Your Money
Questions? We've got answers
From income taxes to identity theft and FSAs, here's the answers to some of your questions.
December 15, 2003: 2:53 PM EST
By Gerri Willis, CNNfn

NEW YORK (CNN/Money) - The e-mails keep coming and we would like to take the opportunity to answer some of your questions in this special Five Tips column.

Question 1

"I know giving a yearly gift to a child is tax-free for me, but how much is the child taxed as the giftee?" -- Claire

In order to avoid the gift tax, you'll want to limit your yearly gifting to family members to $11,000 per gift if you're single or $22,000 for couples.

There is no tax for the recipient, except for gains in value after the gift is received. Here's an example: If you're given a gift of stock from a family member and subsequently sell it after it runs up, you'll have to pay capital gains like any other stockholder.

But the real financial pinch for gift recipients is a little more subtle. College financial aid programs penalize students' assets more than parents' when it comes to the proportions that must go to education. That simple fact may drive families to hold college savings in the parents' names rather than their children's.

Question 2

"I am in the military and went to Iraq for 6 months. Is there a certain tax form I need to complete?" -- Cynthia

Deadlines for filing tax returns have been extended for 180 days following the last day of qualifying combat zone service.

Enlisted personnel, though not commissioned officers, can exclude active duty pay earned any month while serving in a combat zone. Officers also have pay exclusions, but there are limits. Go to for details.

Question 3

"I have a couple of questions on capital gains taxes. Does the reduction include real estate? I just bought a home in Massachusetts which I may need to sell in a year. What would the capital gains be?" -- Mark

Here's some good news for you. The new rules do apply to real estate gains and sales.

For the upper brackets, the tax rate went from 20 percent to 15 percent. And for the lower two brackets, the tax fell from 10 percent to roughly 8 percent to 5 percent.

Keep in mind that you qualify for an exclusion on capital gains if you lived in your home for two of the last five years. That exclusion is $250,000 for single filers and $500,000 for joint filers.

An additional point, though not real estate related, is that if you are a stock or fund investor you may be facing some serious capital gains this year for the first time in several years.

Mutual funds typically distribute capital gains taxes for the fund at the end of the year and these payouts are taxable. If you're buying funds at the end of this month, beware. Grab payout details from the fund companies directly or their Web sites.

Also, think about holding your stocks for a year or longer, that way you'll qualify for the lower long-term capital gains tax rate of 15 percent, effective on sales after May 5 of this year. Otherwise, your gains will be taxed as ordinary income, subject to tax rates as high as 35 percent.

Question 4

"Three years ago I was the victim of identity theft. I still have five collections on my credit report and have even put forgery alerts out with the three big credit reporting agencies, but I can't get these off my record." -- John

Log onto for the Identity Theft Resource Center, a non-profit organization. Click on the victim resources tab on the left-hand side then click on victim guides. Look for the section talking about collection agencies and identity theft.

The big thing here is to continue to write letters to the collection agencies and send along any documentation, such as receipts or police reports, you have as proof. Send your documentation certified mail with return receipt requested so the agencies can't tell you they never received it.

There is nothing wrong with playing hardball, either. Give the agencies a timeframe, and if you don't get any action say you'll consider legal action against them and possibly consult an attorney.

Question 5

"I'm in a flexible spending account through my employer. Why can't you roll over unused money for the next year?" -- Roy

The IRS rules say "use it or lose it." Therefore, when you enroll in the FSA program, try to estimate as accurate as possible the amount of health care and dependent care expenses, including day care and in-home care costs, you will incur during the year.

You can deposit up to $3,000 per year pre-tax for health care expenses and up to $5,000 for dependent care.

If you want to estimate the amount you should save, you can plug in some figures into the FSA calculator. You can find them on several sites including and

Consider using any left-over funds the end of the year to pay for eyeglasses, medical examinations and other preventative expenses eligible under the plan.

And the Treasury Department and IRS announced earlier this year that over-the-counter medicine and drugs may be reimbursed from a health Flexible Spending Account.

Antacids, allergy medicines, pain relievers and cold medicines are eligible, but nutritional supplements, such as vitamins, are not.

It is also good to know several organizations continue to press Congress in making a change to FSA rollover rules.  Top of page

Gerri Willis is the personal finance editor for CNN Business News. Willis also is co-host of CNNfn's The FlipSide, weekdays from 11 a.m. to 12:30 p.m. (ET). E-mail comments to

3 reasons to retire as early as you can
In your 40s with no retirement savings? Make these your next moves
Retirement planning mistakes you probably don't realize you're making
It's getting a lot harder for global brands to win in China
Apple Watch Series 4 review: It's time to give one to Grandma
The Fed has a lot to talk about besides higher interest rates

graphic graphic