State Tax Refund—Why Do I Have To Report It As Income?

If you receive a deduction on your taxes for something and later recover the "loss," you must return the "loss" to your income. This rule, the Tax Benefit Rule, is seen most often when a taxpayer receives a 1099-G on their state tax refund from the prior year. For an explanation of how the Tax Benefit Rule works and other instances where you should consider adding this money to your income, read this C.P.A. Insight.

Mortgage Forgiveness Income May Be Excludible From Taxable Income

Normally when debt is forgiven, the forgiven amount is considered taxable income for the person responsible for the debt. Recent tax law changes have made exceptions for qualified principal residence indebtedness. However, this is not necessarily a tax-free transaction–more likely tax-deferred. For more information on the rules surrounding mortgage forgiveness, read this C.P.A. Insight.

Where Is Your Tax Home?

The IRS has often interpreted one’s tax home to be the location of the taxpayer’s principal place of business; however the Second, Fifth, Sixth and Ninth Circuit Courts have all maintained that a taxpayer’s tax home is the location of his permanent residence. For more information on establishing residency to maintain your tax home, read this C.P.A. Insight.