Common tax questions everyone is wondering
During tax season, there are a number of areas that generate questions. Here are five of the most tax FAQs and their answers. But like most things, there can be exceptions, so always ask for help when in doubt.
- Are my miles earned on my credit card taxable? Taxation of any extras you earn with a credit card – including miles, discounts, and even cash back – is not taxable if you had to pay to get them. Other rewards you receive, such as a reward for signing up for a card or referring a new cardholder, the IRS considers taxable income.
- Does my employer contribution count toward the 401(k) limit? Your employer’s matching contributions do not count toward your maximum contribution limit, which for this year is $22,500. If you’re 50 or older, you can sock away an additional $7,500 (for a total of $30,000) this year.
- What happens to loans from my retirement account if I change jobs? When you switch jobs, you must repay any loans borrowed from your employer-sponsored retirement account within a short time. If you do not repay the loan, the outstanding balance becomes a distribution subject to income taxes and an early withdrawal penalty.
- Do I really need to report gifts given to people? Yes, but only if you give more than $17,000 ($34,000 if married) in 2023 to any one person. You must report it to the IRS on a gift tax return. That’s because the IRS keeps track of gifts you can make over the course of your lifetime, which in 2023 is $12,920,000 ($25,840,000 if married). Only after reaching this lifetime dollar amount will you need to actually make a gift tax payment. Check out “Understanding the gift giving tax,” for more information.
- Do I have to report a loss? You may think the IRS isn’t interested in losses you incur, such as when you sell a stock at a loss or if your business loses money. You should always report losses on your tax return because you can use them to offset income under certain conditions. In addition, you can carry forward most losses to future years to offset income.
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Have your own question? Contact RRBB Advisors. The answer could surprise you.
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