SALE OF YOUR PERSONAL RESIDENCE

If you sell a primary personal residence that you owned and lived in for at least 2 years (24 months) out of the 5 years leading up to the date of the sale (date of Closing) you can exclude up to $250,000 of - $500,000 if filing a joint return and both spouses owned and lived in the home for 2 out of 5 years – from federal, and probably state, income taxes.  The first $250,000 or $500,000 of gain is tax-free.

The two years of residence does not have to be consecutive 12-month calendar years.  If, for example, you live half of the year in the north and half of the year in a summer home four 6-month years would qualify.

To determine your “cost basis” when calculating the gain you begin with the original purchase price, less any credits provided by the seller. 

If you inherited the home your basis is the fair market value (appraised value) of the property on the date of death of the person from you inherited the property.  If a federal or state estate or inheritance return was filed the value of the property listed on that return is the basis.  

You then add –

·         Closing costs paid on the purchase of the home. either as part of the closing or paid separately

·         Capital improvements made to the property over the years

·         Closing costs paid on the sale of the home, either as part of the closing or paid separately

·         Costs of sale you paid directly, such as advertising and marketing expenses

Closing costs that are added to basis include –

·         Abstract or title fees

·         Charges for installing utility services

·         Real estate commissions

·         Legal fees (including fees for the title search and preparing the sales contract and deed)

·         Appraisal and document preparation fees

·         Recording fees

·         Survey fees

·         Transfer or stamp taxes

·         Title insurance

·         Mortgage points that were not deducted/deductible on Schedule A

You can include any closing costs the seller owes that you agree to pay, such as -

·         Real estate taxes owed up through the day before the sale date

·         Back interest owed by the seller

·         The seller‘s real estate commissions and title recording or mortgage fees

·     Charges for improvements or repairs that are the seller’s responsibility (i.e. lead paint removal)

IRS Publication 523 lists examples of improvements that increase the basis of the property -

Additions:

Bedroom, Bathroom, Deck, Garage, Porch, Patio

Lawn & Grounds:

Landscaping, Driveway, Walkway, Fence, Retaining wall, Swimming pool

Systems:

Heating system, Central air conditioning, Furnace, Duct work, Central humidifier, Central vacuum, Air/water filtration systems, Wiring, Security system, Lawn sprinkler system

Exterior:

Storm windows/doors, New roof, New siding, Satellite dish

Insulation:

Attic, Walls, Floors, Pipes, and duct work      

Plumbing:

Septic system, Water heater, Soft water system, Filtration system

Interior:

Built-in appliances, Kitchen modernization, Flooring, Wall-to-wall carpeting, Fireplace

If you included in your basis the cost of an energy-saving improvement and you received a tax credit or subsidy for the improvement, you must subtract the credit or subsidy from your total basis.

Special rules apply to a home acquired via a trade, in a divorce, or as a gift, a home used partly for business or rental, and a home that was foreclosed, repossessed, condemned, or abandoned.  The above referenced IRS Publication 523 discusses these situations in detail.

A special calculation is also required for a surviving spouse who originally purchased the home jointly with his/her spouse.  That is the subject for another post.

Once you have sold your personal residence you should send your tax professional the following items ASAP so he/she can calculate the gain on the sale during the “off-season” and be ready when you file your 2026 return –

·         The Closing Statement for the original purchase of the home

·         The Closing Statement for the sale of the home

·         A list of capital improvements made to the property over the years

·         A list of expenses of sale you paid directly

Any questions?

TTFN

WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’?

 

It is very, very important that you get your federal and state GDE (the “E” is extension) in the mail TODAY.  Take the envelope(s) to the Post Office and hand it/them to a postal clerk and watch him/her stamp the postmark date on it/them.

The penalty for late payment of tax is ½ of 1% (.005) per month.  The penalty for late filing is 5% (.05) per month.

* The IRS has released its list of the “Dirty Dozen tax scams for 2026: IRS reminds taxpayers to watch out for dangerous threats”.

