The IRS Deductions Blog

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Question: Had to recharacterize Roth contributions to Traditional IRA… now back to Roth in 2010?

In 2009 my husband and I each contributed $5000 to our Roth IRAs. We are a good 30 years from retirement. When we got our tax returns in order a couple of months ago we realized we had exceeded the limit for Roth and we had to recharacterize these contributions into Traditional IRAs. Now that 2010 is here and there is no income limit for rollovers, would we have to pay taxes on the rollover even though the contributions were already taxed in 2009?

A related question: If we were to contribute another $5k each for 2010 to the Traditional IRAs could we rollover this to the IRAs by the end of FY2010? In other words, is it possible to add the 2010 funds and then rollover? We are above the deductible income limit – so what taxes would then have to be paid in this scenario?

Answer: You are misusing the term “rollover.” If you are above the deductible income limit for traditional IRAs, it makes no sense to contribute to them – especially since you are 30 years away from retirement. Make your 2010 contributions directly into the Roth IRA(s) instead.

If you want to convert the traditional IRAs to Roths, 2010 is the year to do so because you can spread the tax bite out over two years.

Items on Amazon Right Now for Deductible Ira Limits 2009:

Not too early to think about 2011 taxes

The Bush-era tax cuts have been extended, the alternative minimum tax is patched and capital gains rates are set.

Question: Where can I purchase laptop insurance if I don’t have home insurance?

I know about Safeware, but I was wondering if there are other companies I can purchase it from, especially where I have the option of a deductible to lower the premium cost. This needs to be for coverage in the USA because many of the companies online who offer laptop insurance are based out of the U.K.

Answer: You can cover it on a renters insurance policy but that only covers theft.

You can take a personal articles policy that covers more. Most big carriers write that type of policy. Ask your auto insurance company if they offer it first.

Items on Amazon Right Now for Deductible Home Insurance:

The Original Club Steering Wheel Lock – Red $39.22 Exclusive club design. Fits on steering wheel rendering vehicle impossible to steer. Deters potential break-in and theft. Double tumbler lock with 2 keys. No. 1000: The Auto Club for cars No. 2000: The Truck Club for pickups, vans, 4X4s, and RV’s…

The Club Basic Steering Wheel Lock – Black $31.11 Just because you are on a budget doesn’t mean you have to sacrifice security. The CLUB Basic Steering Wheel Lock gives you the protection you want. Highly visible – this strong visual deterrent alerts a potential thief that your car is protected. Tough to defeat – time and effort are a thief’s enemies….

SquareTrade 3-Year Electronics Warranty ($250-300) $41.99 SquareTrade Care Plans are great value and cost 70% lower on average than traditional warranties.  Upon purchase, you will get an email confirmation.  You will not be mailed a paper contract.  If you have questions, please call: 1.877.WARRANTY….

SquareTrade 3-Year Tablet Accidental Protection Warranty ($500-600) $120.50 Accidental Damage from Handling (ADH) guards you against life’s little mishaps, whether you drop your cell phone on the street or splash coffee on your laptop.  ADH must also be purchased within 30 days of when you bought your item. ADH coverage begins on the 31st day after the item’s purchase – issues in the first 30 days are not covered. Upon purchase, you will get an email confirmation.  You …

Homeowners relucant to get earthquake insurance

In the wake of Japan’s devastating earthquake and tsunami, many Californians are re-evaluating their decision to not buy earthquake insurance.

How To Buy the Right Homeowners Insurance for You : How to Choose a Home Insurance Deductible

Question: $2k mac laptop. 2.5 years old. Great condition. Should I sell it or donate it for a write-off?

Cosmetically, it looks great. I recently had the hand rest and monitor bezel replaced under the apple care warranty — both chipped for no good reason, as is common for the model. I’ve actually got about 6 months left on the warranty too.

Business-wise, I was a freelance web developer who recently took a full-time gig. I don’t have many deductions except for itemized expenses. I had a home office, so some of my rent & utilities are deductible.

Lets say I can get $800-900 cash for it. Am I likely to see that much in savings as a write-off? Thank you!

Answer: I would definitely sell it. why donate a perfectly good laptop? chances are you won’t think twice about it ever again. And you could always donate something with more meaning. So you still get that part done.

Items on Amazon Right Now for Deductible Home Office Expenses:

NeatReceipts Scanner and Software for Expense Management and Reporting $209.95 …

Quicken Rental Property Manager 2011 – [Old Version] $59.96 Quicken Rental Property Manager 2011 includes all of the features found in Quicken Home & Business, plus smart tools for managing your rental properties. Always know how your home-based business is doing. Helps maximize deductions and simplify your taxes. Manage Your Personal, Business, and Rental Property Finances in One Place Organizes Your Finances All in One Plac…

J.K. Lasser’s 1001 Deductions and Tax Breaks 2012: Your Complete Guide to Everything Deductible $9.98 A straightforward guide to taking tax breaks and deductions on your 2011 tax returnCompletely revised to reflect important changes in this year?s tax laws, J.K. Lasser?s 1001 Deductions & Tax Breaks 2012 will help you take advantage of every tax break and deduction that you may be entitled to. This comprehensive guide is clearly organized by subject matter so you can easily find situations that ma…

Every Landlord’s Tax Deduction Guide (2nd Edition) $34.99 This bestseller is the only book on tax deductions specifically for residential landlords! If you own rental property, you should be taking advantage of the many tax write-offs available. Every Landlord’s Tax Deduction Guide gives residential landlords the plain-English guide they need to save money on taxes — without the services of a high-priced accounting firm. This book explains how to ma…

Superior Plus Announces 2010 Annual and Fourth Quarter Results, Updated 2011 Outlook and a Dividend Reduction

CALGARY, ALBERTA–(Marketwire – Feb. 17, 2011) – Superior Plus Corp. (TSX:SPB) F

Home Office Deduction

Question: Are interests from a loan to update a roof tax deductible?

