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| As the old saying goes, there are only two certainties in life: death and taxes. While we have yet to find a way to successfully avoid either, there are a few tricks of the trade that can minimize the impact the taxman has on your pocketbook. After all, nobody likes taxes, but we all have to deal with them, so we might as well handle them in the best way possible. When the end of the year approaches, many investors' thoughts turn to how they can avoid paying tax. (Notice we said avoid, not evade.) Although a lot depends on your personal situation, there are a few simple tax principles that apply to most investors and can help you save money (We also recommend talking to a tax planner.) In this article, we'll look at the tax benefits of making smart investment decisions, writing off expenses, effectively managing your capital gains and more. Dividends------ KNOWLEDGEFINANCIAL.COM Are you an investor who ends up paying too much capital gains tax on the sale of your mutual fund shares because you've overlooked dividends that were automatically reinvested in the fund over the years? Reinvested dividends increase your investment in a fund and thus reduce your taxable gain (or increase your capital loss). For example, say you originally invested $5,000 in a mutual fund and had $1,000 in dividends reinvested in additional shares over the years. If you then sold your stake in the fund for $7,500, your taxable gain would be the result of subtracting from the $7,500 both the original $5,000 investment and the $1,000 reinvested dividends. Thus, your taxable gain would be $1,500. Many people would forget to deduct their reinvested dividends and end up paying tax on $2,500. Bonds When the stock markets perform badly, investors make the flight to quality and look elsewhere for places to put their money. Many find a safe haven in bonds. When you are calculating your taxes, remember to report the interest income on your tax return: you may not have to pay tax on all the interest you received. If you bought the bond in between interest payments (most bonds pay semiannual interest), you usually won't pay tax on interest accrued prior to your purchase. You must still report the entire amount of interest you received, but you'll be able to subtract the accrued amount on a separate line. Many investors also find short-term government debt a convenient safe harbor for their money when the equity markets are less than robust. Municipal bonds are often issued by local governments or similar entities in order to finance a particular project, such as the construction of a school or a hospital, or to meet specific operating expenses. For the retail investor, municipal bonds, or munis, can offer significant tax advantages. Most munis are issued with tax-exempt status, meaning the returns they generate do not need to be claimed when you file your tax return. Combined with the added safety of the low-risk nature of municipal bonds, they can be very attractive investments when stock market expectations are weak. (For further reading, see Weighing the Tax Benefits of Municipal Securities.) Write-Offs // KNOWLEDGEFINANCIAL.COM Did you buy a home computer last year? If you did, you can possibly write off a portion of the cost if you used the computer to place trades or to help manage your portfolio. The portion of the computer's cost that is deductible depends on how much you use the computer to monitor your investments. For example, if you paid $1,500 for a computer, and you use it to keep tabs on your investments 20% of the time, $300 of the computer's cost is eligible to be written off as an expense. For investors who invest in small business ventures or are self-employed, there are many operating expenses that can be written off. For example, if you take any business trips during the year that require you to obtain accommodations, the cost of your lodging and meals can be written off as a business expense, within specified limits dependent upon where you travel. If you travel frequently, forgetting to include these types of seemingly personal expenses can cost you sizeable dollars in lost tax savings. For homeowners who have moved and sold their home during the year, an important consideration when reporting the capital gain on the sale is the actual cost basis of the purchase of the home. If your home has undergone renovations or similar improvements having a useful life of more than one year, you will likely be able to include the cost of such improvements into the adjusted cost base of your home, thus reducing your capital gain incurred on the sale and the resultant taxes. Tax-Deferred Programs Are Like Free Money Every time you trade a stock, you are vulnerable to capital gains tax. Making your purchases through a tax-deferred account can save you a pile of money. Tax-deferred accounts come in many shapes and sizes. The most well known are Individual Retirement Account (IRA) and Simplified Employment Pension (SEP) plans. The basic idea is that you are not taxed on the funds until you withdraw, at which point you are taxed at the rate of your income tax bracket. Waiting to cash in until after you retire will save you even more because your income will likely be lower when you are no longer working and earning a steady income. Also, while the benefits of tax-deferred accounts are substantial on their own, they provide an additional benefit of flexibility, as investors need not be concerned with the usual tax implications when making trade decisions. Provided you keep your funds inside the tax-deferred account, you have the freedom to close out of positions early if they have experienced strong price appreciation, without regard to the higher tax rate applied to short-term capital gains.KNOWLEDGEFINANCIAL.COM |
Match Your Profits and Losses in the Same Year
In many cases, it is a good idea to match the sale of a profitable
investment with the sale of a losing one within the same year. Capital
losses can be used against capital gains, and short-term losses can be
deducted gains (or losses) are only applied to your tax return when they
are realized. So-called paper gains and losses do not count - since you
have not actually sold your investments, there is no guarantee that your
investments gains (or losses) are only applied to your tax return when
they are realized. So-called paper gains and losses do not count - since
you have not actually sold your investments, there is no guarantee that
your investments will not change in value before you close out your
position. However, by actively choosing to close out (perhaps
temporarily) of losing investments, you can successfully match your
capital gains with offsetting losses, significantly reducing your tax
burden. (Learn more about tax-loss harvesting in Selling Losing
Securities for a Tax Advantage.)
significantly reducing your tax burden. (Learn more about tax-loss
harvesting in Selling Losing Securities for a Tax Advantage.)
Add Broker Fees to the Cost of Your Stocks
Buying stocks isn't free. You always pay commissions and may also pay
transferring fees if you change brokerages. These expenses should be
added to the amount you paid for a stock when determining your cost
basis. When you sell the shares, subtract the commission from the sale
price of the stocks. Think of these costs as a write-off because they are
direct expenses incurred to help you make your money grow.
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After all, brokerage fees and transaction costs represent money that
comes directly out of your pocket as an expense incurred while
undertaking an investment, and although modern discount brokerages
often charge relatively low fees that do not usually have a material
effect on an investor's returns, there is no reason to avoid claiming every
expense possible when filing your taxes. Many small brokerage fees
incurred over the course of an entire year can add up to hundreds of
dollars, and for active traders who place hundreds or even thousands of
trades every year, the impact of brokerage fees can be substantial.
Try To Hold On to Your Stocks for At Least 12 Months
Here is another good argument for the buy-and-hold strategy: short-term
capital gains (less than one year) are always taxed at a higher rate than
long-term ones. The difference between the tax rates of long-term and
short-term capital gains can be 13% or more in some states and
countries, and when you consider the long-term effects of compounding
on reduced income taxes incurred today, it can prove very beneficial to
hold onto your stocks for at least one year.
Most investors plan to take part in the equity markets for decades,
perhaps moving from stock to stock as the years pass, but still keeping
their money actively working for them in the market for the duration of
their capital accumulation phase. If you fit this description, take a
moment to consider the tax advantages of using a longer-term
buy-and-hold strategy if you are not doing so already - the savings can
be worth more than you think.
Conclusion
It seems there are almost as many intricacies embedded into tax laws as
there are investors who pay taxes. Part of a successful financial plan is
astute tax management: ensuring you are actively taking advantage of
tax avoidance opportunities that apply to your situation and also making
sure you do not overlook any expenses or other income-reduction
techniques that can reduce your taxable earnings.
