| name | tax-research |
| description | Research current tax rules, regulations, rates, and deadlines using web search and foundational tax knowledge. |
Tax Research Skill
When researching tax rules or answering tax questions, follow these guidelines.
Research Approach
- Start with fundamentals: Apply your knowledge of core tax concepts to frame the question.
- Search for current rules: Tax law changes frequently. Always use web search to verify current rates, thresholds, phase-outs, and deadlines for the relevant tax year.
- Cite sources: When referencing specific rules, note the source (IRS publication, tax code section, government website, etc.).
- Jurisdiction matters: Always confirm which jurisdiction applies. Rules differ dramatically between countries, and between states/provinces within a country.
Core Tax Concepts
Income Classification
- Ordinary income: Wages, salaries, tips, interest, short-term capital gains, business income — taxed at regular rates
- Qualified dividends and long-term capital gains: Preferential lower rates in many jurisdictions
- Tax-exempt income: Municipal bond interest (US), certain foreign income under treaty, Roth distributions
- Passive income vs. active income: Different loss limitation rules apply
Deductions vs. Credits
- Deductions reduce taxable income (value depends on marginal rate)
- Above-the-line (available regardless of itemizing): IRA contributions, student loan interest, HSA contributions
- Below-the-line (itemized): mortgage interest, state/local taxes (SALT), charitable contributions, medical expenses
- Credits reduce tax dollar-for-dollar (more valuable than deductions)
- Nonrefundable: reduce tax to zero but no refund of excess
- Refundable: can produce a refund beyond tax owed (e.g., Earned Income Credit, certain child tax credit portions)
Marginal vs. Effective Tax Rates
- Marginal rate: The rate applied to the next dollar of income (the bracket you're "in")
- Effective rate: Total tax ÷ total income — the actual overall percentage paid
- Tax planning decisions should consider the marginal rate for timing and optimization
Alternative Minimum Tax (AMT)
- A parallel tax calculation that disallows certain deductions and preferences
- Taxpayer pays the higher of regular tax or AMT
- Key triggers: large state/local tax deductions, incentive stock option exercises, tax-exempt private activity bond interest
Estimated Tax Payments
- Required when withholding doesn't cover the tax liability
- Generally due quarterly (US: Apr 15, Jun 15, Sep 15, Jan 15)
- Safe harbor: pay 100% of prior year tax (110% for high-income taxpayers in the US) or 90% of current year tax
- Penalties for underpayment are calculated per quarter
Key Research Areas
Retirement Accounts
- Contribution limits: Change annually — always search for the current year's limits
- Traditional vs. Roth: Pre-tax vs. after-tax contributions; income limits for deductibility/eligibility
- Required Minimum Distributions (RMDs): Age thresholds and calculation rules change with legislation
- Employer plans vs. individual: 401(k)/403(b) vs. Traditional/Roth IRA — different limits and rules
- Catch-up contributions: Additional amounts for those over 50 (and sometimes 60+)
Capital Gains
- Holding periods: Short-term (≤ 1 year) vs. long-term (> 1 year)
- Rate brackets: Long-term capital gains have their own rate structure
- Net Investment Income Tax (NIIT): Additional 3.8% on investment income above thresholds (US)
- Capital loss limitations: Usually limited to offsetting gains + a fixed amount per year (e.g., $3,000 in the US)
- Carryforward rules: Unused losses carry forward indefinitely in most jurisdictions
Business and Self-Employment
- Self-employment tax: Social Security + Medicare on net self-employment income
- Qualified Business Income (QBI) deduction: Deduction for pass-through income (check current rules and limitations)
- Home office deduction: Simplified vs. regular method
- Business expenses: Ordinary and necessary; documentation requirements
- Estimated taxes: Self-employed individuals must make quarterly payments
International
- Foreign earned income exclusion: For qualifying US citizens/residents abroad
- Foreign tax credit: Avoid double taxation on foreign-source income
- FBAR / FATCA: Reporting requirements for foreign financial accounts
- Tax treaties: May reduce withholding rates or exempt certain income types
- Transfer pricing: Rules for transactions between related entities across borders
Real Estate
- Depreciation: Residential (27.5 years) vs. commercial (39 years) in the US
- 1031 like-kind exchanges: Deferral of gain on investment property swaps
- Primary residence exclusion: Gain exclusion on sale of primary home (check current limits and requirements)
- Passive activity rules: Rental income is generally passive; real estate professional exception
- Cost segregation: Accelerating depreciation on components of a building
Disclaimer Guidelines
Always include appropriate disclaimers:
- Before detailed advice: "This analysis is for informational purposes. Consult a qualified tax professional for advice specific to your situation."
- When rules are ambiguous or changing: "This area of tax law is subject to interpretation / pending legislation. Verify current rules with a tax professional."
- When amounts are large or decisions are significant: "Given the amounts involved, I strongly recommend consulting a CPA or tax attorney before proceeding."
- When you're uncertain: Clearly state what you know, what you're unsure about, and what the user should verify.
- Never: Claim to be providing legal or professional tax advice. Never guarantee a specific tax outcome.
Search Tips
When searching for tax information:
- Include the tax year in your search (rules change annually)
- Use official source domains when possible (irs.gov, revenue.ie, gov.uk/hmrc, canada.ca/revenue-agency)
- Search for the specific form number or code section when applicable
- Look for "2025 tax brackets" rather than just "tax brackets" to get current data
- Check for recent legislation that may have changed long-standing rules
