Best Way to Report SDI Payments
QUESTION: In the past, I have deducted California State Disability Insurance as a miscellaneous deduction on my federal, but not California state, income tax return. For 1987, my SDI payment was $262.80. May I still use this as a miscellaneous deduction for 1987, and is it subject to the 2% adjusted gross income limit?--W. R.
ANSWER: According to the Internal Revenue Service, mandatory contributions, such as State Disability Insurance, are fully deductible as taxes and not subject to the 2% adjusted gross income limit. (The 2% limit, a new provision in the tax code, allows a taxpayer to deduct miscellaneous expenses only to the extent that they exceed 2% of adjusted gross income.) To qualify for the full deduction, claim your SDI payments as state taxes, not miscellaneous expenses.
Q: I have several accounts at a local savings and loan whose literature states that each account is insured up to $100,000. My question is: Does the federal government stand behind this? It seems to me that I read recently that only a total of all the accounts was subject to the $100,000 insurance. Can you clear this up?--M. W. T.
A: The rules governing FSLIC insurance are more complicated than you might think.
One of the biggest misunderstandings about FSLIC insurance is that the $100,000 limit is applied on a per-account basis, says Kathy Nagle, director of the insurance division of the Federal Home Loan Bank Board, which administers the fund. Actually, the insurance coverage is based on a somewhat complicated set of categories defining each type of savings and loan account. And, most important, the insurance is limited to $100,000 per category per institution.
For the average person, there are two major types of accounts: individual and joint. The FSLIC will insure both individual and joint accounts to a maximum of $100,000. But the key thing to remember is that you might have several different individual and/or joint accounts at your savings and loan: checking, savings, certificate of deposit and so on. Together, these accounts--plus any interest they have accrued up to the day the institution is closed by the Federal Home Loan Bank Board--are insured to a maximum of $100,000. For example, if you have $5,000 in your checking account, a $25,000 savings account and a $75,000 certificate of deposit under the same individual or joint names, you have exceeded the limit by $5,000, plus any interest owed you.
The rules for joint accounts are even more complicated, but the bottom line is that no one person can qualify for more than $100,000 worth of insurance for accounts held jointly with others. For example, if you hold a $100,000 certificate of deposit jointly with your spouse and two additional accounts jointly with each of your two children, you are presumed to hold half of the $300,000 worth of certificates, or $150,000. Those holdings exceed the individual insurance limit on joint accounts by $50,000. If you’re blessed with a portfolio of this size, probably your best bet is to spread it around at several institutions to make sure you’re completely covered.
For more information, write for the brochure titled “Insurance of Accounts” from the Insurance Division of the Federal Savings and Loan Insurance Corp., 1700 G St. N.W., Washington, D.C. 20552.
Q: Whenever our individual retirement account investments mature, we call all the local banks and savings and loans to find out their rates. Is there an easier way? Are IRA rates listed somewhere?--F. L. A.
A: Unfortunately, the simplest answer is “No.” But we won’t leave it at that.
Some banks and savings and loans do offer separate interest rates on IRA accounts, but many do not. So you can shop rates by checking to see if your local paper carries a weekly or monthly chart listing the rates that various institutions are offering on a variety of savings accounts. The Times runs such a chart on Page 3 every Saturday in the Business section.
In addition, if you’re willing to pay for it, there is a wealth of available information comparing various investments, notably mutual funds, in business magazines. Furthermore, “100 Highest Yields,” an $84-per-year weekly newsletter, tracks yields on bank certificates of deposit. The newsletter can be reached at Box 088888, North Palm Beach, Fla. 33408.