While many investors are eager to read about the next investment
opportunity that holds potential for market-beating returns, few put in the
same amount of effort to minimize their taxes. Do yourself a favor when
tax season rolls around this year and take the time to ensure you're
doing all you can to keep your money in your pocket - the savings you
uncover may make for a healthy boost to your annual return.
In many cases, it is a good idea to match the sale of a profitable
investment with the sale of a losing one within the same year. Capital
losses can be used against capital gains, and short-term losses can be
deducted gains (or losses) are only applied to your tax return when they
are realized. So-called paper gains and losses do not count - since you
have not actually sold your investments, there is no guarantee that your
investments gains (or losses) are only applied to your tax return when
they are realized. So-called paper gains and losses do not count - since
you have not actually sold your investments, there is no guarantee that
your investments will not change in value before you close out your
position. However, by actively choosing to close out (perhaps
temporarily) of losing investments, you can successfully match your
capital gains with offsetting losses, significantly reducing your tax
burden. (Learn more about tax-loss harvesting in Selling Losing
Securities for a Tax Advantage.)
significantly reducing your tax burden. (Learn more about tax-loss
harvesting in Selling Losing Securities for a Tax Advantage.)
Add Broker Fees to the Cost of Your Stocks
Buying stocks isn't free. You always pay commissions and may also pay
transferring fees if you change brokerages. These expenses should be
added to the amount you paid for a stock when determining your cost
basis. When you sell the shares, subtract the commission from the sale
price of the stocks. Think of these costs as a write-off because they are
direct expenses incurred to help you make your money grow.
ADVERTISEMENT
After all, brokerage fees and transaction costs represent money that
comes directly out of your pocket as an expense incurred while
undertaking an investment, and although modern discount brokerages
often charge relatively low fees that do not usually have a material
effect on an investor's returns, there is no reason to avoid claiming every
expense possible when filing your taxes. Many small brokerage fees
incurred over the course of an entire year can add up to hundreds of
dollars, and for active traders who place hundreds or even thousands of
trades every year, the impact of brokerage fees can be substantial.
Try To Hold On to Your Stocks for At Least 12 Months
Here is another good argument for the buy-and-hold strategy: short-term
capital gains (less than one year) are always taxed at a higher rate than
long-term ones. The difference between the tax rates of long-term and
short-term capital gains can be 13% or more in some states and
countries, and when you consider the long-term effects of compounding
on reduced income taxes incurred today, it can prove very beneficial to
hold onto your stocks for at least one year.
Most investors plan to take part in the equity markets for decades,
perhaps moving from stock to stock as the years pass, but still keeping
their money actively working for them in the market for the duration of
their capital accumulation phase. If you fit this description, take a
moment to consider the tax advantages of using a longer-term
buy-and-hold strategy if you are not doing so already - the savings can
be worth more than you think.
Conclusion
It seems there are almost as many intricacies embedded into tax laws as
there are investors who pay taxes. Part of a successful financial plan is
astute tax management: ensuring you are actively taking advantage of
tax avoidance opportunities that apply to your situation and also making
sure you do not overlook any expenses or other income-reduction
techniques that can reduce your taxable earnings.
While many investors are eager to read about the next investment
opportunity that holds potential for market-beating returns, few put in the
same amount of effort to minimize their taxes. Do yourself a favor when
tax season rolls around this year and take the time to ensure you're
doing all you can to keep your money in your pocket - the savings you
uncover may make for a healthy boost to your annual return.
TAX SAVING TIPS FOR INDIVIDUAL INVESTOR
TAX SAVING TIPS FOR INDIVIDUAL INVESTOR, GREAT INFORMATION FOR ALL // Tax Breaks for Almost Everyone; THE MOST IMPORTANT TAX SAVING
YOU MUST KNOW NOW...
YOU MUST KNOW NOW...
The mortgage interest deduction is probably the most well-known, and generally the largest, of all the
deductions that can be itemized. But not only interest is eligible to be deducted. Loan origination points, when taken in the year
that the loan was made, can also be itemized.
Another method for reducing your tax bill is by the utilization of tax credits. Tax credits are dollar-for-dollar reductions
subtracted from your tax liability. There are tax credits for college expenses, for retirement savings, even for adopting children.
Two very important education-related tax credits are the Hope Credit and the Lifetime Learning Credit. The Hope Credit is for
students in their first two years of college. The Lifetime Learning Credit is for anyone else taking college courses.
One of the best, and most abused, tax credits is the Earned Income Credit (EIC). Unlike other tax credits, the EIC is credited to
your account as a payment. This means that the credit can often result in a tax refund even if the total tax owed has been
reduced to zero. You may be eligible to claim the earned income credit if you earn less than a certain amount and have a
qualifying dependent.
deductions that can be itemized. But not only interest is eligible to be deducted. Loan origination points, when taken in the year
that the loan was made, can also be itemized.
Another method for reducing your tax bill is by the utilization of tax credits. Tax credits are dollar-for-dollar reductions
subtracted from your tax liability. There are tax credits for college expenses, for retirement savings, even for adopting children.
Two very important education-related tax credits are the Hope Credit and the Lifetime Learning Credit. The Hope Credit is for
students in their first two years of college. The Lifetime Learning Credit is for anyone else taking college courses.
One of the best, and most abused, tax credits is the Earned Income Credit (EIC). Unlike other tax credits, the EIC is credited to
your account as a payment. This means that the credit can often result in a tax refund even if the total tax owed has been
reduced to zero. You may be eligible to claim the earned income credit if you earn less than a certain amount and have a
qualifying dependent.
Taxes
The More You Know, the Less You’ll Pay // ----KNOWLEDGEFINANCIAL.COM
Do you own a business? Do you have real estate, stock, or any other type of investment? Did you lose money in Las
Vegas last year? Do you have a job? Are you alive? If you answered “yes” to any of the preceding questions, then
you could probably benefit from all of the tax information that you can get. Taxes have a huge impact on virtually all
of us, and their implications can be felt in almost every area of our financial lives.
Unfortunately, it is extremely difficult to master the United States Tax Code. And with literally hundreds of changes
made to the laws yearly, it becomes even more of a challenge to stay abreast of its current structure. This is a
conundrum, because taxes are certainly one of the most important areas which require up-to-date information.
Many people are intimidated by the thought of both preparing and paying their taxes. It is here where education can
begin to pay dividends. This section will provide a host of valuable information that will help you to understand many
general tax topics.M
The More You Know, the Less You’ll Pay // ----KNOWLEDGEFINANCIAL.COM
Do you own a business? Do you have real estate, stock, or any other type of investment? Did you lose money in Las
Vegas last year? Do you have a job? Are you alive? If you answered “yes” to any of the preceding questions, then
you could probably benefit from all of the tax information that you can get. Taxes have a huge impact on virtually all
of us, and their implications can be felt in almost every area of our financial lives.
Unfortunately, it is extremely difficult to master the United States Tax Code. And with literally hundreds of changes
made to the laws yearly, it becomes even more of a challenge to stay abreast of its current structure. This is a
conundrum, because taxes are certainly one of the most important areas which require up-to-date information.
