Need an income tax guru...

Drdogface · Drdogface's Garage

Hopefully some of you guys can help me figger this out.

My wife and I use Turbo Tax. We file as married filing separately because she usually gets a refund while I usually have to pay and I don't want to screw her out of her refund. Anyway, this year she broke her leg in August so had major league medical expense of $5K, paid our property tax of $5500K (I pay the mortgage...she the taxes which usually balances out) Since she only made $14K in salary (out of work from August on) she really does not need all that deduction this year.

Question 1. Can she hold over some of these to next year ? Turbo tax does not seem to mention that?

Question 2. This year there seems to be a new part the tax law for married filing separately. It has a page for "Community Property Income Adjustment" Can I adjust my income down since she has so many expenses which are tax deductible ? It sure helps me out and does not seem to affect her if we add the same to her income. ??

Dueller · 03-19-2012, 09:25 AM

Caveat : I'm not a tax attorney.

It has been my experience that filing seperately (when you are not seperated) rarely results in an overal tax savings. If you do filie seperately, if one itemizes deductions, both have to (i.e., you can't itemize while she claims standard deduction). With your wife's income so low she is going to incur a verry low tax liability...and she may be able to itemize a large potion of out of pocket medical expense since the threshhold is anything in excess of 7.5% of her AGI.

About the only time I've seen it as favorable is if one spouse owes a huge tax bill and the otherr does not want to be jointly liable in the evet of a seperation/divorce.

YMMV

Dueller · 03-19-2012, 09:28 AM

As to question 2, it think that provision states INCOME DERIVED FROM COMMUNITY PROPERTY MUust be split evenly between the two of you if you file sepqrately.

How to File Taxes on Community Property Income | Small Business - Chron.com

Drdogface · Drdogface's Garage

Well, we've discussed filing jointly and likely will next year. What I just did as an experiment was to subtract $5000 from my income and add the same to hers. There is a new page/law for doing that this year. It dropped my bill from 2200 to 1100 and did not affect her refund at all. Dunno if that's the way it's supposed to work or if it's legal but it seems to be. This is only for community property states which Kalif is.

Dueller · 03-19-2012, 09:37 AM

Was the income your moving 5000 around from some type of property or other joint venture? The way I read it is it has to be reported in equal amounts.

Oh yeah...if your talking about income averaging in question 1 that was abolished in the midd-late 90's IIRC

Dueller · 03-19-2012, 09:43 AM

You may try this...if you both itemize, chalk up the entire 5000 med expenses on her and see if she has 0 tax liability on her seperate return. If your combined income were in the $85 K range or above you likely wouldn't reach the 7.5% threshold to claim it on your return. Report all other itemized deductions on your schedule A and see what you come up with.

Just a WAG.

Good luck

Drdogface · Drdogface's Garage

The 5000 (just a temporary experiment) was just a guess. I had not yet seen/read the article that Dueller linked to. I'm trying to read and reread that article to see if I can now do it right. If it affects my wife's refund I'll just compensate her for it. What a F'ing mess. It was all so much easier last year.

Dueller: Neither of us earn near $85K together or separately. My non investment income is from IRA withdrawal (24000) and Social Sec (16000). Her income was only 14750. If I don't adjust the income on that community prop page then I have to pay about 2200 while she gets a refund. If I lower my income there by 5000...just a guess as I said...it lowers my tax by half and does not affect her refund. I'll have to study that article and try to do it right.

Drdogface · Drdogface's Garage

Quote:

Originally Posted by NotaBRG

When you were single?

No...not single but there was not this Community Property BS to deal with.

Dueller · 10:13 AM

Quote:

Originally Posted by Drdogface

No...not single but there was not this Community Property BS to deal with.

I just read the com prop article...seems that you DO have to split ya'lls income from all sources. That sucks. Seems that if the income is derived from separate accounts you may be able to report it just to yours; e.g., Soc Sec and maybe IRA...article really doesn't say.

May be time to hire an accountant to prepare your return. Probably br $300 well spent.

Drdogface · Drdogface's Garage

Dueller,
I just added all income from non investment, incl. SS and IRA plus her earned income and divided in two. Added 14000 to hers and subtracted same from mine. My tax is 0, her refund dropped $671 so I'll pay her that. Next year we go to and acct. and file jointly. I think I did this right...at least according to the article.

Thank you SOOO much for the help....all who answered, many thanks. This forum is awesome.