Personal Tax Issues

In many cases, if you have a small business, keeping your business taxes low is the best way to keep your overall tax bill as low as possible. However, even if your business occupies the majority of your time and effort, and presents the most thorny issues at tax time, don't neglect the personal and family side of your tax return.

Depending on the ages of your family members, types and level of income, and investment activities, the personal side of your tax return may be quite complicated.

What's more, there are numerous opportunities to save money on taxes on the personal side. Buying or refinancing a home, contributing to a regular or Roth IRA, investing in higher education, or riding the Wall Street roller coaster all present you with potential tax breaks. If you become familiar with the rules and keep up with the annual changes, you will be able to take advantage of all the breaks available to you.

Our discussion of non-business tax issues is organized into the following topical areas:

• Filing status and exemptions explores the basic questions of who must file a tax return, who qualifies as a dependent, and what your options are as to picking a filing status.
• Employment income and related deductions discusses the tax treatment of income reported to employees on W-2 forms, as well as income received by farmers, and various types of miscellaneous income such as unemployment benefits, disability benefits, and gambling winnings. This chapter also discusses tax breaks that may be claimed by employees and the self-employed, including moving expenses, the tax credit for child and dependent care expenses, and miscellaneous deductions for employee business expenses.
• Real estate covers the tax benefits of buying and owning a home, such as itemized deductions for home mortgage interest and real estate taxes. It also addresses the issues that must be faced by investors in real estate, or those who rent out their home or a vacation home for some part of the year. Finally, this chapter discusses recordkeeping for homeowners and the tax consequences of selling a home or other real estate.
• Investments discusses the tax treatment of interest and dividend income; capital gains on investment sales; income from other entities such as estates and trusts, partnerships, LLCs and S corporations; and REMICS. Also discussed are itemized deductions related to investments, and special rules for handling the investment income of a minor child.
• Retirement explains how to report periodic payments from pension and annuity plans, as well as lump-sum distributions and Social Security benefits. It also covers all the rules related to IRAs - both Roth and traditional - whether you are making contributions or taking distributions.
• Standard and itemized deductions covers the standard deduction as well as itemized deductions not specifically discussed elsewhere: medical and dental expenses, state and local taxes, interest, charitable contributions, casualty and theft losses, and miscellaneous itemized deductions.
• Tax credits and other issues for families deals with some of the tax breaks for individuals: the child tax credit, tax benefits for adoption, and tax breaks for education, such as the new "American Opportunity" education credit. It also covers the credit for the elderly and the disabled, and the earned income credit for low-income families. The tax aspects of alimony and child support are discussed as well.

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