Jean Chatzky responds to your tax questions

It’s March 14 — and that means you have one month and one day to get your taxes done. In this third column of tax tips, "Today" financial editor Jean Chatzky responds to reader questions. Happy filing!

Q: I remember hearing a year or two back about the government planning to eliminate taxes on dividends. Did the law go through, and how will it affect me at tax time?

A: Yes, the law went through. Here’s the background:

Dividends are the profits some companies pay out to their stockholders throughout the year. The IRS used to regard tax dividends as normal income. If your income caused you to be taxed at 25 percent, then any dividend payments you received would also be taxed at 25 percent. The law that went into effect in the spring of 2003 didn't eliminate dividend taxes, but rather reduced them to 15 percent (or 5 percent for taxpayers in lower income levels).

How much the new tax law will affect you depends on whether you own stocks or mutual funds that pay dividends, and how much income you derive from those dividend payments. People who depend on an income stream from investments that pay high dividends, such as utility company stocks, will fare the best, since the IRS won't tax that portion of their income as much as it had in the past.

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Be aware that the new rules don't apply to income from money market funds, bond funds, or certain types of stock dividends that the IRS classifies as interest (such as dividends from Real Estate Investment Trust stocks). Also, the law doesn't affect any dividends from investments already in tax-deferred vehicles like 401(k) plans or IRAs.

Q: I'm an artist — a painter, actually. I have a full-time office job, mostly for the health insurance, but also because I don't make enough money from my painting to support myself. One room in my apartment is entirely devoted to being an art studio. I'm wondering how much money I need to earn from selling paintings in order to write off deductions like the art studio, supplies, and so on. Or does my full-time job make it so that I cannot claim artist/painter as a second profession?

A: I have good news for you: It doesn't matter that you have another job. The government will allow you to deduct your art supplies, the percentage of rent and utilities that your studio occupies in your apartment, and any other expenses that relate to your painting business.

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