Several Questions

Getting into tax season....

1) I have a full-time job and also a schedule C business. I have a long-term care policy I buy through my employer. I do not itemize medical expenses. Is there any provision to deduct the long-term care premiums?

2) I have a condo that I paid $176,000 for and lived in for a year. On 1/1/2009 I converted it to a rental. I set the value of the land at $11,000, leaving $165,000 for the building. I'd have expected the depreciation to be $6,000 - $165,000 divided by 27.5. Turbo Tax shows it as 27.5 year property, but gives me depreciation of $5,750. Any idea why?

3) When I lived in states with no income tax (Texas and Florida) I funded my retirement plans (where possible) on a Roth basis. Now that I am in a state with a high income tax, I fund them on a traditional (pre-tax) basis. I do have some hope of retiring to a low-tax state (I'm 52 years old). Does this seem in general like a more sensible plan, to fund pre-tax since I am also saving the state income tax as well as Federal?

4) I have about $120,000 in a SEP IRA, $100,000 in a Rollover, and $300,000 in a Roth. My income is over the Roth contribution limit. I would love to take advantage of the "Roth Conversion Trick" where you make an after-tax contribution, then convert to a Roth tax-free. I might be able to take the $100K from the Rollover and roll it into either my self-employed 401(k) or my employer's plan. However, if I understand the rules correctly, I would have to clear out the SEP also. That is, say I contribute $5,000 to a nondeductbile IRA. If I then convert $5000, this would come 96% from the SEP (with a cost basis of zero) and 4% from the new IRA, so I'd have to pay tax on $4,800 of the conversion. Is there any clever way to get around this? (I created the SEP some years ago by terminating my Keogh - right now I wish I hadn't, but who could have foreseen the current set of rules?)

5) With regard to the condo, I get a property tax bill in November. I don't even know what time period it is for. I paid the 11/2008 tax bil in 1/2009, and the 11/2009 bill in 12/2009. I can deduct both in 2009, right? Does it matter if the 11/2008 bill was for 2008, when I used the condo as my primary residence, or if it was for 2009, when it was rental property? In theory I know that in the first case it would be on Schedule A and in the second case on Schedule E, but I don't have any kind of passive loss limit issue. The only issue might be that I didn't itemize for 2008, so if the 11/2008 bill was for 2008 AND I had to consider it as Schedule A, I would get no benefit. But I don't think that matters, does it - no matter what, if I paid it in 2009, it's a 2009 deduction.

Thanks in advance.

Reply to
Hank Youngerman
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Yes, you can include your LTC premiums and allowed medical premiums on the front of Form 1040, Adjustments, but not more than your (Schedule C profit less 1/2 SE tax).

Yes, but why isn't your software showing you that calculation?

Depreciation on residential rental property uses the Mid-Month convention. That is, your January in-service date is deemed to occur on Jan 15 so your calculation is (165,000/27.5) x (11.5/12) = 5750.

Yes.

Establishing which is your primary residence is complicated and I'd need much more data to know if you had done that. I'll leave this as an issue for discussion.

Reply to
Arthur Kamlet

Wasn't there a rule that if you could be covered by a plan at your or your spouse's workplace, then your premiums are not deductible? Or does that only apply to medical insurance premiums, not long term care premiums?

BTW, the 11k value of the land -- does it come from official property appraisal statements?

Reply to
removeps-groups

It depends on your age. If you contribute 16.5k to a Roth 401k, your CA state tax on it may be $1500, and the federal tax may be $4500 or so -- depending on your tax bracket. If you're young enough, the Roth could triple in value to about 50k. All 50k would be tax free. But if it was a regular 401k, then 50k is taxable at perhaps 25% depending on your tax bracket, with no state tax if you retire in TX, so that's

12.5k tax. Of course, you wouldn't take the 50k all at once, but your savings numbers look high enough that you might be in the 25% tax bracket.

It is possible to rollover both regular and SEP IRA's into your 401k. You have to see if your plan 401k plan allows it though. If they don't allow contribution from a SEP IRA only, then perhaps you can rollover the SEP IRA into the traditional IRA, though I haven't checked to see if this is possible.

Reply to
removeps-groups

Not sure what you mean by "official". Property tax assessment value is allowed as a "safe harbor" amount, but is not required. The land should be valued at FMV. For example, if you can estimate the value of the land the condo building sits on by market comparison to similar parcels of vacant land, and then divide by ownership percent, that would work.

-Mark Bole

Reply to
Mark Bole

If the insurance is through his employer's plan how can he take the self-employed adjustment? The 1040 instructions are clear that this wouldn't qualify. Not just nitpicking here. If there's been a development that allows someone with self-employment income to use the adjustment for premiums paid for an employer plan, I got some amending to do.

Phil Marti Clarksburg, MD

Reply to
Phil Marti

Agree. I didn't see that first time around. Assuming the employer plan offers a subsidy, and I'd be confident it does, then those months for which TP had that plan available, he cannot take the SE premiums above the line deduction.

Reply to
Arthur Kamlet

----- Original Message ----- From: "Hank Youngerman" Newsgroups: misc.taxes.moderated Sent: Friday, January 08, 2010 10:28 AM Subject: Several Questions

Reply to
Diogenes

I don't know if it matters, but the LTC plan is not subsidized by the employer. It is essentially an individual plan, with payroll deduction.

Reply to
Hank Youngerman

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