Tax questions answered

February 11, 2000: 8:12 p.m. ET

CPA Kevin Ondik helps taxpayers make sense of their write-offs, deductions

NEW YORK (CNNfn) - From tax breaks for first-time homebuyers, to dividend earnings, to educational expense write-offs, certified public accountant Kevin Ondik, with Friedman, Alpren & Green, answers your questions.
    Every Friday afternoon from now until April 15, our network will provide expert advice to viewers who call in with tax questions and CNNfn.com readers who send us their e-mails. Check back Monday for a full transcript of Friday's show with Ondik.
    Some of your e-mail questions were answered on air, while others were addressed after the show. Those answers are provided for you here:

     Q. If a family purchased its first home, but had previously owned a mobile home, would it be able to use funds from an IRA without incurring a penalty under the first time home-buyer clause?
    A. A mobile home qualifies as a principle residence if it has sleeping, eating and toilet facilities. As long as two years have passed since disposing of the mobile home, up to $10,000 could be used from the IRA without penalty.

    Q. Is the capital gains tax related to the time between when you buy and sell the stock? Does interest paid on margin accounts with a brokerage firm qualify for a tax deduction?
    A. Yes, you must hold the stock for over 12 months to obtain the lower tax on long term capital gains. Yes, providing you have sufficient investment income, such as interest, short-term capital gain to offset the expenses.

    Q. I own a house in India and I would like to know whether I can take a tax deduction for traveling (ticket expense) to India to be able to maintain the property. I think I read somewhere that you could do it last year, but I am not able to find any information on it (as to what forms I should file to take the deduction etc). I would appreciate your information on this. I am a resident of the United States.
    A. The expense would be deductible, but it could be questioned on motive; i.e., vacation or personal reasons.

    Q. Is the total amount of dividends earned taxed and reported (on a tax return) at a particular percentage rate; as opposed to bank interest , which is reported at face-value amount of interest earned on the 1099INT?
    A. For individuals, the total amount of dividends earned are taxed. There are different rules for corporations that receive dividends.

    Q. If I had a large loss year but I could only take $3,000 deduction in my tax return, then could I use that loss to offset the profit I make this year?
    A. Assuming this is a capital loss, the carry forward may be used to offset capital gains in subsequent years.

    Q. What are the income levels that change a married person's tax bracket filing jointly? Such as, if you make $20,000 a year then your tax bracket is _____%? Then if you make $25,000 a year instead what is your tax bracket, and so on.
    A. 15 percent on taxable income, not gross income for 1999, Married Filing Jointly - 15 percent from $0 to $43,050, 28 percent from $43,050 to $104,050, 31 percent from $104,050 to $158,550, 36 percent from $158,to $283,150, and 39.6 percent on amounts over $283,150.

    Q. On Oct 6th, this year I turn 70. Can I contribute to my Sep IRA for 2000 & 2001 and my IRA for 2000 & 2001? What amount must I withdraw and when must I start? Does the balance in the accounts continue to grow tax free when I start to withdraw?
    A. The SEP is considered a qualified plan as long as you have sufficient earned income, you can contribute for 2000 and 2001. Depending on your income level you may not contribute to a regular IRA. In any event, no IRA contributions may be made once you become 70-1/2. You must withdraw funds once you become 70-1/2 or the year after by April 1^st, but two distributions would be required. The balance continues to grow tax free.

    Q. I recently had to cash in a mutual fund in order to pay taxes, and, reinvested the remainder. Do I pay taxes on the whole amount or just on the profit made from the original investment? I had been paying on the capital gains so it appears as if I'm being double taxed.
    Can you give me more information on this kind of thing? I am a 52 yr. old widow and have a pretty good handle on trying to manage my own finances; however, I have triggered some tax events by cashing in on mutual funds for living expenses and paying my son's college tuition.
    Also, may I use the qualifying widow tax bracket again this year? My husband died in 1997 at which time I filed jointly. The following year, I filed as a qualifying widow. May I do that again for 1999?
    A. Pay tax on the profit. Reinvested dividends or capital gains are added to your basis. If your son is your dependent, you may use the qualifying widow brackets for 1999.

    Q. I bought a Van last year in Colorado. I paid about $2,000 in taxes when I registered it with DMV. The tax software is not specific on what can be itemized. Can you answer that? I know the license fee can be itemized but that is only $40. What about owner tax, etc.?
    A. Sales tax on autos is not deductible, even if used for business.

    Q. If I sell my house above the price at which I bought it, what is my tax liability if I decide to rent? If the house is sold at the purchase price or at a loss, does this change my tax liability? If there is a tax liability with the sale of a home, how long do I have before I need to purchase another home?
    A. Depends on the size of profit and how long you lived in the house.
    Sale at loss - not deductible. If there is a profit, the rules for reinvesting no longer apply.

    Q. I was wondering if a non-U.S. citizen investing in stocks using e-trade is required to declare U.S. taxes?
    A. Generally, no.

    Q. My wife and I each made $2,000 contributions to our Roths in January of 1999 for the 1999 tax year. Now we have learned our MAGI will exceed $160,000. What our options?
    A. Inform payee and either change to non-deductible IRA or withdraw by April 15, 2000.

    Q. Is an educational expense only limited to courses taken towards improvement of your skills in one's profession?
    Would books and software be deductible? Can you give me some examples of miscellaneous expense?
    A. Yes. Books - yes; software may be depreciated over 36 months.

    Q. If I buy an option w/someone, keep it in his account, then he sells it, can he transfer money or stock into my account and I pay my share of the taxes, if I can show the transfer of half the cost from my account at the time of the option purchase?
    A. Yes.

    Q. I have an existing SEP/IRA, I am a salaried employee of my own Sub S corporation as president; I've contributed to SEP for YE 1999 in January 2000. Can I have a Roth IRA as well for 1999? Also, is my spouse eligible for 1999 Roth or regular IRA if she has no income, considering that I have SEP already?
    A. Depends on your adjusted gross income - if over $150,000, no Roth or IRA.

Q. What fees, interest, and other charges are deductible when buying and selling a primary residence?
A. Points paid to obtain the mortgage are deductible and any real estate taxes you had to reimburse the sellers for.