[saketsengar]

Hello Gentlepersons;

My name is Saket an Indian citizen from Seattle, WA. Got a ques regarding my Tax status?

I came to US on May 19, 2002 on F-1 visa. After completing my master's in July 2004, I started working for a compnay on OPT effective September 15, 2004. I got my H1B approved as of September 15 2005 & since then work in the same company on H1B.

For 2005, I filed 1040NREZ as NR Alien. But I am sure what is my Tax status now & which forms to file.

I bought a condo in May 2005, I was not able to take deductions for the mortgage in 2005 but can I take mortgage deductions this year + standard student deduction of $5000??

Thks
:)

[AtlantaTaxExpert]

Saket:

Based on what you have told me, and assuming your are single, you filed correctly for 2005 by fling Form 1040NR-EZ.

You could have filed dual-status for 2005 and maybe been able to deduct the mortgage interest for the time you were on H-1B status, but it is unlikely the deductions would have exceeded the $5,000 standard deduction you were allowed to claim as an Indian student in 2005.

For 2006, you will file as a resident alien (Form 1040) and be able to claim the mortgage interest and real estate taxes for the entire year as itemized deductions on Schedule A. It is likely that a full year of mortgage payments will exceed the $5,150 standard deduction for 2006. You will also be able to amortize the points and loan origination fees you paid in 2005 when you closed on the condo. You may also be able to deduct cash and non-cash donations to charity, as well as state and local income taxes withheld from your paycheck.

You can claim EITHER itemized deductions or the standard deduction, but NOT BOTH!

If you need help with your tax return for 2006, please contact me at [email protected].

[saketsengar]

Thks for the quick response, I highly appreciate!!

I have another quick ques for you, I pay for my sister's college expense ( Tution fees, books & other miscelleneous expenses). She goes to school in Savannah, GA & I am in Seattle, WA. Can I claim her as my dependent relative & take deductions for the college expense I paid during 2006??

Moreover, I used my Credit card to pay the fees & other expenses and then repaid my credit card company using my checking account. Will this have any impact??

Thks
Saket

[AtlantaTaxExpert]

Sekat:

Since she is your sister and you are paying for her college, you would normally meet the criertia for claiming her as a dependent, provided her gross income did NOT exceed $3,300.

However, it is likely she is on a F-1 visa while attending college. If this is the case, she is a non-resident alien and she fails to meet the citizenship or residence test required to claimed as a dependent.

BOTTOM LINE:

- If she is on a F-1 visa, you cannot claim her as a dependent.
- If she earned MORE than $3,300, she makes too much money to be claimed as a dependent.

If either of the two conditions above apply, you cannot claim her as a dependent NOR can you claim her education expenses as either a deduction to a credit on your tax return.

[saketsengar]

Thxs for the help & quick reply. I really appreciate. Have a happy & prosperous new year.

[saketsengar]

I got another ques, if you can help me with this that will be great!!

I am expecting a huge year end bonus which will bump up my table income ( YTD compensation) of the year by 40%. Is there any legal consequences or H1B visa defeciency,I must be aware of if I make more than what is disclosed in my H1B petition as my yearly compensation...

[AtlantaTaxExpert]

I doubt that the bonus will have any effect on H-1B visa, because that yearly compensation figure that you projected on your H-1B petition is merely an estimate. I expect some variance is allowed.

However, I am NOT an immigration attorney, so it might make sense to go to the LAW forum on AskMeHelpDesk and post your question under the Immigration Law subsection.

[saketsengar]

Thank You

[AtlantaTaxExpert]

Glad to help!

[saketsengar]

Hello :

I got another question for you. I was going through the replies you sent me earlier, you have mentioned to amortize the points for the mortagage on my condo. This will help me to reduce my taxable income. Could you please elaborate what do you mean by amortize the points??

[AtlantaTaxExpert]

Amortize is an accounting term. It means to equally spread out the expense (or, in your case, the deduction) over the life of the loan.

Example: You paid a total of $3,000 in points and loan origination fees on a 30-year mortgage loan closed in early December 2001. Because that was your only itemized deduction, you could not deduct that $3,000 in the year you closed because the $3,000 did not exceed the standard deduction. In this case, you amortize the points and loan origination fees and deduct $100 each year for the next 30 years.

If, however, you refinance the loan three years later (in December 2004), you can accelerate the amortization and deduct whatever is left on the amortization schedule in the year you completed the refinancing. That would allow you to deduct $2,800 on your 2004 tax return as an itemized deduction.

Also, a technical interpretation of the tax law requires that I tell you that, for 2005, you should have filed a dual-status tax return. I will leave it to you to decide if you should amend your 2005 tax return. If you amend, it is likely that you will owe no more in tax. The amendment will put in total compliance with the tax law. Contact me at [email protected] if you need help with this amendment.