Unless Congress avoids the Fiscal Cliff, we will have a return of the so-called Marriage Penalty, resulting in higher taxes for many couples 2013.
Prior to the Bush tax cuts, there was a indeed a “penalty” against married couples under the tax code, as their standard deduction and income tax brackets were less than twice those of singles. In essence, married couples were paying higher taxes than their non-married counterparts.
When Congress passed the Bush tax cuts, however, they corrected the imbalance by, among others, giving married couples a standard deduction that’s exactly twice that of individuals. They also established income ranges for the 10% and 15% tax brackets to be exactly double that given to individual taxpayers.
According to New York Tax Attorney Shamsey Oloko, if the country goes over the fiscal cliff, the average taxpayer, and the real estate industry, may feel the pain in yet another way – debt forgiveness.
Normally, if a lender forgives a portion of a loan, the beneficiary is required to pay taxes on the forgiven portion of the loan, as it would on an income.
However, in 2007, Congress passed a law, the Mortgage Forgiveness Debt Relief Act of 2007, which allowed taxpayers to avoid paying such taxes. Thus, if a lender agrees to a short sale or agrees to take less than you owe on your mortgage, you would not have to pay taxes on the unpaid balance of the loan.
With the year about to come to an end, taxpayers may want to make charitable contributions, including clothing and household items, to good causes, and take deductions on their tax returns in the process. It is helpful to keep in mind IRS requirement in making these contributions, to avoid audit problems along the way.
To deduct clothing and household items, they generally must be in good used condition or better. If you think the item is worth more than $500, you should get an appraisal and keep records.