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Tax Considerations for the Working Individual Reviewing 2018 Returns – Investments, Income, and Other Issues

January 2, 2020 Tags: , , , , Jacob Sturgill

Investments and income are typically the two biggest players in your tax plan. After all, these are likely to be your primary sources of personal revenue.

When it comes to planning your tax strategy, you need to consider a variety of factors related to your income and investments, as well as some various issues that are related to these categories. Here are the top considerations to make for income, investments, and other issues.

This article is second in a series on Tax Considerations for the Working Individual. Read of the series here:

  1. Tax Considerations for the Working Individual – Family and Filing Issues
  2. Tax Considerations for the Working Individual – Investment Income and Other Issues
  3. Tax Considerations for the Working Individual – Qualified Plan Issues

 

Investment Income Issues

Depending on your specific investments, there are a few areas on your 2018 return to check and ensure whether you’re on the right path for your 2019 tax strategy.

 

Interest

Are your investments earning interest? (Review From 1040, Lines 2a and 2b) Did you receive any dividends? (1040, Lines 3a and 3b) If you answered “yes” to either of these questions, you need to reference Schedule B for more information about which accounts are generating interest and whether dividends earned are qualified or ordinary.

 

Income and Investments

If you’re self-employed and your income is greater than $200,000 ($250,000 married, filing jointly), you may be required to pay and additional Medicare tax at 0.9% (consult Form 8959). For all working individuals, if your income is greater than $200,000 ($250,000 MFJ), and you have high Net Investment Income (see Form 8960), your income may be subject to a Net Investment Income Tax at 3.8%.

 

 

Capital Gains

Remember, your capital gains and losses also count toward your income and make a difference at tax time. For capital gains distributions, consult Schedule D, Line 13; for losses look at Schedule D, Lines 6 and 14. Verify whether short- or long-term loss carryovers are properly accounted for.

 

Income Issues

While you’re probably already making notes of income changes from 2018 to 2019, here are some specifics to focus on during your review.

 

W-2 Employees

If you’re a W-2 employee, you’ll want to review your W-2 for any HSA and FSA contributions from both your employer and your pre-tax income. Additionally, you need to review your retirement plan contributions and employer matching.

 

Stock Options

If you are part of an employee stock option or have any other type of equity compensation, you will need to consult your 2018 return to see how this impacted your tax strategy during the last year. Look at your W-2 and Schedule D to learn more about how your get a better understanding of your tax responsibility for exercising or selling your option. If you filed an 83(b) election, ensure that you prepare one this year as well.

 

Other Issues

There are, of course, some odds and ends issues that are difficult to classify with other categories. However, when you’re filing your taxes, it’s important to account for all of your financial activities. Here are some additional issues you want to watch out for.

 

State-Specific Issues

You will want to take a look at your state return, in addition to your federal one, to look for specific issues unique to your locale. If you have recently moved or earned income in another state during the calendar year, consult a financial professional to learn about the tax laws that apply to your situation.

 

Real Estate

If you have real estate investments, consult Schedule E to see how to properly claim your rental income.

 

Student Loans

You may be able to claim interest paid from student loans if you paid any this year. Look at Schedule 1, Line 33 to see whether the deduction applies to your situation.

These are only some of the considerations that you need to make as you review your 2018 tax return and prepare for the upcoming tax season. To learn more about tax considerations for the working individual, consult our resources on family and filing issues.

This article is second in a series on Tax Considerations for the Working Individual. Read of the series here:

  1. Tax Considerations for the Working Individual – Family and Filing Issues
  2. Tax Considerations for the Working Individual – Investment Income and Other Issues
  3. Tax Considerations for the Working Individual – Qualified Plan Issues

 

This information is not intended to be a substitute for specific individualized tax advice.  We suggest that you discuss your specific tax issues with a qualified tax advisor. 

Tax Considerations for the Retiree – Investment Income and Other Issues

December 30, 2019 Tags: , , , Jacob Sturgill

Your income situation as a retiree is probably quite a bit different than it was when you were working. There may be multiple streams of income to account for, as well as other unique factors to consider from year to year.

Investment income is an essential item to cover here, since this is likely to represent a meaningful portion of your retirement income. There may also be some odds and ends that impact your tax strategy in other ways, so we’ll take a look at those too.

This article is second in a series on Tax Considerations for the Retiree. Read of the series here:

  1. Tax Considerations for the Retiree – Family and Filing Issues
  2. Tax Considerations for the Retiree – Investment Income and Other Issues
  3. Tax Considerations for the Retiree – Qualified Plan Issues

 

When it comes to your investment income, here are the issues you want to consider:

 

Are You Reporting Investment Interest?

Investment interest should be reported on Form 1040, Lines 2a and 2b. You will also want to look at Schedule B to get a better idea of which accounts are generating interest and see how you reported them in 2018.

 

Did You Receive Dividends?

Dividends will also be reported on Form 1040, but on Lines 3a and 3b. Again, look at Schedule B to see whether the dividends are ordinary or qualified and how to proceed with reporting this income.

 

How Does Your MAGI Impact Your Net Investment Income?

If you have a MAGI above $200,000 ($250,000 MFJ), and significant investment income, you may be subject to an additional Net Investment Income Tax of 3.8% (Form 8960). Talk to your tax professional to learn more about whether this additional tax will affect your bottom line and to see whether there are strategies you can use to offset this liability.

 

 

Did You Have Capital Gains or Losses?

Look at Form 1040, Line 6 for reporting capital gains or losses. If you have Capital Gain Distributions, you’ll want to consult Schedule D, Line 13 for more information about reporting. For losses, look to Schedule D, Lines 6 and 14 to calculate your short- and long-term loss carryovers. Ensure that you account for losses carried over from previous tax returns.

 

Other Issues

Additionally, there are some tax issues that fall outside of the broader categories, but still need attention when you’re working on your tax strategy. These other issues include:

 

Medical Expenses

If you had large medical expenses during the year, you may be able to deduct a portion of the expenses from your tax responsibility. Look at Schedule A, Line 1 to understand more about your medical expenses and the deduction limit. You will also want to factor your Medicare Premiums and Long Term Care Premiums into your total medical expense figure.

 

State Taxes

As always, you will need to consider your individual state tax responsibility in addition to your federal taxes. Your state tax return from 2018 should contain information to help you get a better idea of what your state tax liability will be for this year. Your tax professional can help you to determine how state laws impact your tax strategy.

 

Real Estate

If you own rental properties, you may be able to claim deductions. Consult Schedule E for more details on how to claim your rental real estate deductions.

These are only some of the considerations that you need to make as you review your 2018 tax return and prepare for the upcoming tax season. To learn more about tax considerations for the retiree, see our post on family and filings issues.

This article is second in a series on Tax Considerations for the Retiree. Read of the series here:

  1. Tax Considerations for the Retiree – Family and Filing Issues
  2. Tax Considerations for the Retiree – Investment Income and Other Issues
  3. Tax Considerations for the Retiree – Qualified Plan Issues

 

This information is not intended to be a substitute for specific individualized tax advice.  We suggest that you discuss your specific tax issues with a qualified tax advisor.