Many people are intimidated by the thought of both preparing and paying their taxes. It is here where education can
begin to pay dividends. This section will provide a host of valuable information that will help you to understand many
general tax topics.M
| Tax-Slashing Secrets for Real Estate Wealth There are very few business opportunities that allow you to build wealth without paying taxes - and then subsequently pay reduced rates when the time comes to settle up with Uncle Sam. Real estate, however, is a prime exception. Today I will focus on two strategies that can slash the taxes you pay on your real estate investments - and put a lot more money in your pockets at the same time. Set up properly, both of these wealth-building tools will result in little to no tax due until your property is sold. Tax Strategy One: Offsetting Rental Income Let's assume you purchased a rental property for $100,000 and you found a tenant who paid $1,100 rent per month. Your monthly out-of-pocket expenses averaged $1,000. This would include mortgage payments, repairs, management fees, and so on. While this scenario does generate some positive cash flow (cash inflows greater than cash outflows), this will most likely result in a tax loss. The reason for this is that when you file this activity on your tax return, you are entitled to depreciate your property. Depreciation allows you to recoup the purchase price of your property over time through annual tax deductions. In other words, depreciation is a noncash expense. Combining depreciation with other rental expenses may very well mean that your total expenses exceed the amount of cash you have actually spent out of pocket on the rental activity. In some situations, this tax loss can be used to offset other W-2 income. The bottom line to you is that you receive valuable tax benefits. The wealthy realize this, which explains part of the reason that they are so actively involved in real estate. Tax Strategy Two: Make the Most of Property Appreciation The second wealth-building aspect in this example would be the appreciation of the property itself. Over time, real estate values tend to increase. Let's assume that over a three-year period the property you purchased has increased in value to $120,000. The monthly mortgage payments made on the property have reduced the outstanding debt to $95,000. You now have increased your net worth by $25,000 without paying a dime in tax. Are you starting to see why the wealthy are involved in real estate? They're not in real estate because they are wealthy, they're wealthy because they're in real estate. Another exciting part of this scenario is that when you sell that property and turn that equity into cash, the majority of the gain will be taxed as a long-term capital gain. That means preferential tax treatment! Currently, the maximum long-term capital gain rate is 15 percent. |
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| Tax Deductions For Rental Property Owners Do you own real estate that you rent out? Besides the potential for an ongoing income and capital appreciation, such investments offer deductions that can reduce the income tax on your profits. But first, what kind of real estate investor are you: a passive investor or real estate professional? In this article we'll show you how your classification could make a big difference in the number of tax breaks you get.  If you spend the majority of your time in the real estate business as a real estate professional, your rental losses are not passive. This means that your losses are fully deductible against all income, passive and non-passive. Otherwise, your losses are passive and only deductible up to $25,000 against your rentals' income (deduction phases out if your modified adjusted gross income (MAGI) is between $100,000 and $150,000). However, losses of more than $25,000 can be carried over to the following year. The IRS defines a real estate professional as someone who spends more than one-half of his or her working time in the rental business. This includes property development, construction, acquisition and management. You must also spend more than 750 hours per year working on your real estate rental properties. Common Income Sources Rental Income Money you receive for rent is generally considered taxable in the year you receive it, not when it was due or earned; therefore, you must include advance payments as income. For example, suppose you rent out a house for $1,000 per month and you require that new tenants pay first and last months' rent when they sign a lease. In this case, you'll have to declare the $2,000 you received as income, even though a $1,000 of that $2,000 covers a period that might be several years in the future. Tenant-Paid Expenses Expenses your tenant pays for you are considered income. This would include, for instance, an emergency repair on a refrigerator a tenant has to have done while you are out of town. You can then deduct the repair payment as a rental expense. Trade for Services Your tenant might offer to trade his services in exchange for rent. However, you must include a fair market value of the services as income. As an example, if your tenant offers to paint the rental house in exchange for one month's rent (valued at $1,000), you must include the $1,000 as income, even though you didn't actually receive the money. However, you will be able to deduct the $1,000 as an expense. Security deposits Security deposits are not taxable when you receive them if the intent is to return this money to the tenant at the end of the lease. But what if your tenant does not live up to the lease terms? For example, suppose that you collect a $500 security deposit and then your tenant moves out and leaves holes in the walls that cost $400 to repair. You can deduct that amount from the security deposit during the year that you return it. At that time, though, you must include the $400 that you used to repair the wall as income. You will also be able to show the $400 as a deductible expense. Repairs Vs. Improvements Rental property owners may assume that anything they do on their property is a deducible expense. Not so, according to the IRS. A repair keeps your rental property in good condition and is a deductible expense in the year that you pay for it. Repairs include painting, fixing a broken toilet and replacing a faulty light switch. Improvements on the other hand, add value to your property and are not deductible when you pay for them. You must recover the cost of improvements by depreciating the expense over your property's life expectancy. Improvements can include a new roof, patio or garage. Therefore, from a tax standpoint, you should make repairs as the problems arise instead of waiting until they multiply and require renovations. Common Deductions Mortgage Expenses Expenses to obtain a mortgage are not deductible when you pay them. These include commissions and appraisals. However, you can amortize them over the life of your mortgage. Once you start making mortgage payments, remember that not all of the payment is deductible. Since part of each payment goes toward paying down the principal, this amount is not a deductible expense; the portion paid toward interest is deductible. Your mortgage company will send you a Form 1098 each year showing how much you've paid in interest throughout the year. This is deductible. Also, if a part of your payment includes money that goes into an escrow account to cover taxes and insurance, your mortgage company should report that to you as well. Travel Expenses Money you spend on travel to collect rent or maintain your rental property is deductible. However, if the purpose of the trip was for improvements, you must recover that expense as part of the improvement and its depreciation. You have two choices on how to deduct travel expenses: the actual expenses or the standard mileage rate. You can read more about the IRS's requirements and current mileage allowance in chapter 4 of Publication 463. Other Common Expenses In addition to repairs and depreciation, some of the other common expenses you can deduct are: Insurance Taxes Lawn care Tax return preparation fee Losses from causalities (hurricane, earthquake, flood, etc.) or thefts Condominiums and Cooperatives If you own a rental condominium or cooperative, each has some special rules. Condominiums With a condominium you might pay dues or assessments to take care of commonly-owned property. This includes the building structure, lobbies, elevators and recreational areas. When you rent out your condominium, you can deduct expenses, such as depreciation, repairs, interest and taxes that relate to the common property. However, just as with a single-family rental, you cannot deduct money spent on capital improvements, such an assessment for a cabana at the clubhouse. Instead you must depreciate your cost of any improvement over its life expectancy. Cooperatives Expenses you have for a cooperative apartment you rent out are deductible. This includes the maintenance fees paid to the cooperative housing corporation. Capital improvements are treated differently - you cannot deduct the cost of the improvement, nor can you depreciate it. You must add the cost of the improvement to your cost basis in the corporation's stock. This will reduce your capital gain when you sell the apartment. Keep Good Records Under the IRS's Schedule E there are spaces for numerous categories of expenses. Therefore, the IRS gives you flexibility in the items you can deduct. But be prepared to back up your claim, and be sure to break out expenses that are for repairs and maintenance from those that are capital improvements. Remember, money you spend on improvements could reduce your tax liability when you sell. In addition, if you claim to be a real estate professional, you should keep supporting documentation (appointment books, diaries, calendars, logs, etc.) to prove your active participation and the time spent on your properties each year. All in all, there are quite a few types of deductions available to real estate investors and it pays to know which ones you qualify for. |
| Is it true that you can sell your home and not pay capital gains tax?  It is true in most cases. When you sell your home, the capital gains on the sale are exempt from capital gains tax. Based on the Taxpayer Relief Act of 1997, if you are single, you will pay no capital gains tax on the first $250,000 you make when you sell your home. Married couples enjoy a $500,000 exemption. There are, however, some restrictions on this exemption. In order for the sale to be exempt, the home must be considered a primary residency based on Internal Revenue Service (IRS) rules. These rules state that you must have occupied the residence for at least two of the last five years. If you buy a home and a dramatic rise in value causes you to sell it a year later, you would be required to pay capital gains tax on the gain. This rule does, however, allow you to convert a rental property into a primary residence because the two-year residency requirement does not need to be fulfilled in consecutive years. For example, suppose that you invest in a new condo. You live in it for the first year, rent the home for the next three years and, when the tenants move out, you move back in for another year. At the end of this five-year period, you will be able to sell your condo without having to pay capital gains tax. The other major restriction is that you can only benefit from this exemption once every two years. Therefore, if you have two homes and lived in both for at least two of the last five years, you won't be able to sell both of them tax free. This act has been beneficial for home owners because it has significantly changed the implications of home sales. Before the act, sellers had to roll the full value of a home sale into another home within two years in order to avoid paying capital gains tax. This, however, is no longer the case, and the proceeds of the sale can be used in any way the seller sees fit. |
Banking and Finance, Business and Financial news, Political News,
The Market News.