* The NATP blog explains “What every client {taxpayer} needs to understand about taxpayer responsibility” –

“The IRS holds the taxpayer legally responsible for the accuracy of their income tax return, even if a professional prepared it.”

* And NATP explains “How to receive the $1,000 Trump {Section 530A} Account deposit”.

* As he does at this time each year Russ Fox is providing his Top Ten list of “Bozo Tax Tips”.

TTFN

WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’?

 

* The National Association of Tax Professionals (NATP) has prepared a “media backgrounder” outlining several common “Tax myths taxpayers are falling for in 2026”.  

* Hey, NJ, senior homeowners (highlights are mine) –

“The Stay NJ program offers property tax benefits to eligible homeowners aged 65 and older. It reimburses applicants for 50% of their property tax bills, up to a maximum of $13,000, with a 2025 benefit cap of $6,500. To qualify {for 2025 payments send in 2026 – rdf}, you must have owned and lived in a home for the full 12 months of 2025 and have an income below $500,000. . . . . Stay NJ benefits are calculated after ANCHOR and Senior Freeze benefits are determined and are issued quarterly.

And - “We will begin issuing First-Quarter payments for the 2024 Stay NJ Program on February 9, 2026. Eligible recipients will receive their paper checks in the mail.”

* Back to the National Association of Tax Professionals, it provides “Trump 530A Accounts explained for tax professionals” – which also provides useful information for taxpayers.   

* The F.I. TAX GUY provides a guide to help in “Understanding Your Form 1099-DIV”

* The IRS explains “New Schedule 1-A and Form 1040 instructions show how taxpayers will claim important deductions”.

Regarding the section of Schedule 1-A on the new “Senior Deduction” – see my post “Is A Puzzlement”.

TTFN

IS A PUZZLEMENT!

 

As a “senior citizen” (age 65 or older) I am entitled to the new $6,000 “Senior Deduction” on my 2025 Form 1040-SR.  Married seniors are entitled to a maximum deduction of $12,000 on a joint return (the deduction is not allowed if you are filing separately).

The deduction is phased out at 6% of the amount MAGI (AGI plus foreign income excluded) exceeds $75,000 for unmarried filers or $150,000 if married filing a joint return.

So, if a single filer has a MAGI of $80,000 his/her deduction is reduced by $300 ($5,000 x 6%).  He/she can deduct $5,700.

Looking at a real-life example, one would think that a married couple, both of whom are seniors, with a MAGI of $322,030 would reduce the allowable deduction by $10,322 ($172,030 x 6%) and be able to claim $1,678 ($12,000 less $10,322).  But that is not the case.

If you follow the form – Schedule 1-A Part V – the couple gets no Senior Deduction.

Line 31 – Enter the amount from Line 3 (MAGI)             322,030

Line 32 – Enter 150,000 if married filing jointly              150,000

Line 33 – Subtract 32 from 31                                      172,030

Line 34 – Multiply line 33 x 6%                                       10,322

Line 35 – Subtract line 34 from $6,000                      0

For some strange reason the phase-out amount is subtracted from $6,000 and not $12,000.  If there had been a positive number on Line 35 it would have been doubled to get the total allowable deduction.  So, this married couple is screwed out of a $1,678 deduction.

I have no idea why the calculation is done this way.  Is this what Congress intended?  But then the members of Congress who voted on this new tax deduction never actually read the bill but - they voted as they were told to by their Party.

Is a puzzlement. 

TTFN

WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’?

 

And so it begins – the 2026 tax filing season (for 2025 returns).  I am glad I am retired!

* Did you hear – “National Taxpayer Advocate delivers Annual Report to Congress; finds taxpayer service was strong in 2025 but foresees challenges for taxpayers who encounter problems in 2026”.

One item of note that could cause issues with processing and reviewing 2025 returns (highlight is mine) –

“The IRS started 2025 with about 102,000 employees and finished with about 74,000, a reduction of 27%. Reductions were made in virtually all IRS functions, including Taxpayer Services. . .”

