The Salina Journal from Salina, Kansas on January 16, 1986 · Page 26
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The Salina Journal from Salina, Kansas · Page 26

Salina, Kansas
Issue Date:
Thursday, January 16, 1986
Page 26
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The Salina Journal Thursday, January 16,1986 PageT6 Medical rule altered Divorced or separated parents should be aware of new rules regarding medical expenses. Under the Tax Reform Act of 1984, divorced, separated, or married parents who have not lived together during the last six months of the calendar year, and have supplied more than half of the child's support together, can now deduct the expenses they incurred for their children's medical care. Previously, only the parent who could claim the child as a dependent was entitled to claim medical expenses. According to the Internal Revenue Service, the child will be treated as a dependent of both parents for purposes of the medical expense deduction. This deduction creates a tax benefit for the parent who is not entitled to the exemption for the child. Special rules apply to divorced taxpayers If you're divorced or separated, there are special tax provisions you should know about before you prepare your tax return, according to the Internal Revenue Service. There are tax rules if you are paying or receiving alimony, tax breaks if you qualify for "Head of Household" status, tax credits if you pay someone to watch your child so you can work, and an earned income credit that returns money to you if you have a low income. If your divorce has been declared final during this tax year, you are generally considered to be in the "single" tax status. However, you can save money on your taxes if you can qualify for the "Head of Household" tax status. If you qualify as a head of household, your tax rate will be lower than the rates for single people. To qualify for head of household status, you had to be unmarried on the last day of the year. To be considered unmarried, even if married but living apart, you must file a separate tax return and your spouse cannot have lived in your home during the last six months of the tax year. In addition, you also must have paid more than half the cost of maintaining a home during the year for: an unmarried child who does not have to be your dependent; for a married child whom you can claim as a dependent or whom you could claim as your dependent except that the non-custodial parent will claim the exemption for the child; or for any other relative whom you may claim as a dependent. Except for your parents, any of these relatives for whom you Feeling ^ toll 4 and squeezed by tax shelters? Wow, have we got a IRA for you. 12 month = 8.75% .. P .r. 24 month = 9.0O% .. P . r . 36 month = 9.25% a.p.r. GREAT PLAINS FEDERAL CREDIT UNION Gain or loss possible on divorce settlement If a taxpayer transferred assets to a former spouse before July 19,1984, as a part of a divorce property settlement, there may be a gain or loss on the transfer. This also applies to transfers after July 18,1984, made under divorce or separation agreements in effect before July 19,1984. Generally, the gain or loss is the difference between the adjusted basis of the property and its fair market value at the time of the transfer. If the property has increased in value there may be a taxable gain, while a decrease in value would result in a loss. However, a loss is only deductible if the property is business or investment property. The spouse making the transfer would realize the gain or loss on the transfer. An equal division of property that is co-owned by both spouses does not result in a gain or loss, according to the Internal Revenue Service. However, the Tax Reform Act of 1984 changed the rules for divorce property settlements. If assets are transferred after July 18,1984, to a former spouse as a part of a divorce property settlement, there will be no gain or loss on the transfer. The transfer will be treated as a gift from the spouse making the transfer. The adjusted basis in the property of the spouse making the transfer will carry over to the spouse receiving the property. The new rules can apply to all transfers made after 1983 if both spouses choose to have them apply. maintain a home must live with you more than half the year. If you pay someone to care for your child so you can go to work or look for work, you can save money on your taxes as well. The credit for child and dependent care expenses allows you to take a tax credit of up to 30 percent of the money you pay for child care each year. Your child has to be under 15 years old or be unable to care for himself or herself for you to take this credit. If your adjusted gross income is $10,000 or less, you may take a credit of up to $720 if you have one child, or up to $1,440 if you have two or more children being cared for. The maximum credit decreases for higher incomes. It is important to remember that you may claim this credit only if you have child care expenses to allow you to work or look for work. You can claim a credit for the expense of having a pre-school child attend a day care center or nursery school during the day. However, the regular costs of schooling for a child in the first grade or above cannot be considered for the credit. Care for the child before and after school hours can be used to figure this credit. 2061 S. Ohio 825-4621 If those figures sound too good to be true, they're not. They reflect the type of tax- deferred returns you can earn by opening an A. G. Edwards Self-Directed Individual Retirement Account and buying zero coupon bonds. These zero coupon bonds, issued by major corporations, pay no interest. Instead, like Treasury bills, they are issued at a fraction of their face value and are paid in full at maturity. Thus, they help your I.RA contribution go further. The big plus of zero coupon bonds is their compounded rate of return, which looks even better when sheltered from current taxes in an I.RA. You may not always be able to reinvest interest from traditional bond investments at the high rates they offer today. Interested in an investment which can mean so much to your retirement planning? Find out more... call your nearest A. G. Edwards office today. •Represents the purchase of '5,000 face amount of Certificates of Accrual on Treasury Certificates (CATS) maturing 2-15-1996 priced at 39.96 on 110-1986 A.G. Edwards & Sons, Inc. —Investments Since 1887— 1O1 UnlUd Building Salina, Ks. 874O1 825-4030 1-800-332-0347 SifK AN-RP-I7-ETS

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