THE BANKING AND THE AMERICAN FINANCIAL SYSTEM.
HISTORY, SUCCESS AND FAILURE!
SMALL BUSINESS, METHODS, TECHNIQUES, AND STRATEGIES
Business structures 101. LLP, LLC, S-corp and C-corp: It's not just
alphabet soup! A breakdown of what you need to know, in layman's
terms.
FINANCIAL KNOWLEDGE: The Successful Investment Journey, Ten
Tips For The Successful Long-Term Investor. Ten Steps to Building a
Winning Trading Plan, Five Things To Know About Asset Allocation
SAVING MONEY: THE SECRETS OF SAVING; WAYS TO SAVE A
LOT OF MONEY AND GETTING RICHER. 66 WAYS TO SAVE
MONEY
BUILDING WEALTH! How to Become Wealthy? Nine Truths That Can
Set You on the Path to Financial Freedom.
Becoming Wealthy One Bite at a Time! 7 Rules of Wealth Building,
Practical Keys to Amassing Investment Capital
UNCLAIMED MONEY, UNCLAIMED PROPERTY, THE FORGOTTEN
TREASURE SEATING IN THE HANDS OF THE STATES
GOVERNMENT
COULD BE YOURS OR TO SOMEONE YOU MAY KNOW!
Billions of dollars have been lost. Could some of it be yours? Yes
the government may owed you money; you may not even know about
it.
FINANCIAL FREEDOM: A SMARTEST WAY TO PREPARE A
BETTER FUTURE IS TO PLAN TODAY TO OBTAIN A COMPLETE
FINANCIAL FREEDOM.
Ten Resolutions to Make Your Financial Life Easier
WHY YOU AREN’T RICH?
Many people assume they aren't rich because they don't earn enough
money. If I only earned a little more, I could save and invest better,
they say, they don’t have a good education, they say they have too
much responsibilities; Excuses, Excuses, Excuses. THIS IS WHY!
INSURANCE: WAYS TO MAKE MONEY & SAVE MONEY ON YOUR
INSURANCE. THE IMPORTANCE OF INSURANCE IN SOMEONE'S
LIFE!
Homeowners' Insurance: What You Need to Know. Auto Insurance,
Life Insurance
Will & Living trust
What is a will and what is living trust? How does a living trust avoid
probate?
Auto Loans: Great Car, Great Price…. But what about the Financing?
Explore your financing options!---
Auto dealers have a long history of using questionable sales tactics to
bilk consumers in the market for a new car. Many people keep their
eye on the sale price and neglect scams involving vehicle financing,
which can add thousands of dollars to the price of a car.
Money Management: 10 Ways to Avoid Overdraft and Bounced
Check Fees! Three Ways to Put Your Budget On on Auto Pilot! The
Low Tech Way to Budget Your Money
FREE CREDIT REPORT CAN HELP YOU FIND OUT WHAT'S GOOD
OR WHAT'S BAD AND ALSO DETECT ID THEFT!
CREDIT INFO: SAVE YOUR CREDIT, RESCUE IT, PROTECT IT,
INCREASE YOUR SCORE. WE HAVE VALUABLE INFORMATION TO
HELP YOU.
IDENTITY THEFT: HOW TO PROTECT AND DEFEND YOURSELF
AGAINST IDENTITY THEFT? -----DETER, DETECT AND DEFEND?
DEFEND YOURSELF AGAINST IDENTITY THEFT; LEARN THE
IMPORTANT METHODS AND TECHNIQUES TO RECOVER FROM ID
THEFT!
The Market News.
THE BANKING AND THE AMERICAN FINANCIAL SYSTEM.
HISTORY, SUCCESS AND FAILURE!
SMALL BUSINESS, METHODS, TECHNIQUES, AND STRATEGIES
Business structures 101. LLP, LLC, S-corp and C-corp: It's not just
alphabet soup! A breakdown of what you need to know, in layman's
terms.
FINANCIAL KNOWLEDGE: The Successful Investment Journey, Ten
Tips For The Successful Long-Term Investor. Ten Steps to Building a
Winning Trading Plan, Five Things To Know About Asset Allocation
SAVING MONEY: THE SECRETS OF SAVING; WAYS TO SAVE A
LOT OF MONEY AND GETTING RICHER. 66 WAYS TO SAVE
MONEY
BUILDING WEALTH! How to Become Wealthy? Nine Truths That Can
Set You on the Path to Financial Freedom.
Becoming Wealthy One Bite at a Time! 7 Rules of Wealth Building,
Practical Keys to Amassing Investment Capital
UNCLAIMED MONEY, UNCLAIMED PROPERTY, THE FORGOTTEN
TREASURE SEATING IN THE HANDS OF THE STATES
GOVERNMENT
COULD BE YOURS OR TO SOMEONE YOU MAY KNOW!
Billions of dollars have been lost. Could some of it be yours? Yes
the government may owed you money; you may not even know about
it.
FINANCIAL FREEDOM: A SMARTEST WAY TO PREPARE A
BETTER FUTURE IS TO PLAN TODAY TO OBTAIN A COMPLETE
FINANCIAL FREEDOM.
Ten Resolutions to Make Your Financial Life Easier
WHY YOU AREN’T RICH?
Many people assume they aren't rich because they don't earn enough
money. If I only earned a little more, I could save and invest better,
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INSURANCE: WAYS TO MAKE MONEY & SAVE MONEY ON YOUR
INSURANCE. THE IMPORTANCE OF INSURANCE IN SOMEONE'S
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Homeowners' Insurance: What You Need to Know. Auto Insurance,
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Will & Living trust
What is a will and what is living trust? How does a living trust avoid
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Auto Loans: Great Car, Great Price…. But what about the Financing?
