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What is a Claim of Right Repayment Credit?
There are a few rare situations where you may be forced to repay income from a prior year. Some examples of this may include Social Security benefits repayments, overpaid vacation or sick pay from an employer, overpaid unemployment benefits, and potentially many other situations could apply. The IRS and many states allow…
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Can I Deduct My Motor Vehicle Fees as Personal Property Tax?
Contributed by: PhillipB TaxPro FreeTaxUSA Team Personal property tax on any of your vehicles is deductible if the tax is based on the value only, and the tax is imposed on a yearly basis. In some cases, the state may collect personal property tax with your motor vehicle registration fee, so you may need to determine what…
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Advance Payment of the Premium Tax Credit – Alternative Calculation for the Year of Marriage
If you need to repay some of the advanced payment of the Premium Tax Credit that you received, then the alternative marriage calculation may lower the amount you must repay. It allocates 50% of your household income to each spouse and calculates the allowable credit for your pre-marriage months of that amount. NOTE: The…
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How Do I Report a Backdoor Roth?
There are two different types of Individual Retirement Accounts (IRAs) – Traditional and Roth. With a Traditional IRA, you will usually qualify to get a tax deduction in the current year for any IRA contributions you make during the year. When you retire and begin using the IRA, you’ll be taxed on any money you take out of…
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Reporting a Backdoor Roth – Basic Scenario
The basic reporting of a backdoor Roth involves the following scenario: 1. You contribute to a Traditional IRA before the end of the tax year (December 31st). You make too much money for the contribution to be deducted from your taxes, so it is considered a “nondeductible contribution.” 2. Also, before the end of the tax…
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Reporting a Backdoor Roth – Conversion After December 31st
The basic example assumed both the Traditional IRA contribution and the Roth conversion step happened in the same year (for example, both events happened during 2023, for the 2023 tax year). However, it’s possible that both of those steps did not take place during the same tax year. The transaction could be spread across 2…
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Reporting a Backdoor Roth plus a Recharacterization
The Backdoor Roth strategy gets a bit more complicated when a recharacterization is also involved. A recharacterization is when you treat an IRA contribution (either Roth or Traditional) as though it was originally made to the other type of IRA. You accomplish a recharacterization by working with the financial institution…
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Backdoor Roth Plus a Recharacterization – Basic Scenario
Here are the steps for entering a Backdoor Roth including a recharacterization. First: Add the 1099-R for the Roth to Traditional IRA Recharacterization 1. When your recharacterization from traditional to Roth is completed during the tax year (for example, if your 2023 Roth contributions were recharacterized to Traditional…
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Backdoor Roth Plus a Recharacterization – Recharacterization Happens After December 31st
Sometimes, your recharacterization isn't completed until the tax year is already over. As an example, let's say you made a Roth IRA contribution for 2023 during the 2023 tax year. You don't realize until March 2024 (when you're preparing your taxes) that you shouldn't have done this. At that point, you do the…
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Are child care expenses paid to a family member eligible for the Child Care Credit?
Yes, child care expenses paid to a family member are eligible for the Child and Dependent Care tax credit if the family member isn't your spouse, the parent of your qualifying child, or your dependent, and you meet all the tests to claim the Child and Dependent Care Credit. Your family member will be responsible for…