I live in Florida-US and am updating the old roof of my home with a completely new one before the next hurricane season. I assume that this won’t be a tax deductible expense if I pay for it directly, but would I be able to deduct interests of a home equity loan used towards this renovation?

Answer: The use of the money is not the determining factor. Interest on a home equity loan is deductible even if the money is used for a vacation. The deciding factor is that the loan is secured by your home. There are limits if your total loans is greater than $1 million, or if more than $100,000 is used for something other than buying, building, or improving your home. Unless you have a very expensive home, I doubt the limits apply.

Items on Amazon Right Now for Home Renovations Tax Deductible:

Clean house: Tips for paying down your mortgage

Still, it may be easier to pay throughout the year. For example, if your monthly payment is $1,200, pay $100 each month. Another option: Some banks will deduct half the mortgage payment from your account every two weeks, which adds up to 13 payments a year.

Toronto Home Tax Credit 2009

Question: my hubbie and i have filed married joint 3yrs but not legally married, can we file individually now?

For 2007 I worked as an independent contractor and paid no fed, med, ss taxes, and only made about 10k as a part timer. My hubbie did pay taxes. when we went to file the guy really scared us telling me i was in trouble and that we would end up owing alot even with the eic and claiming our 3 yr old. so my husband (not legally married) filed head of household alone, im yet to file my taxes, ive realized that i only have to pay about 400-700 but im concerned about what filing status to use since we do live together, he claimed my son and i would just be claiming home office deductions and so forth. should i do single and file with my mothers address even though my 1099 misc and one w2 would not have the same address. Or could file single with the same address as my hubbie since that is were i live , will that trigger an audit will we get in trouble for filling individually after filing married since we are not legally married, texas does recognize common legal marriage, thnks
a million

Answer: Whoa, what a mess. For federal tax purposes, a marriage means only a legal union between a man and a woman as husband and wife. Further,a person does not meet this test if at any time during the year the relationship between you and that person violates local law.
Has your State ruled you as common law married? If so, DON’T file amended as single for the prior 3 income tax years. You will owe a lot on the Federal, and, if your state has income tax, you may owe a lot on the state, also. If you were married in a foreign country, and OK via the INS, file as married. If your State says you are common law married, make sure your husband amends that head of household 2007 return. Click on Married Filing Jointly and Married Filing Separately in your software. Don’t know how much your husband made, but there is a shot from what you have said that Married Filing Separately would enable you to have a lower income tax liability, or, only slightly higher.

Texas has no income tax. What address did you put on your 2004-2006 returns with the IRS? If you put Texas, get married. Look in to further. Your attorney may have given you erroneous advice. I’m sure every State has common law marriage. It’ s to protect the children.

Items on Amazon Right Now for Federal Tax Home Office Deduction:

TurboTax Home & Business Federal + E-file + State 2011 $70.09 This tax software features the EasyStep® Interview for a step by step guide to efficient calculations in deductions, investment sales history and other tax-related issues. Ideal to use if you are a sole-proprietor, consultant, 1099 contractor, self-employed or a single-owner of LLCs; this software features ItsDeductible®, Audit Risk Meter® and Cost Basis Lookup to help accurately calcu…

TurboTax Home & Business Federal + e-File + State 2010 – [Old Version] $8.07 Designed for sole proprietors, self-employed, consultants, 1099 contractors, and single-owner LLCs. Expanded interview walks you through entering business income and expenses to help you maximize business and personal deductions, home office deductions, depreciation and more. Create W-2 and 1099-MISC forms for your employees and contractors. The Intuit TurboTax Home & Business Tax Year 2010 Softwa…

TurboTax Home & Business Federal + e-File + State 2010 [Download] [OLD VERSION] $54.64 TurboTax Home & Business was designed to help you take full advantage of your personal and business deductions so you get the biggest tax refund possible, double-checking for accuracy and identifying missing deductions and credits. Includes free Federal E-File. Everything you need to easily do your personal and business taxes. Guides you Step by Step through Self-Employment Income, Deductions, an…

TurboTax Home & Business Federal + State + Federal efile 2009 $42.89 TURBOTAX HOME & BUSINESS WITH…

Mortgage Deduction Cut Draws Criticism

PHILADELPHIA | Long considered a key ingredient of American home ownership, the income-tax deduction for mortgage interest now is on the menu of the commission looking for ways to trim the federal deficit.

Bill Clinton Backs Obama’s Tax Cut Deal