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which can add thousands of dollars to the price of a car.
Money Management: 10 Ways to Avoid Overdraft and Bounced
Check Fees! Three Ways to Put Your Budget On on Auto Pilot! The
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FREE CREDIT REPORT CAN HELP YOU FIND OUT WHAT'S GOOD
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Education Tax Credit, Tax Saving, Tax Reduction, Tax Benefits.
TAX EDUCATION CREDITS: The Tuition and Fees Deduction allows you to save big on taxes.
The Student Loan Interest Deduction. Click Here to Learn More...
TAX EDUCATION CREDITS: The Tuition and Fees Deduction allows you to save big on taxes.
The Student Loan Interest Deduction. Click Here to Learn More...
Education Tax Credit, Tax Saving, Tax Reduction, Tax Benefits.
TAX EDUCATION CREDITS: The Tuition and Fees Deduction allows you to save big on taxes.
The Student Loan Interest Deduction. Click Here to Learn More...
TAX EDUCATION CREDITS: The Tuition and Fees Deduction allows you to save big on taxes.
The Student Loan Interest Deduction. Click Here to Learn More...
CAPITAL GAINS AND LOSSES
When you sell a capital asset, the difference between what you sell it for and what you
paid for it is a capital gain or a capital loss.
If your long-term capital gain for the year is more than your net short-term capital loss,
that gain may be taxed at a lower rate.
If you have a taxable capital gain, you may be required to make estimated tax
payments.
----------------------------------------------------------------------------------------
Almost everything you own and use for personal or investment purposes is a capital
asset. Examples are your home, household furnishings, and stocks or bonds held in
your personal account.
When you sell a capital asset, the difference between the amount you sell it for and
your basis, which is usually what you paid for it, is a capital gain or a capital loss.
You have a capital gain if you sell the asset for more than your basis. You have a capital
loss if you sell the asset for less than your basis. Losses from the sale of personal-use
property, such as your home or car, are not deductible.
Capital gains and losses are classified as long-term or short-term. If you hold the asset
for more than 1 year before you dispose of it, your capital gain or loss is long-term. If
you hold it 1 year or less, your capital gain or loss is short-term.
If you have a net capital gain, that gain may be taxed at a lower tax rate. The term "net
capital gain" means the amount by which your net long-term capital gain for the year is
more than your net short-term capital loss.
The highest tax rate on a net capital gain is generally 15% (or 5%, if it would otherwise
be taxed at 15% or less). There are 3 exceptions:
The taxable part of a gain from qualified small business stock is taxed at a maximum
28% rate.
Net capital gain from selling collectibles (such as coins or art) is taxed at a maximum
28% rate.
The part of any net capital gain from selling Section 1250 real property that is required
to be recaptured in excess of straight-line depreciation is taxed at a maximum 25%
rate.
If you have a taxable capital gain, you may be required to make estimated tax
payments. If your capital losses exceed your capital gains, the amount of the excess
loss that can be claimed is limited to $3,000, or $1,500 if you are married filing
separately. If your net capital loss is more than this limit, you can carry the loss
forward to later years.
When you sell a capital asset, the difference between what you sell it for and what you
paid for it is a capital gain or a capital loss.
If your long-term capital gain for the year is more than your net short-term capital loss,
that gain may be taxed at a lower rate.
If you have a taxable capital gain, you may be required to make estimated tax
payments.
----------------------------------------------------------------------------------------
Almost everything you own and use for personal or investment purposes is a capital
asset. Examples are your home, household furnishings, and stocks or bonds held in
your personal account.
When you sell a capital asset, the difference between the amount you sell it for and
your basis, which is usually what you paid for it, is a capital gain or a capital loss.
You have a capital gain if you sell the asset for more than your basis. You have a capital
loss if you sell the asset for less than your basis. Losses from the sale of personal-use
property, such as your home or car, are not deductible.
Capital gains and losses are classified as long-term or short-term. If you hold the asset
for more than 1 year before you dispose of it, your capital gain or loss is long-term. If
you hold it 1 year or less, your capital gain or loss is short-term.
If you have a net capital gain, that gain may be taxed at a lower tax rate. The term "net
capital gain" means the amount by which your net long-term capital gain for the year is
more than your net short-term capital loss.
The highest tax rate on a net capital gain is generally 15% (or 5%, if it would otherwise
be taxed at 15% or less). There are 3 exceptions:
The taxable part of a gain from qualified small business stock is taxed at a maximum
28% rate.
Net capital gain from selling collectibles (such as coins or art) is taxed at a maximum
28% rate.
The part of any net capital gain from selling Section 1250 real property that is required
to be recaptured in excess of straight-line depreciation is taxed at a maximum 25%
rate.
If you have a taxable capital gain, you may be required to make estimated tax
payments. If your capital losses exceed your capital gains, the amount of the excess
loss that can be claimed is limited to $3,000, or $1,500 if you are married filing
separately. If your net capital loss is more than this limit, you can carry the loss
forward to later years.
DIVIDENDS
Dividends refers to the money a corporation pays you because you own stock in that corporation.
You should receive a Form 1099-DIV or a Schedule K-1 if you receive distributions of $10 or more.
Qualified dividends are ordinary dividends that meet the requirements to be taxed at the same maximum rates as net capital gains.
Dividends are distributions of money, stock, or other property a corporation pays you because you own stock in that corporation. You also may receive dividends through a partnership, an estate, a
trust, a sub-chapter S corporation or from an association that is taxed as a corporation.
If you receive dividends in significant amounts, you may have to pay estimated tax.
You should receive a Form 1099-DIV from each payor for distributions of $10 or more. Also, if you receive dividends through a partnership, an estate, a trust, or a sub-chapter S corporation, you
should receive a Schedule K-1 from that entity indicating the amount of dividends taxable to you. Even if you don't receive a Form 1099-DIV or Schedule K-1, you still must report all taxable dividends.
Ordinary dividends are the most common type of distribution from a corporation, and they are taxable as ordinary income unless they are qualified dividends. Qualified dividends are ordinary
dividends that meet the requirements to be taxed at the same maximum rates as net capital gains.
Nondividend distributions can be made in the form of a return of capital or a tax-free distribution of additional shares of stock or stock rights. A return of capital is a return of some or all of your
investment in the stock of the company. A return of capital reduces the basis of your stock and is not taxed until your basis in the stock is fully recovered. Once the basis of your stock has been
reduced to zero, any further return of capital is a capital gain.
Capital gain distributions may be paid by regulated investment companies (mutual funds) and real estate investment trust (REITs). Capital gain distributions are always reported as long-term capital
gains. You must also report any undistributed capital gain that mutual funds or REITs have designated to you in a written notice. Those undistributed capital gains are reported to you on Form 2439.
Form 1099-DIV should break down the distribution into the various categories. If it does not, contact the payor.
INTEREST INCOME
Generally most interest you earn is taxable.
Interest from Series EE and Series I U.S. Savings bonds may be excluded from income
if you pay qualified higher education expenses during the year.
You must report the amount of any tax exempt interest shown on your Form 1099-INT
or similar statement.
Most interest that you receive, and can be withdrawn, is taxable income. Examples of
taxable interest are interest on bank accounts, money market accuracy certificates,
and deposited insurance dividends. If you receive taxable interest, you may have to pay
estimated tax.
