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Show KBfc BMIMk SEP Tax Bill Reduced by Home Expenses Taxes can hit you right where you live. But if you own your home, many of your expenses can reduce your tax bill. Real estate taxes, mortgage interest and replacing a rogf are some expenses ex-penses that affect your taxes by increasing in-creasing your itemized deductions or reducing a gain on the sale of your home. Buying Your Home Basis: Basis is a way of measuring your investment for tax purposes. It is important to know your basis when selling a home or figuring a loss as a result of a casualty. An explanation of "basis" may be found in Publication 55 1 , Basis of Assets. Points: You may deduct qualifying points if the loan is used to buy or improve your main home. The additional addi-tional requirements that must be met to take this deduction may be found in IRS Publication 530, Tax Information for Homeowners. Closing Costs: Your portion of property prop-erty taxes paid at settlement is deductible. deduct-ible. Owning Your Home Home Improvement and Repair Records: Keep receipts for your home improvements. They will be added to your basis. Repairs for ordinary ordi-nary upkeep such as painting or gutter repair are not deductible. However, if you pay these costs as part of a remodeling or restoration project, the entire cost is considered "home improvement" and is ordinarily ordinar-ily an addition to the basis. Mortgage Interest: You may deduct qualifying mortgage interest as an itemized deduction on Schedule A (Form 1040). See Publication 936, Limits on Home Mortgage Interest Deduction, for any restrictions that may apply to you. Taxes: The qualifying assessed property prop-erty tax you pay is an itemized deduction deduc-tion listed on Schedule A (Form 1 040) . Be sure the deduction is for the qualifying assessed property tax, not the amount placed in escrow by your lender to cover property tax. Casualty and Theft Losses: Although Al-though limited, personal property loss due to casualty or theft may be deductible. deduct-ible. Insurance reimbursements will affect the deduction. Publication 530, Tax Information for Homeowners, discusses. deductible loss and how to calculate it. Selling Your Home Postponement of Tax: Generally, paying the tax on the gain from the sale of your main home may be postponed post-poned if you buy a new home within two years before or after the sale and if the purchase price is at least as much as the adjusted sales price of the old home. Selling Expenses: Selling expenses include commissions, advertising, loan charges (seller's points) and legal fees. These expenses are subtracted from the selling price of your old home in order to determine your realized real-ized gain, which is the amount you must spend on your next house in order to postpone the tax on any gain. Fixing-up Expenses: Decorating and repairs done in order to sell your home may affect the amount of gain on which the tax is postponed, but the costs can't be deducted from actual profit. Publication 523, Tax Information Informa-tion on Selling Your Home, covers all the limitations to fixing-up expenses and many other tax issues related to selling your home. Many IRS publications discuss the tax consequenses of homeownership and other related issues. To order free publications and forms, call toll-free 1-800-829-3676. A few are listed below. be-low. PublicationsForms of Interest to the Homeowner Publication 523, Tax Information on Selling Your Home Publication 530, Tax Information for Homeowners (Including Owners of Condominiums and Cooperative Apartments) Publication 545, Interest Expense Publication 551, Basis of Assets Publ ication 587 , Business Use of Your Home Publication 936, Limits on Home Mortgage Interest Deduction Form 2119, "Sale of Your Home" ML i I l Tax "Pub" Just for Armed Forces Publication 3, Tax Information for Military Personnel, is available to lielp the nation's three million mem- tiers of the Armed Forces with their ederal tax returns. Major tax issues discussed are: Items included in gross income, such lis basic pay, bonuses for. re-en-. istment, and special pay for aviation fareer incentives and hazardous duty; terns excluded from gross income. uch as certain allowances for living. family, moving, and travel expenses; dependency exemptions; sale of a home and itemized deductions. Examples Ex-amples are used throughout the booklet to illustrate filing instructions and tax advice. Publication 3 can be ordered by using the order blank in your tax package pack-age or by calling toll-free.. 1 -800-829-3676. IRS Begins New Deposit Penalty System Businesses that do not make federal payroll tax deposits on time are subject sub-ject to a new penalty system. The amount of penalty IRS charges varies with the length of time it takes to make the required federal tax deposit. de-posit. The new penalty system is four-tiered. four-tiered. Beginning in 1990, the failure-to-deposit penalty rates are as follows: 1. two percent for the first five days, 2. five percent for the 6th through the 15th day, 3. 