All thanks to the deplorable and despicable so-called Department of Government Efficiency (DOGE) and convicted felon and indicted traitor Trump.

* NATP tells us, “IRS releases FAQs on Executive Order 14247 payment modernization” and provides a summary.

While refunds requested on 2025 returns will be issued via direct deposit –

“For now, mailed payments to the IRS, including checks and money orders, will still be accepted and processed.”

* From the instructions for the 2025 Form 5695 (highlight is mine) -

“Beginning January 1, 2025, if you are claiming the energy efficient home improvement credit for specified property placed into service in 2025, you must include the four-character alphanumeric unique qualified manufacturer identification number (QMID) for each item.”

This number should be provided by the seller of the item.

* The New Jersey 2025 PAS-1 property tax relief application and instructions are now available at the NJ Division of Taxation website.

* The 2025 PA state income tax forms and instructions are finally available online.

TTFN

THE TWELVE DAYS OF TAX SEASON

Although I have retired, I still celebrate the beginning of the tax-filing season with my annual posting of -

THE TWELVE DAYS OF TAX SEASON

On the first day of tax season my client gave to me a Closing Statement for the purchase of a home.

On the second day of tax season my client gave to me 2 year-end brokerage statements.

On the third day of tax season my client gave to me 3 mortgage statements (without, of course, any analysis of how much of the mortgage interest reported represents interest on acquisition debt).

On the fourth day of tax season my client gave to me 4 W-2s.

On the fifth day of tax season my client gave to me 5 Salvation Army receipts.

On the sixth day of tax season my client gave to me 6 1099-DIVs.

On the seventh day of tax season my client gave to me 7 cancelled checks.

On the eighth day of tax season my client gave to me 8 useless items.

On the ninth day of tax season my client gave to me 9 medical bills (not enough to exceed 7 1/2% of AGI).

On the tenth day of tax season my client gave to me 10 stock sale confirms.

On the eleventh day of tax season my client gave to me 11 employee business expenses (despite being no longer deductible).

On the twelfth day of tax season my client got from me a finished tax return, 11 employee business expenses, 10 stock sale confirms, 9 medical bills, 8 useless items, 7 cancelled checks, 6 1099-DIVs, 5 Salvation Army receipts, 4 W-2s, 3 mortgage statements, 2 year-end brokerage reports, and a Closing Statement for the purchase of a home.

And, of course, on the thirteenth day of tax season my client gave to me a corrected Consolidated 1099 from Wells Fargo Advisors!

TTFN

GETTING READY TO PREPARE YOUR RETURN

 

You will soon be receiving the various forms needed to prepare your 2025 Form 1040. Employers, banks, brokers, mortgage companies, mutual funds, etc. are required to provide taxpayers with W-2s, 1099s and 1098s by January 31, 2026. If you have not received all your information returns by February 15th, contact the employer, bank, broker, or whoever and arrange to receive a duplicate copy.

When you receive your W-2s and 1099s check the figures against your own records to make sure the amounts reported are correct. Carefully compare the gross federal and state wages, federal, state and local income tax withheld, and Social Security and Medicare taxes withheld numbers on your W-2s to the amounts on your paystubs or other records. Also verify that the Social Security numbers on the forms are correct. If you find an error or discrepancy, contact the appropriate employer or financial institution for an explanation or a corrected copy.

A bank may issue one Form 1099-INT for all the accounts – savings, money market and CDs – that belong to the same name and Social Security number. There may be 6 or 7 accounts listed on a 1099-INT. It is important to verify each account listed on the form to make sure all of them belong to you. Years ago, one of my clients received a 1099-INT last year with someone else’s account, that earned $300+ interest, included in the listing! Had he not carefully checked the form he would have paid close to $100.00 in unnecessary federal and state income tax. If you find an error on a Form 1099-INT go to the bank immediately and request a corrected form.

If you collected unemployment during 2025 the state may not mail you a Form 1099-G.  You may need to go online to the state labor department website and print-out the Form.  This is the case for New Jersey.

TTFN

VERY VERY IMPORTANT!

