I want to establish an individual retirement
arrangement (IRA) for me and my spouse but I need additional information.
What is the most I can contribute during the tax year?
If both you and your spouse work and both have taxable compensation,
each of you can contribute up to $2,000 (or the amount of each IRA owner's
compensation, if less) to a separate IRA. Even if one spouse has little
or no compensation, up to $2,000 can be contributed to each IRA if combined
compensation is at least equal to the amount contributed to both IRAs.
You can contribute $2,000 to a separate IRA for your nonworking spouse
if you file a joint return. Your total contribution to both your IRA and
the spousal IRA for this year is limited to the smaller of $4,000 or your
taxable compensation. You cannot contribute more than $2,000 to either
IRA for the year. For additional information, refer to Tax
Topic 451, IRAs, or Publication
590, Individual Retirement Arrangements (IRAs).
Can I deduct alimony paid to my former spouse?
If you are divorced or separated, you may be able to deduct the alimony
or separate maintenance payments that you are required to make to your
spouse or former spouse, or on behalf of that spouse. For additional information,
refer to Tax Topic 452, Alimony Paid (this
topic covers alimony under decrees or agreements after 1984), or Publication
504, Divorced or Separated Individuals.
I own stock which became worthless last year.
Can I take a bad debt deduction on my tax return?
If you own securities and they become totally worthless, you can
take a deduction for a loss, but not for a bad debt.
The worthless securities are treated as though they were capital
assets sold on the last day of the tax year if they were capital assets
in your hands. Report worthless securities on line 1 or line 9 of Schedule
D (Form 1040), whichever applies. In columns (c) and (d), write "Worthless."
For additional information, refer to Publication
550, Investment Income and Expenses (Including Capital Gains and
Losses). For more information on bad debts, refer to Tax
Topic 453, Bad Debt Deduction.
I am considering a tax shelter investment.
How can I tell if the tax shelter is "abusive"?
An "abusive tax shelter" is a marketing scheme that involves
artificial transactions with little or no economic reality. Generally,
you invest money to make money. An abusive tax shelter offers you inflated
tax savings based on large write-offs and credits. It is often out of proportion
to your investment. An abusive tax shelter exists solely to reduce taxes
unrealistically, and thus receive an economic benefit. A legitimate tax
shelter exists to reduce taxes fairly and also produce income. As in any
investment, a real tax shelter involves risks, while an abusive one involves
little risk, despite outward appearances. Abusive tax shelters are often
marketed in terms of how much you can write-off in relation to how much
you invest. This "write- off" ratio is frequently much greater
than one-to-one. A series of tax laws has been designated to halt abusive
tax shelters. For additional information, refer to Tax
Topic 454, Tax Shelters.
I moved to a different state to accept a new
job. Will I be able to deduct all of my moving expenses?
If you moved because of a change in your job location or because
you started a new job, you may be able to deduct your moving expenses.
To qualify for the moving expense deduction, you must meet two tests. The
first test is distance. The second test concerns time. You can only deduct
certain moving expenses that were not reimbursed by your employer. For
additional information, refer to Tax Topic 455,
Moving Expenses, or Publication
521, Moving Expenses.
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