Jury Pay You Can’t Keep Still Taxable
QUESTION: I am serving on a grand jury panel and will be away from my regular job for three months. I will continue to get paid by my company and the state will pay me, too, for my jury service. Will I have to report the jury pay as income when I file my tax return next April?--H. S.
ANSWER: Yes, you will. And it is important that you find out in advance whether your employer requires you to turn over that pay to the company, because jury pay is considered taxable income to the employee even if he or she doesn’t get to keep it.
Before this year, the question of who gets to keep jury pay wasn’t all that pressing. Employees who were forced to give it up still had to report the money as income, but then they simply deducted a like amount from their gross income as an unreimbursed employee expense. No harm done.
But with tax reform, unreimbursed employee expenses are no longer deductible directly from gross income. They are treated as a so-called miscellaneous deduction, which an employee can take only if all such expenses add up to at least 2% of his or her adjusted gross income. That is a very difficult requirement to meet.
In other words, many employees who get jury duty pay will find themselves paying tax on income they don’t get to keep.
Q: I thought annuities were offered only by insurance companies. But I recently heard someone on a radio call-in show talking about private annuities. The expert answering the question obviously thought everyone listening knew all about them because he never bothered to explain what is meant by “private” in this case. Do you know?--K. A.
A: Such annuities are called “private annuities” because they are issued by an individual rather than by a commercial institution.
They are often arrangements between relatives and are most often used as an estate planning tool.
Say your elderly mother owns some stock and real estate. She doesn’t want to sell them outright. But she does need cash to live on, and she does want to reduce the size of her estate so that when you inherit it, you will pay as little in inheritance taxes as possible.
She might hand over the assets to you now in exchange for an annuity that you draw up with some legal help. You would then agree to make payments to her for life or for a certain number of years.
Getting a traditional annuity wouldn’t help her because she would have to buy it with cash. This way, she can transfer the property to you while she is still alive--saving you from paying inheritance taxes and saving her from paying gift taxes.
Just make sure that the present value of the annuity equals the value of the property she transfers.
Q: I recently found several pieces of furniture in my elderly aunt’s attic that I think are quite valuable. I want to have them appraised. Where can I get a list of appraisers and their specialties in my area?--N. I.
A: For a free list, write the American Society of Appraisers, Box 17265, Washington, D.C. 20041. Ask for the group’s Directory of Appraisers.
Debra Whitefield cannot answer mail individually but will respond in this column to financial questions of general interest. Do not telephone. Write to Money Talk, Los Angeles Times, 780 Third Ave., Suite 3801, New York, N.Y. 10017.
