The Best Tax Shelter

You can exclude up to $500,000 of gain in the sale of your personal residence from your taxable income if you file jointly. You can exclude half of that if you are single. This is one of the best tax deals around, and would be even better if the real estate market was more robust and taxpayers were sitting on these kind of gains like many were before 2008. What are the requirements for this good deal? They're not too bad. You can only do it once every 2 years. You have to have owned and used the property as your principal residence for 2 out of the 5 years prior to the sales date. So is it time to start packing boxes and get that tax free income?

I received a letter from the IRS. What do I do?

The first thing to do is not to panic. Many notices can be cleared up with a simple phone call or submission of some documents. Many times the IRS is wrong in their calculations or there is a misunderstanding. You need to be responsive by contacting the IRS on a timely basis. Usually you have 30 days from the date of the notice. They take it as a sign of disrespect if they don't hear from you. I recommend that you give the notice to your CPA to handle.

Regular IRA vs Roth IRA

The three main differences between a Roth and a regular IRA are the following: 1. You get a tax deduction for a regular IRA contribution but not for a Roth contribution. 2. You have to stop making regular IRA contributions at age 70 and 1/2 but there is no age restriction on Roth contributions. 3. You have to start to take distributions out of your regular IRA after age 70 and 1/2 but there is no such requirement for a Roth. Which is better? It all depends on your priorities.

Georgia Section 529 Plan

You can contribute up to $2,000 per child for college to a section 529 Georgia plan and take a deduction on your Georgia tax return. You don't get a Federal deduction but the funds grow tax free. You can contribute to any other state's 529 plan too, but you won't get the GA deduction then. You deduct the amounts on schedule 1 line 8 on the GA return for  Georgia higher education savings plan.

Publicly Traded Partnerships (PTPs)

Your broker may invest in a PTP for you which are subject to the passive activity rules which can limit the deduction of losses. PTPs are even under more restrictive rules concerning the deductibility of losses. You can only deduct losses against future income from that specific PTP and not against other PTPs or other  passive income. If you sell the PTP in a taxable transaction, then you can deduct all suspended losses.

Child Care Credit

You can get $1,200 in a tax credit if you have at least $6,000 in qualifying expenses and two qualifying children ( generally under age 13). The following expenses qualify: preschool for children under the level of kindergarten, before or after school care for those children in kindergarten and higher grades, day camp costs, and  babysitting fees. Overnight camp does not qualify. In order to get the credit, you have to provide the name, address, and Federal identification number of all child care providers on your tax return.

2013 Personal Exemption Limitation

You are allowed a $3,900 exemption for yourself, your spouse, and any dependents on the 2013 tax return. However if your adjusted gross income(AGI) is over $250,000(single) or $300,000(joint) then your exemption is reduced by 2% on each $2,500 above the $250,000 and $300,000 thresholds. For example, a married couple with an AGI of $400,000 would see a reduction of their personal exemption of $7,800(3900*2) of $2,000 to $5,800 (.02*2500*100,000/2500=2000).