The Good Tax Guide » Tax Payment

Do I have to pay tax on academic scholarships?

Tax Guide — Wed, 24 Sep 2008 03:59:58 +0000

One can remove the academic scholarship from taxes if they meet some criteria. These criteria are put forward by the responsible tax authorities. Day by day the cost of living is going on increasing. As it increases the college costs also increases. So, more amount of money is required for this purpose. So if a child is getting scholarship it can help a lot.

Also the benefit of scholarship can be improved more if proper steps are taken to avoid it from taxes. In case if the child is attending a private college rather than a government college then the cost will be double. So it would be difficult for the parents to pay the money even with the available scholarships if taxes are deducted from that. So, proper measures must be taken to make sure that such academic scholarships get free from taxes.

If the academic scholarship is used for other purposes like paying room rent and travel expenditures then it should be shown in the tax form. In that case it will become taxable as the scholarship is meant only to be used for paying tuition fees and for buying the necessary books. The scholarship will be free from tax if and only if the person is a candidate for a degree in some educational institution. The scholarship money should not be used for other purposes. If you use it for any other purpose then you will have to pay the tax on that amount.

Is Tax payment on accelerated death benefits and viatical settlements necessary?

Tax Guide — Wed, 24 Sep 2008 03:54:18 +0000

Everyone knows that day by the cost of living as well as medical expenses are increasing. So, more money is required if a person gets admitted in the hospital. As the cost of medical care is very high, most of the insurance companies are having insurance policies with the accelerated death benefit feature. The cost paid by the insurance company on the insurance policy to the terminally ill for surrendering his/her policy is known as accelerated death benefit.

Another option is to sell the policy to a viatical settlement company. These companies buy this policy mainly for their investors. Some companies also buy the policies for themselves. Both, accelerated death benefit and viatical settlement are tax free. But if the benefits are used for a long term care, then the excess mount is taxable and should be shown when filing the tax returns. This is applicable if and only if it exceeds IRS per diem limit. So make sure that you show the proper amount when filing the tax forms. Make sure that you get the tax reduction by placing the accelerated death benefit or viatical settlement below the limit mentioned by them. So choose appropriate measures to keep it away from the tax zone.

Is it necessary to pay tax on mutual fund dividends and capital gains?

Tax Guide — Thu, 16 Oct 2008 08:11:54 +0000

All the dividends you receive from mutual funds should be reported on tax returns. In the case of a mutual fund the dividend will be paid in several ways. So the receiver must show the received dividend amount which is taxable in the tax returns. Failure in doing so will result in tax penalties for the person. According to the procedure of the mutual fund, they will send Form 1099-DIV to the receiver. The necessary instructions required for filling the tax form will be sent by the mutual fund itself. The dividends are to be entered into the Form 1040, Schedule B, line 5. In line 13 the mutual fund capital gains has to be entered. These are the long term gains distributed by the mutual funds. One must report the mutual fund capital gains made in the tax return form. But mutual fund non taxable distribution is not taxable as the name suggests. But it is non taxable only until the basis is reduced to zero. In case of any foreign tax, it will be mentioned in the Form 1099-DIV by the mutual fund. So, all dividends that one receive should be reported in the tax returns, nothing should be left out.