Answers to your tax season questions

Answers to your tax season questions

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tax season 2024

The IRS announced it will open the 2024 income tax return filing season on January 29. That’s when the tax agency will begin accepting and processing 2023 tax year returns.

Here are answers to seven tax season questions we receive at this time of year.

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The kiddie tax could affect your children until they’re young adults

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kiddie tax

The so-called “kiddie tax” can cause some of a child’s unearned income to be taxed at the parent’s higher marginal federal income tax rates instead of at the usually much lower rates that a child would otherwise pay. For purposes of this federal income tax provision, a “child” can be up to 23 years old. So, the kiddie tax can potentially affect young adults as well as kids.

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It’s possible (but not easy) to claim a medical expense tax deduction

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medical expense tax deduction

One of your New Year’s resolutions may be to pay more attention to your health. Of course, that may cost you. Can you deduct your out-of-pocket medical costs on your tax return? It depends. Many expenses are tax deductible, but there are several requirements and limitations that make it difficult for many taxpayers to actually claim a deduction.

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Don’t overlook taxes when contemplating a move to another state

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legal domicile

When you retire, you may think about moving to another state — perhaps because the weather is more temperate or because you want to be closer to family members. Don’t forget to factor state and local taxes into the equation. Establishing residency for state tax purposes may be more complex than you think.

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Court awards and out-of-court settlements may (or may not) be taxed

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damages

Monetary awards and settlements are often provided for an array of reasons. For example, a person could receive compensatory and punitive damage payments for personal injury, discrimination or harassment. Some of this money is taxed by the federal government, and perhaps by state governments. Hopefully, you’ll never need to know how payments for personal injuries are taxed. But here are the basic rules — just in case you or a loved one does receive an award or settlement and needs to understand them.

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The “nanny tax” must be paid for nannies and other household workers

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nanny tax

You may have heard of the “nanny tax.” But if you don’t employ a nanny, you may think it doesn’t apply to you. Check again. Hiring a housekeeper, gardener or other household employee (who isn’t an independent contractor) may make you liable for federal income and other taxes. You may also have state tax obligations.

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4 ideas that may help reduce your 2023 tax bill

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2023 tax

If you’re concerned about your 2023 tax bill, there may still be time to reduce it. Here are four quick strategies that may help you trim your taxes before year end.

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Key 2024 inflation-adjusted tax amounts for individuals

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2024 tax adjustments

The IRS recently announced various 2024 inflation-adjusted federal tax amounts that affect individual taxpayers.

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11 Exceptions to the 10% penalty tax on early IRA withdrawals

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early IRA withdrawal

If you’re facing a serious cash shortfall, one possible solution is to take an early withdrawal from your traditional IRA. That means one before you’ve reached age 59½. For this purpose, traditional IRAs include simplified employee pension (SEP-IRA) and SIMPLE-IRA accounts.

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