Myths about Taxable Income

My Social Security benefits aren’t taxable.

Depending on the amount of other income that a taxpayer has to report, their benefits may be taxable – but the maximum amount of Social Security benefits that must be included is 85 percent.

I don’t need to report stock sales if I bought other stocks with the proceeds.

Many taxpayers think that if they reinvested the money from a stock sale, or otherwise didn’t see any cash, that it doesn’t need to be reported. But stock sales outside of retirement accounts must be reported.

I’m a student and only work part-time, so I don’t have to file a return.

Filing requirements are based on filing status, dependency status, amount of income, and whether it is earned or unearned – not whether you’re a student.

My deadbeat cousin lives in one of my rental properties. He doesn’t pay much, but I can still treat it as a rental.

There are limits on how far below fair market rental value you can go – including the fact that expenses cannot exceed income. There may be other limits as well: The Tax Court has suggested that a fair rent for a family member could be up to 20 percent below market.

My spouse and I separated last year and lived apart for most of the year – so I can file Single.

Unless you were legally divorced or separated as of the end of the year, you cannot file as single.