Interest on insurance dividends you leave on deposit with the Department of Veterans
Affairs, however, is not taxable.
Interest on Series EE and Series I U.S. Savings bonds generally does not have to be
reported until you redeem or dispose of the bonds or they mature. Interest from these
bonds may be excluded from income if you pay qualified higher educational expenses
during the year and meet other requirements.
Certain distributions commonly referred to as dividends are actually interest. They
include "dividends" on deposits or share accounts in cooperative banks, credit unions,
domestic savings and loan associations, federal savings and loan associations, and
mutual savings banks.
If you have a bond, note, or other debt instrument that was originally issued at a
discount, part of the original issue discount may have to be included in your income
each year as interest.
You must show the amount of any tax exempt interest you received during the tax year.
This is an information reporting requirement only, and does not convert tax exempt
interest to taxable interest. You should receive a Form 1099-INT, Form 1099-OID or a
similar statement from each payer of interest of $10 or more, showing the taxable
interest you must report.
Generally most interest you earn is taxable.
Interest from Series EE and Series I U.S. Savings bonds may be excluded from income
if you pay qualified higher education expenses during the year.
You must report the amount of any tax exempt interest shown on your Form 1099-INT
or similar statement.
Most interest that you receive, and can be withdrawn, is taxable income. Examples of
taxable interest are interest on bank accounts, money market accuracy certificates,
and deposited insurance dividends. If you receive taxable interest, you may have to pay
estimated tax.
Interest on insurance dividends you leave on deposit with the Department of Veterans
Affairs, however, is not taxable.
Interest on Series EE and Series I U.S. Savings bonds generally does not have to be
reported until you redeem or dispose of the bonds or they mature. Interest from these
bonds may be excluded from income if you pay qualified higher educational expenses
during the year and meet other requirements.
Certain distributions commonly referred to as dividends are actually interest. They
include "dividends" on deposits or share accounts in cooperative banks, credit unions,
domestic savings and loan associations, federal savings and loan associations, and
mutual savings banks.
If you have a bond, note, or other debt instrument that was originally issued at a
discount, part of the original issue discount may have to be included in your income
each year as interest.
You must show the amount of any tax exempt interest you received during the tax year.
This is an information reporting requirement only, and does not convert tax exempt
interest to taxable interest. You should receive a Form 1099-INT, Form 1099-OID or a
similar statement from each payer of interest of $10 or more, showing the taxable
interest you must report.
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..TERM INSURANCE
ADVANTAGES, TERM
INSURANCE GENERAL
KNOWLEDGE. Buy the term,
and invest the difference.
.. INVESTMENT PRODUCTS:
Investing & Money
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INSURANCE PRODUCTS:
How to make profits with
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BUILDING FINANCIAL
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MARKET LEARN THIS
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Top 10 home-buying
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HOW TO USE HOME
INSPECTION REPORTS TO
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...ACCOUNTING: The Basics
of Accounting...
...TAXES: THE
FUNDAMENTAL OF TAXES.
THE MORE YOU KNOW, THE
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ADVANTAGES, TERM
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and invest the difference.
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RICH?
BUILDING FINANCIAL
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..RULE OF 72: The compound
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..MILLIONAIRE: How To Make
Your First $1 Million? The
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..FORTUNE: BEFORE
INVESTING IN THE STOCK
MARKET LEARN THIS
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and Federal.
Housing Finance Authority of
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County
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TOP 10 CREATIVE
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Top 10 home-buying
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...ACCOUNTING: The Basics
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...TAXES: THE
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| ..News Letter: Tax Saving Business News, financial news, the world market. ..Biography & History of the personalities & politicians,, ..The world worst natural disasters & earthquakes in the history of humanity,, .Inventions. Great Inventions and discoveries of the century,, What are they? .. HAITI: Things you don't know & what you must know. Learn More!,, |
| Tax Breaks for Almost Everyone // ----- KNOWLEDGEFINANCIAL.COM You'll find lots of new deductions, credits and expanded eligibility rules when you prepare your tax return wll, the correct way it suppose to be done. The Most Overlooked Tax Deductions For This Year... KNOWLEDGEFINANCIAL.COM - KNOWLEDGE FINANCIAL GROUP The Most-Overlooked Tax Deductions Years ago, the fellow running the IRS told Kiplinger's Personal Finance magazine that he figured millions of taxpayers overpaid their taxes every year by overlooking just one of the money-savers listed here. We’ve updated all the key details in this popular slide show to ensure that your 2015 return is a money-saving masterpiece. Cut your tax bill to the bone by claiming all the breaks you deserve. ------------- State Sales Taxes You may hear that this tax break expired . . . which it does regularly, only to be just as regularly revived by Congress. That’s exactly what happened for purposes of 2015 returns. The break expired at the end of 2014 and then was revived retroactively in December 2015 to cover 2015 returns. But this time, Congress actually found the courage to make this break permanent. This is particularly important to you if you live in a state that does not impose a state income tax. You see, Congress offers itemizers the choice between deducting the state income taxes or state sales taxes they paid. You choose whichever gives you the largest deduction. So if your state doesn't have an income tax, the sales tax write-off is clearly the way to go. In some cases, even filers who pay state income taxes can come out ahead with the sales tax choice. The IRS has tables that show how much residents of various states can deduct, based on their income and state and local sales tax rates. But the tables aren't the last word. If you purchased a vehicle, boat or airplane, you may add the sales tax you paid on that big- ticket item to the amount shown in the IRS table for your state. The IRS even has a calculator that shows how much residents of various states can deduct, based on their income and state and local sales tax rates. ---------------====================== Reinvested Dividends This isn't a tax deduction, but it is an important subtraction that can save you a bundle. And this is the one that former IRS commissioner Fred Goldberg told Kiplinger millions of taxpayers miss . . . costing them millions in overpaid taxes. If, like most investors, you have mutual fund dividends automatically used to buy extra shares, remember that each reinvestment increases your tax basis in the fund. That, in turn, reduces the taxable capital gain (or increases the tax-saving loss) when you redeem shares. Forgetting to include reinvested dividends in your basis results in double taxation of the dividends—once in the year when they were paid out and immediately reinvested and later when they're included in the proceeds of the sale. Don't make that costly mistake. If you're not sure what your basis is, ask the fund for help. Funds often report to investors the tax basis of shares redeemed during the year. In fact, for the sale of shares purchased in 2012 and later years, funds must report the basis to investors and to the IRS. ======================= Student-Loan Interest Paid by Mom and Dad Generally, you can deduct interest only if you are legally required to repay the debt. But if parents pay back a child's student loans, the IRS treats the transactions as if the money were given to the child, who then paid the debt. So as long as the child is no longer claimed as a dependent, he or she can deduct up to $2,500 of student-loan interest paid by Mom and Dad each year. And he or she doesn't have to itemize to use this money-saver. (Mom and Dad can't claim the interest deduction even though they actually foot the bill because they are not liable for the debt.) ====================== Job-Hunting Costs If you're among the millions of