 

This post, which I issue every year at this time, is for all of the journalists and bloggers out there.

When writing about taxes this filing season DO NOT advise your clients to ask, consult, contact, or talk to your CPA or a CPA!

The correct advice is – ask, consult, contact, or talk to your or a tax professional.

The mere existence of the initials “CPA” after a person’s name does not in any way, shape, or form indicate that he or she knows his or her arse from a hole in the ground when it comes to preparing 1040s.

The initials related to competence in preparing 1040s are EA for Enrolled Agent.

A particular CPA may indeed be competent and experienced in preparing 1040s, and many are, but it is only because of the education, training, experience, and other factors that are unique to that specific individual, and has nothing whatsoever to do with the initials “CPA”. 

And that specific individual is just one of your many choices among tax professionals.

Got it?

TTFN

DON'T BE IN A HURRY!

 

The IRS has announced that the tax filing season for 2026 will begin on January 26, 2026.

However – here is some good advice I have been giving to taxpayers for almost two decades.

You shouldn’t wait till the last minute to prepare your tax return.  But don’t rush to be among the first taxpayers of the year to have your taxes done.

Do not visit your tax professional, or prepare your tax return, until you are sure you have received ALL information returns and documentation from ALL sources.

Before I retired the “tax filing season” always officially began for me on February 1st.  I told my clients not to give me their “stuff” until then, and rarely prepared a tax return before the 1st of February unless both the client and I are sure that he/she has received everything necessary to properly prepare the return.

The reason I chose February 1st is because, under federal law, all W-2s, 1099s and 1098s are required to be furnished to taxpayers by January 31st (unless the 31st falls on a week-end). The instructions for these forms state that the “furnish” requirement will be met if the form is properly addressed and mailed on January 31st.  Plus, most banks, brokerages, mortgage companies, colleges, and the like are not able to send out 1099s and 1098s until the end of the January.

Decades ago, when I still had a storefront office open to the public, a long-time client came in on the morning of February 1st to have his return prepared.  He had received all the 1099s for interest and dividends for all accounts and investments as well as the 1099s for Social Security and pensions.  Upon reviewing the documents, he presented to me I found that he had a form for every source of income he had reported on the previous year’s return.  He told me he had not sold any stock during the year, and that there had been no spin-offs, mergers or “cash in lieu” for fractional shares.  So, I prepared the federal and state returns.

He left the office with the completed returns happy in the thought that he was finished with his “uncles” for the year and pleased with himself for being so early.  He returned home, signed the returns with his wife, and went directly to the Post Office to mail the returns.

The next afternoon I got a call from the client.  He had gotten another 1099-R in the mail that morning!  His wife received a pension from Lucent Technologies and, while the amount of the annual pension generally remained constant, early in the year Lucent had made a special one-time distribution to its retirees from a fund other than the regular pension fund,and issued a separate 1099-R for this distribution.

The client returned to my office that afternoon and I prepared amended returns, for an additional fee, to claim the income and withholding from the new 1099-R.  I instructed him to wait to mail the amended returns until he received the refund checks from the original returns, so as not to confuse the IRS and NJ by having two returns in the system at the same time.  The bottom line is the client had to pay twice for filing his returns.

If you have a brokerage account there is an excellent chance that you will receive at least one corrected “Consolidated 1099 Statement” or “Tax Reporting Statement” to report taxable dividends, interest and gross proceeds after the initial statement arrives in late January or early February. The final corrected 1099 may not arrive until mid-March.  

And if you have invested in a limited partnership the GDMF Form K-1 will probably not arrive until at least mid-March – and possibly not until August!  This is also the case if you were the beneficiary of the estate of a deceased person – you may be receiving a Form K-1 from the estate.  You should check with the Executor to see if one will be issued.

So, to repeat – don’t be in a hurry to be among the first to file your tax return. 

TTFN

WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’?

 

The first BUZZ of 2026!

“IRS announces first day of 2026 filing season” –

“The Internal Revenue Service announced Monday, January 26, 2026, as the opening of the nation’s 2026 filing season.”

