The Tax Prophet: February 2002 FAQ

Elevator in Home Sale of Residence Overpayment of taxes U.S. tax filing for U.S. expatriate

My wife is permanently disabled and we are considering a $23,000 home elevator. If my father pays for if, can he deduct the expense subject to 7.5% AGI (the medical expense limitation)?

Your father may gift more than $11,000/yr. if the additional amounts are for medical purposes as set forth in the tax code. An elevator can be a medical expense under certain circumstances. It would be better for your father to gift the money to you so that you could purchase the elevator. You would have a claim that you incurred a medical expense as an itemized deduction to the extent the cost outweighs the increase in value to your home. The cost of installing an elevator to assist a taxpayer with a heart ailment is a medical expense to the extent the cost of the elevator is higher than the increase in value of the home. For instance, if the elevator costs $23,000 and by virtue of having an elevator, the home's value increases by $15,000, then $8,000 qualifies as a medical expense.

See Also: The Tax Prophet's on Real Estate Taxation

My father recently died and now my 76 year old mother has received a $900,000 offer for their long-time George residence. What happens if she sells?

Unfortunately, your mother cannot carry forward her husband's share of the residential exemption. Thus, your mother may exclude $250,000 in profits, the maximum exclusion for a single person. An installment sale does not increase the residential exemption, but could lessen the taxes paid each year, depending on your mother's tax bracket. Planning Note: Be sure to properly calculate your mother's adjusted basis in the property. If she received the property from her husband or held it as "marital or community" property under the laws of Georgia, the basis in the property could have received a substantial basis "step-up" upon the death of your father.

See Also: The Tax Prophet's Tax Class on Residence

If I overpay my federal taxes, is there a penalty?

There is no penalty for overpaying your federal taxes. You are entitled to a refund of the overpayment or you may apply the overpayment to next year's taxes. If you overpay your state taxes and deduct state taxes as an itemized deduction, any refund received by your state is considered income for federal tax purposes in the following year.

I am a U.S. citizen living in Greece married to a Greek citizen. I earn $3,000 in interest and dividends. Do I file a U.S. tax return and if so, do I have to report my husband's earnings?

Unless your gross income exceeds approximately $7,000, you have no reporting obligation. If your income exceeds this level, then you must file Form 1040, although if you have wages or salary income $74,000 or less you can "elect" to exclude this income from U.S. taxation under the earned income exclusion. See my January Hot Topics for an explanation of the earned income exclusion.. You may file amended returns and make this election for past years, if appropriate. This exclusion only applies to foreign "earned income" and not interest, rents, capital gains or dividend income, which is taxed under the general rules applying to all U.S. taxpayers.

See Also: The Tax Prophet's articles on Foreign Taxation

All contents copyright � 1995-2003 Robert L. Sommers, attorney-at-law. All rights reserved. This internet site provides information of a general nature for educational purposes only and is not intended to be legal or tax advice. This information has not been updated to reflect subsequent changes in the law, if any. Your particular facts and circumstances, and changes in the law, must be considered when applying U.S. tax law. You should always consult with a competent tax professional licensed in your state with respect to your particular situation. The Tax Prophet® is a registered trademark of Robert L. Sommers.



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