unemployed Americans who were looking for a job in 2015, we hope you were successful . . . and that you kept track of your job-search expenses or can reconstruct them. If you were looking for a position in the same line of work as your current or most recent job, you can deduct job-hunting costs as miscellaneous expenses if you itemize. Qualifying expenses can be written off even if you didn't land a new job. But such expenses can be deducted only to the extent that your total miscellaneous expenses exceed 2% of your adjusted gross income. (Job-hunting expenses incurred while looking for your first job don't qualify.) Deductible costs include, but aren't limited to: Transportation expenses incurred as part of the job search, including 57.5 cents a mile for driving your own car plus parking and tollsFood and lodging expenses if your search takes you away from home overnightCab faresEmployment agency feesCosts of printing resumes, business cards, postage, and advertising. =================== Moving Expenses to Take Your First Job Although job-hunting expenses are not deductible when looking for your first job, moving expenses to get to that job are. And you get this write-off even if you don't itemize. To qualify for the deduction, your first job must be at least 50 miles away from your old home. If you qualify, you can deduct the cost of getting yourself and your household goods to the new area. If you drove your own car on a 2015 move, deduct 23 cents a mile, plus what you paid for parking and tolls. For a full list of deductible expenses, check out IRS Publication 521. |
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| -Income tax Help, Free Tax File, Free Tax preparation-- ..Tax Return Preparer Review: The Return Preparer Review final report is now available. ..What's new for this filing season. Do You Need to File a Federal Income Tax Return? Even though they are not required to. Find out if your income is below the filing requirement. --- -Check On Your Tax Refund-{Where Is My Refund}? -Tax E-File-{Electronic Tax Filing, Rapid Refund} -..IRS e-file: Filing your taxes online was never easier! A quick, easy, smart way to get your taxes where you want them to be --- Done! -..You can file online for free through the Free File program. -Tax Information For Tax Professionals- -Where to File Addresses for Tax Professionals for Use in Calendar Year 2010& 11. Addresses for tax professionals use in mailing individual returns Address for the 2010&11 Tax Filing Season. -Tax Information For Businesses- |
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'' Taxes, Everything About Taxes;
The More You Know, The Less You
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'' Tax Saving Tips For Individuals &
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| '' Financial Service '' { Wall Street Market} '' Financial Planning '' '' Retirement Planning '' '' Banking & Finance '' '' Business & Investing '' '' Wealth & Assets Mngt. '' '' Visionone Holding Company '' '' Femkonsa Capital Investment '' '' Market Advice & Investing Help '' '' How To Buy & Sell Investment Products '' '' Financial Literacy '' |
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| Investing Education Center / / Stock Market News & Information Achieving your financial goals also means picking the right investments. Find the right stocks, bonds,mutual funds, index funds, Reit's, Tax Liens, and exchange-traded funds to build and enhance your portfolio. '' How To Buy And Sell Stocks '' '' How To Buy And Sell ETF's '' '' How To Buy And Sell Bonds '' '' How To Buy And Sell Index Funds'' '' How To Buy And Sell Tax Liens & Tax Deeds '' '' How To Buy And Sell Options '' '' How To Buy And Sell Mutual Funds '' '' How To Buy And Sell Municipal Bonds '' '' How To Buy And Sell REIT's '' '' How To Buy And Sell Real Estate '' |
Military Reservists' Travel Expenses
Members of the National Guard or military reserve may write off the cost of travel to drills or meetings.
To qualify, you must travel more than 100 miles from home and be away from home overnight. If you
qualify, you can deduct the cost of lodging and half the cost of your meals, plus an allowance for
driving your own car to get to and from drills.
For 2015 travel, the rate is 57.5 cents a mile, plus what you paid for parking fees and tolls. You may
claim this deduction even if you use the standard deduction rather than itemizing.
==============
Deduction of Medicare Premiums for the Self-Employed
Folks who continue to run their own businesses after qualifying for Medicare can deduct the premiums
they pay for Medicare Part B and Medicare Part D, plus the cost of supplemental Medicare (medigap)
policies or the cost of a Medicare Advantage plan.
This deduction is available whether or not you itemize and is not subject to the 7.5% of AGI test that
applies to itemized medical expenses for those age 65 and older. One caveat: You can't claim this
deduction if you are eligible to be covered under an employer-subsidized health plan offered by either
your employer (if you have a job as well as your business) or your spouse's employer (if he or she has a
job that offers family medical
==================
Child-Care Credit
A credit is so much better than a deduction; it reduces your tax bill dollar for dollar. So missing one is
even more painful than missing a deduction that simply reduces the amount of income that's subject to
tax. In the 25% bracket, each dollar of deductions is worth a quarter; each dollar of credits is worth a
greenback.
You can qualify for a tax credit worth between 20% and 35% of what you pay for child care while you
work. But if your boss offers a child care reimbursement account—which allows you to pay for the child
care with pretax dollars—that’s likely to be an even better deal. If you qualify for a 20% credit but are in
the 25% tax bracket, for example, the reimbursement plan is the way to go. (In any case, only amounts
paid for the care of children younger than age 13 count.)
You can't double dip. Expenses paid through a plan can't also be used to generate the tax credit. But
get this: Although only $5,000 in expenses can be paid through a tax-favored reimbursement account,
up to $6,000 for the care of two or more children can qualify for the credit. So if you run the maximum
through a plan at work but spend even more for work-related child care, you can claim the credit on as
much as $1,000 of additional expenses. That would cut your tax bill by at least $200.
Members of the National Guard or military reserve may write off the cost of travel to drills or meetings.
To qualify, you must travel more than 100 miles from home and be away from home overnight. If you
qualify, you can deduct the cost of lodging and half the cost of your meals, plus an allowance for
driving your own car to get to and from drills.
For 2015 travel, the rate is 57.5 cents a mile, plus what you paid for parking fees and tolls. You may
claim this deduction even if you use the standard deduction rather than itemizing.
==============
Deduction of Medicare Premiums for the Self-Employed
Folks who continue to run their own businesses after qualifying for Medicare can deduct the premiums
they pay for Medicare Part B and Medicare Part D, plus the cost of supplemental Medicare (medigap)
policies or the cost of a Medicare Advantage plan.
This deduction is available whether or not you itemize and is not subject to the 7.5% of AGI test that
applies to itemized medical expenses for those age 65 and older. One caveat: You can't claim this
deduction if you are eligible to be covered under an employer-subsidized health plan offered by either
your employer (if you have a job as well as your business) or your spouse's employer (if he or she has a
job that offers family medical
==================
Child-Care Credit
A credit is so much better than a deduction; it reduces your tax bill dollar for dollar. So missing one is
even more painful than missing a deduction that simply reduces the amount of income that's subject to
tax. In the 25% bracket, each dollar of deductions is worth a quarter; each dollar of credits is worth a
greenback.
You can qualify for a tax credit worth between 20% and 35% of what you pay for child care while you
work. But if your boss offers a child care reimbursement account—which allows you to pay for the child
care with pretax dollars—that’s likely to be an even better deal. If you qualify for a 20% credit but are in
the 25% tax bracket, for example, the reimbursement plan is the way to go. (In any case, only amounts
paid for the care of children younger than age 13 count.)
You can't double dip. Expenses paid through a plan can't also be used to generate the tax credit. But
get this: Although only $5,000 in expenses can be paid through a tax-favored reimbursement account,
up to $6,000 for the care of two or more children can qualify for the credit. So if you run the maximum
through a plan at work but spend even more for work-related child care, you can claim the credit on as
much as $1,000 of additional expenses. That would cut your tax bill by at least $200.
