to claim a refund."
Am I required to pay estimated quarterly taxes if my only source of income is my pension?
"Maybe," Bronnenkant said.
"The IRS states that you have to pay the lesser of 90% of your current year tax or 100% of the prior year tax -- 110% if last the AGI is greater than $150,000 -- through withholding and/or estimated tax payments. If the pension withholding is not enough to meet these safe harbor requirements, estimated tax payments may be needed to avoid an underpayment penalty."
If I received a Christmas gift of over $15,000, do I need to pay taxes on it?
"Gifts received -- regardless of the amount -- are exempt from income tax," Bronnenkant said. "However, if the gift was used to purchase a bond that generates taxable interest, the interest received is taxable income."
He added, "Note: The donor will have to file a Form 709 Gift Tax Return if the gift exceeds the annual exclusion -- $16,000 for 2022 and $17,000 for 2023. Notably, gift taxes do not apply on the first $12.06 million of gifts in excess of the annual exclusions."
I am a retired Air Force veteran. Do I have to pay taxes on my military retirement pay and VA wound pay?
"Military pensions are normally considered taxable income," Bronnenkant said. "However, the portion of the pension that is for a service-connected disability would qualify for tax-free treatment. Thank you for your service!"
I am over 80 years old. What income must I pay taxes on?
"You may be receiving Social Security income. Typically, Social Security income alone is not taxable, but if you have other streams of income, like from retirement -- reported on Form 1099-R -- anywhere from 50% to 85% of a portion of your Social Security may be taxable," said Lisa Greene-Lewis, CPA, tax expert with TurboTax.
"Remember, you may not have to file if your income is not over the standard deduction -- $12,950 [for] single [filers] plus [an] additional $1,750 for being 65 and over."
How do qualified dividends and capital gains figure into your adjusted gross income for tax purposes?
"Both qualified dividends and capital gains are figured into your adjusted gross income, but qualified dividends and long-term capital gains from investments sold after one year may be taxed at lower capital gains rates," Greene-Lewis said.
"Also, don't forget you can lower your capital gains -- and in turn, ordinary income -- by offsetting capital losses against capital gains."
Can I claim my boyfriend's kids on my taxes?
"You may be able to, but there are some stipulations," Greene-Lewis said.
They would be considered a non-relative, so they would have to live with you the entire year.
You would need to provide over half of their support.
Your boyfriend or anyone else could not claim them.
They could not make over $4,400 taxable income.
They have to be a U.S. citizen, U.S. National, or a resident of Canada or Mexico.
I had medical services performed in 2022, but they were not billed until 2023. Which tax year are they reported in -- 2022 or 2023?
"Since individuals are on a cash basis, you can go by when you paid the bill," Greene-Lewis said. "Make sure you have proof of your payment, like your bank statements or credit card bill."
Do I have to report the money I get back from a credit card to the IRS?
"If the money you get back is a rebate based on your spending money on the credit card, it would not be taxable," Greene-Lewis said.
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Gabrielle Olya contributed to the reporting for this article.
This article originally appeared on GOBankingRates.com: Tax Experts Answer Your Most Pressing Tax Questions