Of course, before I retired tax season always began, for me, on February 1^st – when all W-2s were required to have been distributed.  Don't be in a hurry to be the first to file your tax return.  Wait until you have ALL the necessary information returns and other documents.

This IRS release also discusses “online tools and resources help with tax filing”.

* The 2025 Form 1040, Form 1040-SR, and Schedules 1 - 3 and the instruction book are now available to download at the IRS website.

* And the New York State 2025 tax forms and instructions are also available online.

* Russ Fox has announced his choice for “The 2025 Tax Offender of the Year” at TAXABLE TALK

* And, perhaps a week late, Russ provides his annual reminder to those who use their car for business that “It’s Time to Start Your 2026 Mileage Log”.

TTFN

A REMINDER

As 2025 ends a reminder –

Donald “The Man Who Would Be King” Trump, the current President of the United States, is a totally worthless piece of excrement, completely devoid of intelligence, character, integrity, honor, humanity, sympathy, and empathy who does not possess a single redeeming positive human quality or value.  He does not care one ounce about anyone or anything but himself and has never performed a single totally unselfish act in his entire adult life.  Trump is the absolute worst human being to hold national public office in US history.

No one single individual has ever done more damage to America, the American people, American freedom and democracy, and true American values than Donald Trump.

The greatest threat to America, the American people, American freedoms and democracy, and true American values continues to be Trump and today’s Republican Party.  In 2026 it is VITAL that ALL intelligent and patriotic Americans vow to work to defeat EVERY Republican candidate in EVERY election at EVERY level.

Our future depends on it!

TAFTY

WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’?

The last BUZZ of 2025!

* The 2025 NJ state income tax forms and instructions available on the NJ Division of Taxation website.

The only change to the 2025 NJ-1040 I could find is a question about Digital Assets at the top of Page 1.

The final version of the 2025 Form 1040 and 1040-SR, as well as New York and PA state tax returns, are not yet available online.

* The TAX FOUNDATION identifies “State Tax Changes Taking Effect January 1, 2026”. 

* It’s that time of year again – time for “PNC's 2025 Christmas Price Index®: Holiday Cheer Comes at a Premium!” (highlights are mine) -

“The cost of celebrating Christmas is climbing again. Now in its 42nd year, the PNC Christmas Price Index® (PNC CPI) reveals that the cost of the gifts from the classic holiday carol ‘The Twelve Days of Christmas’ has risen 4.5% compared to last year, outpacing the Bureau of Labor Statistics' Consumer Price Index (BLS CPI) October year-over-year reading of 3.0%.

The PNC CPI, launched in 1984, is a light-hearted take on the BLS CPI and measures the change in prices consumers could expect to pay for True Love's gifts. Data is compiled by PNC's Investment Office using sources from across the country, including dance and theatre companies, hatcheries, pet stores and others. Overall, the 12 gifts that comprise the PNC CPI increased to a tree-topping $51,476.12 this year.”

The biggest percentage jump is the 5 golden rings – up 32.5 % from 2024.

* The IRS has finally released the 2026 Standard Mileage allowances -

“Beginning Jan. 1, 2026, the standard mileage rates for the use of a car, van, pickup or panel truck will be:

·  72.5 cents per mile driven for business use, up 2.5 cents from 2025.

·  20.5 cents per mile driven for medical purposes, down a half cent from 2025.

·  20.5 cents per mile driven for moving purposes for certain active-duty members of the Armed Forces (and now certain members of the intelligence community), reduced by a half cent from last year.

· 14 cents per mile driven in service of charitable organizations, equal to the rate in 2025.”

The charitable rate is set by Congress and hasn’t been increased for several years.

TTFN 

MERRY CHRISTMAS!

 

https://www.youtube.com/watchv=CKT1yU033C0&list=RDCKT1yU033C0&start_radio=1

 

A very Merry Christmas

and a Happy New Year.

Let's hope it's a good one,

without any Trump!

WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’?