10 percent for more than 15 days and 4.15 percent if the deposit is not made within 10 days after IRS issues the first notice demanding payment. A penalty is charged for delinquency delin-quency or for depositing an insufficient insuffi-cient amount. A penalty may also be assessed if the federal tax deposits are improperly mailed or delivered to IRS offices rather than to authorized depositories depo-sitories or Federal Reserve banks. More information about payroll taxes is in Publication 937, Business Reporting. Call IRS toll-free 1-800-829-3676 to order your free copy. IRS Publication Covers Depreciation If you are unfamiliar with or confused con-fused about ways to recover your costs for certain business or income producing pro-ducing property, get IRS Publication 534, Depreciation. Publication 534 explains what can be depreciated and discusses various depreciation methods. Charts and sample worksheets are also included. You can request free Publication 534 by calling l-800-TAX-FORM (1-800-829-3676). New Tax Rates for The Self-Employed Self-employed taxpayers will find new maximums and new self-employment tax rates on the 1990 Schedule SE, Social Security Self-Employment Tax. The maximum earnings amount subject to social security has been increased in-creased from $48,000 in 1989 to $51,300 for 1990. The net self-employment tax rate increased from 13.02 percent to 15.3 percent. The two percent credit is replaced by two deductions when figuring income tax and self-employment tax. Call IRS toll-free at 1-800-829-3676 to order free Publication 533, Self-Employment Tax. Find Out If You're an Employee or Not Whether you are considered an employee em-ployee or an independent contractor determines not only how you pay your taxes, but also what kind and how much. Generally, an employee is under the control of an employer about when, where and how to work. An independent contractor, on the other hand, is responsible to an employer em-ployer only for the successful completion com-pletion of the job. The independent contractor, rather than the employer, controls or directs the method and means of accomplishing the job. Publication 937, Business Reporting, Report-ing, lists 20 factors used to determine if you are an employee. If you want the Internal Revenue Service to judge your status, fill out Form SS-8, "Determination "De-termination of Employee Work Status for Purposes of Federal Employment Taxes and Income Tax Withholding," Withhold-ing," and send it to your IRS District Director. Both Publication 937 and Form SS-8 SS-8 may be ordered by calling 1-800-TAX-FORM (1-800-829-3676). The standard mileage rate for tax year 1990 is 26 cents per mile. The ceiling for using the standard mileage rate for the first 15,000 miles only has been rescinded for tax year 1990. Report deductible expenses for business use of a car on IRS Form 2106, Employee Business Expenses. For a more complete explanation of these rules, including topics such as leased cars, depreciation, partial business busi-ness use and recordkeeping, order Publication 917, Business Use of a Car, from the IRS. Call toll-free I-800-TAX-FORM (1-800-829-3676) to order a free copy. Also, you can call Tele-Tax, IRS recorded tax information, toll-free at 1-800-829-4477 and ask for topic 310. Unearned income1 If a person who can be claimed is a dependent has more than $500 ir income, in-come, any part of which is uneai led such as interest or dividends, fed:ral income tax may be owed on a por ion of the income. Call 1-800-T.X-FORM (1-800-829-3676) and oider free IRS Publication 929, Tax R. les for Children and Dependents, for details. Witholding a Must for Tips Employers are responsible for withholding with-holding social security and income taxes on tip income reported to them by employees. ryv I rv aH v-'- V ess;--. sOn n III fN ffy-- 329 III L-M 1 |