Last Updated on July 12, 2021 by Editor Team
One of the most frequent questions tax attorneys and certified public accountants hear begins with the words, “Do I have to pay tax on?” Most queries along these lines are related to either retirement income from the Social Security Administration or various kinds of life insurance payouts. Below are the five most frequent questions along with brief answers that apply in most cases. It’s important to remember that everyone’s tax situation is unique, so always consult with your own financial advisor for specific information about the amount of taxes you owe.
Precious Metals Appreciation
Say you purchased a one-ounce gold bar many years ago at a price of $500. Now that the yellow metal has soared to nearly $1,800 per ounce, you decide to sell it and pocket a handsome profit. How much of the sales price will be taxable? In short, you’ll pay the long-term (held the asset for longer than one year) capital gains rate on the profit. Depending what income bracket you’re in, that rate will be 20, 15, or 0 percent. In this example, the gain is $1,300 ($1,800-$500).
Viatical Life Insurance Settlements
When an insured person is deemed to be so ill that they have less than 24 months to live, they can sell their life insurance policy for cash in a process called a viatical settlement. If you decide to do this, keep in mind that it’s actually a very big decision for you and your family, but can often be an effective way to deal with medical bills and final expenses. For most people, as long as they follow the general laws and guidelines about viatical settlements, there’s no tax on what they receive from the sale of the policy. So, if you want to receive cash to use as you wish from an active life insurance policy, consider reviewing a simple online guide to help you plan correctly and receive a payout as quickly as possible.
While many of us look to hitting the jackpot at the casino and fall short, unless you’re a professional gambler, your winnings from gaming are treated as ordinary income. But, there’s an escape hatch, of sorts. You can deduct verifiable (you have the receipts or paperwork to prove it) gaming losses from gaming winnings. An example is you go to the casino and win $1,000 playing the slots. Next week you lose $900 playing poker. If that’s all your gaming activity for the year, you need to add $100 to your ordinary income when you file your tax forms.
Social Security Benefits
Social security benefit taxation is a tricky topic. However, there are some general guidelines that apply to most taxpayers. For example, for most single and married filers, you won’t pay any tax on social security if your adjusted gross income, including social security payments to you, is less than $25,000 and $32,000, respectively. Go above those limits, and at least half of what you receive in the form of SS income is subject to taxation as ordinary income.