 

* From Russ Fox at TAXABLE TALK – “New Jersey: We Delayed Processing Your Extension Payment So We’re Going to Penalize You for Our Error”.

As Russ points out –

“This is also a reminder to you that many notices sent by tax agencies are wrong in part or in whole.  Do not blindly pay a notice!  Send it to your tax professional and have them check it for accuracy.”

In my experience, more often than not error notices from the IRS and state tax agencies are incorrect.  And especially notices from the NJ Division of Taxation.

* The NJ DIVISION OF TAXATION website discusses “One Big Beautiful Bill Act (OBBBA) and the New Jersey Gross Income Tax” (highlight is mine)–

“For Tax Years 2025 through 2028, under the One Big Beautiful Bill Act (OBBBA) there are new federal income tax deductions for senior citizens, overtime, and tips. However, the New Jersey Gross Income Tax (GIT) has defined categories of income and deductions and is not computed based on federal adjusted gross income. Therefore, federal deductions under the federal OBBBA regarding overtime, tips, and senior citizens do not affect a taxpayer's New Jersey Individual Income Tax return (Form NJ-1040, NJ-1040NR, or NJ-1041).”

And “One Big Beautiful Bill Act (OBBBA) - Changes to Charitable Contribution Deductions” (again, highlight is mine) -

“For the purposes of the New Jersey Gross Income Tax Act, there is no provision similar to the Federal Internal Revenue Code allowing charitable deductions. Therefore, there are no changes for Gross Income Tax purposes.”

* The NATP reports “IRS first-time penalty abatement: automatic in 2026” (highlight is mine) –

“The IRS administrative penalty waiver for first-time abatement (FTA) has been in existence since 2001. In the past, tax professionals and taxpayers had to write or call the IRS to request the waiver. Starting in 2026, taxpayers who qualify for FTA will automatically receive the abatement from the IRS.”

The article includes an overview of the First-Time Abatement requirements.

THE LAST WORD

Every single person who voted for convicted felon and indicted traitor Trump for President in 2024 is truly an enemy of the state and an enemy of the people, a traitor to the United States and to the Constitution, and the greatest threat facing America today.

There has NEVER been an intelligent or acceptable reason for ANYONE to vote for Trump for ANY office!

TTFN

HAPPY THANKSGIVING!

 

WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’?

 

All the BUZZ in this installment comes from the federal government.

* The IRS has released a draft of the Form 1098-VLI - Vehicle Loan Interest Statement - to be used beginning in 2026 to report the interest paid on a qualified passenger car loan that qualifies for the new BBNSBB deduction

* This just in – “Social Security Announces 2.8 Percent Benefit Increase for 2026”.

And “ . . . the maximum amount of earnings subject to the Social Security tax (taxable maximum) is slated to increase to $184,500 from $176,100.”

* Sad news.  Jory Heckman reports “IRS tells states Direct File ‘will not be available’ in 2026” at the FEDERAL NEWS NETWORK (highlight is mine) - 

“The IRS sent an email on Monday to 25 states it partnered with on Direct File, which has been running for two filing seasons, telling them that ‘Direct File will not be available in Filing Season 2026,’ and that ‘no launch date has been set for the future’.”

This was done despite -

“Former members of the Direct File team, however, claim the project largely succeeded in its goal of making it faster and easier for individuals to file their taxes.”

The corrupt Trump Administration clearly gave in to pressure from Henry and Richard and other commercial tax preparation companies.

* And the IRS has released the cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2026. 

THE LAST WORD

Just so you know –

Over the past 50+ years I have voted for Democratic, Republican, and Independent candidates – depending on the election, the issues, and the candidates.

As I posted in the past –

“In 2012 I voted for Mitt.
But I’ll never vote for Trump,
‘cause he’s a worthless piece of shit.”

I have no issues with “traditional” Republicans or true conservatives.  I do, however, strongly oppose and denounce “today’s” Trump-embracing and Religious Right controlled Republican Party – and very seriously believe that it is truly the greatest enemy of and danger to America and American democracy.

TAFN