Austin Real Estate Homes - What You Need to Know

Tax Tips

'Tax Tips' is a service provided by Austin, Berrier, Darling & Co., P. C. Certified Public Accountants. 6010 Balcones Drive Suite 210, Austin, Texas 78731 (512) 454-6010. The information provided herein should not be acted upon without individual evaluation and advice.

December tax tip

You do not have to change jobs to get a job hunting tax break.

Job hunting expenses may be deducted on your tax return. The key is to comply with a few easy rules. Job hunting expenses are deductible as long as you are actively seeking a new job anditis doing the same type of work that you are doing right now. You don't have to change jobs to claim the deduction. You only need to be seeking work in your current profession. However, if the work you seek is in a different profession; then, the expenses incurred are not deductible.

Job hunting expenses include travel to find a job. Whoa! If part of the travel is for personal reasons (like to vacation or visit relatives) then only those travel expenses that were in pursuit of the job are deductible. On the other hand, a 100% deduction is allowable for those expenses that are directly related to the job search. These would be expenses, such as, postage, printing a resume, long distance calls, lodging and 1/2 of the cost of the meals. Meal expenses are a little bit tricky. Only 1/2 of the cost of the meals can be deducted.

For starters, maximize all retirement plan deductible contributions. If you are eligible to contribute to a 401k plan

If IRS decides to question your job hunting expenses, be ready. Document the "W"s. Where did you go? When did you go? Why did you go? Who did you contact in this job search? How much did each item cost? Have receipts! All of the job hunting expenses will be reported on the Schedule A Itemized Deduction schedule as Other Expenses subject to the 2% limitation.

July & August tax tip

Last year it is estimated that the average tax bill paid per person in this country to local, state, and federal authorities was $9,900 per person. For a family of four, that equates to $39,600 per year. This is more than the average family spent to provide their food, clothing, shelter, transportation and education last year.

What can you and I do to protect our income from the voracious tax authorities? The strategy is to take advantage of each of the multitude of legal ways to lower our taxes.

Basically, the trick is to do all possible to defer income into future tax periods (thereby taking advantage of the time value of money) and to accelerate deductible payments into the current period.

For starters, maximize all retirement plan deductible contributions. If you are eligible to contribute to a 401k plan
or a Keogh plan or an SEP, contribute to the maximum allowable. Each person, who will have earned income this year, can contribute their earnings up to $2,000 maximum to an IRA. Dependent upon total earnings and participation in qualified retirement plans, the eligible IRA may be either a Deductible IRA, a Nondeductible IRA or a Roth IRA. For most people, we recommend the Roth IRA.

More tax tips will follow in future months.

May & June tax tip

Give a gift that will last a life time! A great gift to give to an 18 year old employed child or grandchild is a $2,000 Roth IRA.

Why fund a retirement account for an 18 year old? Because, if you use a yearly 10% return percentage and nothing is taken out of the account, at age 65 it will be worth $176,395. With no further contributions or distributions, at age 75 it would grow to be $457,523.

Bottom line? If you have a working child, the greatest gift you can give that child is a Roth IRA up to the limit of either the child's annual earnings or $2,000, whichever is less!

April tax tip

You can extend the April 15th deadline for filing the 1998 income tax return Form 1040. But you can not extend the time to pay the 1998 taxes. If there are taxes due on the Form 1040, they must be paid by April 15th. For self-employed workers, it may be a smart technique to extend the tax return filing date to permit a longer time to fund a SEP IRA or a KEOGH plan. A SEP IRA or a KEOGH plan can be funded for 1998 up to the day before the tax return is field.

February and March tax tip

If your 1998 Adjusted Gross Income on your Form 1040 is less than $160,000, it would be a good idea to make a 1998 contribution to a ROTH IRA prior to the deadline of April 15th. This will start the 5 year (60 months) penalty clock ticking for you as of January 1, 1998. This means you have already expired over 14 months of the 60 months in case you desire to take a distribution from a ROTH IRA for a first time home buyer (haven't owned a home for two years prior to the date of purchase of a primary personal residence), education, or if you will be at least 59 1/2 years old before the 5 years are up.

January tax tips

Property Tax

Here's how the property tax system works:

The Appraisal District determines the value of all properties, grants exemptions and certifies values to the taxing units.
The governing bodies of taxing units, such as City Council and School Board, review budgets and then set the tax rates which determine how much taxes are due on each property.
The Tax Assessor-Collector calculates how much you owe for each taxing unit, prepares and sends bills, collects monies due and disburses the funds to the appropriate taxing unit.

By law, the Tax Assessor-Collector cannot waive penalty and interest on delinquent taxes, adjust values, or ignore deadlines established in the Texas Property Tax Code.

Attention Homeowners!! You do NOT have to pay a fee to file a homestead exemption.

To receive an exemption or to protest values, you must apply to the Appraisal District. Protests of value must be filed by May 31st, or within 30 days after you receive a notice of value. When you receive a tax bill, it is already too late to protest value. Exemptions must be requested between January 1 and April 30. Phone 834-9138.

Taxpayers Over age 65
The over-65 homestead exemption reduces the taxable value of property which in turn lowers the amount of tax you pay. An applicant qualifies for the exemption on his/her 65th birthday.

Taxpayers with Disabilities
The disabled person exemption reduces taxable value and lowers taxes for those who qualify. Taxpayers must choose over-65 or disabled, NOT both.

Taxpayers who Own a Duplex
In recent years, duplex owners have seen their property split out into two parcels. Usually, one parcel is the side that gets the homestead exemption and the other does not. MAKE SURE that you (or your mortgage company) get bills for BOTH SIDES.

Quarterly Payment Plan
Taxpayers who qualify for the over-65 homestead exemption or the disabled homestead exemption may make property tax payments (on homesteads only) in four installments. The first payment is due by January 31 and remaining payments by March 31, May 31 and July 31. To take advantage of this plan, please notify us and we will send you a Letter of Intent to sign and return.

December 1998 tax tips

The deadline is December 31, 1998 for rolling over IRAs into ROTH IRAs to take advantage of the 1998 option to extend the tax payments over four (4) years. It normally takes 4 to 5 weeks to make a transfer from an IRA at one financial institution to a ROTH IRA at a different financial institution. So, do it now!
The first year in which we can contribute to a ROTH IRA is 1998. It is advisable to establish a ROTH IRA for 1998 in order to start the 5 year penalty clock ticking as of 1/1/98. Normally if a distribution is taken out of a ROTH IRA within five years of the date it is established, there is a 10% penalty. The earliest this penalty clock can be turned off is 5 years from 1/1/98: i.e., January 1, 2003. To take advantage of the earliest turnoff date, a ROTH IRA must be established by April 15, 1999 for the year 1998.