A College Credit for Those Long Out of College
College credits aren’t just for youngsters, nor are they limited to just the first four years of college.
The Lifetime Learning credit can be claimed for any number of years and can be used to offset the
cost of higher education for yourself or your spouse . . . not just for your children.
The credit is worth up to $2,000 a year, based on 20% of up to $10,000 you spend for post-high-
school courses that lead to new or improved job skills.
College credits aren’t just for youngsters, nor are they limited to just the first four years of college.
The Lifetime Learning credit can be claimed for any number of years and can be used to offset the
cost of higher education for yourself or your spouse . . . not just for your children.
The credit is worth up to $2,000 a year, based on 20% of up to $10,000 you spend for post-high-
school courses that lead to new or improved job skills.
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Tax Forms That Can
Accidentally Increase Your Tax
Bill..
The upcoming blizzard of little 1099 tax forms
(which report various sources of "income" to the
IRS) brings two key dangers:
1. Losing one that contains key information that
needs to go on your tax return, and
2. Thinking you have to include every dime
reported on the 1099s to the IRS. Lots of the
dollars reported on 1099s are tax-free.
The IRS gets a copy of every 1099 information
return, so it's important to get this right. Set up a
file right now to collect the forms as they arrive in
the mail. And, read on to protect yourself from
accidentally increasing your tax bill by being
misled by a member of the 1099 family.
Accidentally Increase Your Tax
Bill..
The upcoming blizzard of little 1099 tax forms
(which report various sources of "income" to the
IRS) brings two key dangers:
1. Losing one that contains key information that
needs to go on your tax return, and
2. Thinking you have to include every dime
reported on the 1099s to the IRS. Lots of the
dollars reported on 1099s are tax-free.
The IRS gets a copy of every 1099 information
return, so it's important to get this right. Set up a
file right now to collect the forms as they arrive in
the mail. And, read on to protect yourself from
accidentally increasing your tax bill by being
misled by a member of the 1099 family.
The 1099-Q for Payouts
from Education Accounts..
The 1099-Q can be a
heart-stopper. It reports
distributions from a state 529 college
saving plan or Coverdell education
savings account.
But the odds are very, very good that the
payout is completely tax free. That's the
case if the money was used to pay tuition
or other qualifying costs.
Tax is due only if you used the money for
other purposes, and then tax is due only
on earnings, not what's likely to be the
majority of the payout that represents a
return of contributions.
Read the instructions carefully before you
pay tax on any part of a 1099-Q distribution.
from Education Accounts..
The 1099-Q can be a
heart-stopper. It reports
distributions from a state 529 college
saving plan or Coverdell education
savings account.
But the odds are very, very good that the
payout is completely tax free. That's the
case if the money was used to pay tuition
or other qualifying costs.
Tax is due only if you used the money for
other purposes, and then tax is due only
on earnings, not what's likely to be the
majority of the payout that represents a
return of contributions.
Read the instructions carefully before you
pay tax on any part of a 1099-Q distribution.
Tax Forms That Can
Accidentally Increase Your Tax
Bill
The 1099-G for Government
Payments..
Millions of Americans get 1099-Gs each year
showing payments they received from various
federal, state and local governments. Sometimes,
the amount is fully taxable, as is the case for
unemployment compensation. (Sorry, but it's
true:
The government gives with one hand and takes
with the other.) But, when it comes to state
income tax refunds, the vast majority of
recipients can simply ignore this 1099.
For the 70% or so of taxpayers who claimed the
standard deduction last year, the state refund
reported on the 1099 is 100% tax free. It's also tax
free if you claimed the state sales tax deduction
in lieu of the state income tax write-off.
And, even if you itemized and claimed the income
tax deduction, part of the refund may be tax free.
There's a worksheet in the instruction packet.
Take the time to run through it to protect yourself
against an expensive mistake.
Accidentally Increase Your Tax
Bill
The 1099-G for Government
Payments..
Millions of Americans get 1099-Gs each year
showing payments they received from various
federal, state and local governments. Sometimes,
the amount is fully taxable, as is the case for
unemployment compensation. (Sorry, but it's
true:
The government gives with one hand and takes
with the other.) But, when it comes to state
income tax refunds, the vast majority of
recipients can simply ignore this 1099.
For the 70% or so of taxpayers who claimed the
standard deduction last year, the state refund
reported on the 1099 is 100% tax free. It's also tax
free if you claimed the state sales tax deduction
in lieu of the state income tax write-off.
And, even if you itemized and claimed the income
tax deduction, part of the refund may be tax free.
There's a worksheet in the instruction packet.
Take the time to run through it to protect yourself
against an expensive mistake.
Tax Forms That Can
Accidentally Increase Your Tax
Bill
The 1099-LTC for
Long-Term-Care Benefits..
The IRS requires long-term-care insurance
companies to report to patients the full amount
of benefits paid out under the policy during the
year to the patients directly and to third parties
on their behalf. But don't assume you have to
pay tax on those benefits.
If your policy is "tax-qualified," which it likely is
if it reimburses only for qualified long-term-care
expenses, then the benefits are tax-free. You
don't even have to report the benefits on your
return.
If it's a "per diem" policy, which pays a set
amount regardless of actual expenses, benefits
in excess of a certain amount ($340 a day in
2016), may be taxable. You'll need to fill out IRS
Accidentally Increase Your Tax
Bill
The 1099-LTC for
Long-Term-Care Benefits..
The IRS requires long-term-care insurance
companies to report to patients the full amount
of benefits paid out under the policy during the
year to the patients directly and to third parties
on their behalf. But don't assume you have to
pay tax on those benefits.
If your policy is "tax-qualified," which it likely is
if it reimburses only for qualified long-term-care
expenses, then the benefits are tax-free. You
don't even have to report the benefits on your
return.
If it's a "per diem" policy, which pays a set
amount regardless of actual expenses, benefits
in excess of a certain amount ($340 a day in
2016), may be taxable. You'll need to fill out IRS
Tax Forms That Can
Accidentally Increase
Your Tax Bill
The 1099-C for
Cancellation of Debt..
This one is sometimes referred to as
the "adding insult to injury" form. If
you're in bad enough financial straits
that a lender forgives all or part of the
debt you owe, on a credit card bill, say,
or a home mortgage, the law generally
demands that you treat the cancelled
debt as fully taxable income and share
some of your "good fortune" with
Uncle Sam.
But there's a major exception when the
mortgage on your home is involved. In
the shadow of the housing crisis that
accompanied the Great Recession,
Congress decided to give homeowners
a break if mortgage debt was forgiven
as part of a foreclosure or a short sale.
In such cases, up to $2 million of
forgiven debt secured by your principal
residence will be ignored by the
taxman.
(Note: This does not apply to vacation
homes or rental properties.) As the law
now stands, this exception to the
cancelled-debt-is-taxable-income rule
expires after 2016.
Even without this rule, you don't have
to report cancelled debt as income if
you are insolvent—that is, your debts
exceed your assets—or if the debt is
cancelled in bankruptcy.
Also, if your home mortgage is "non-
recourse," meaning the lender's only
remedy in case of default is to
repossess the property but not sue you
for unpaid debt, then the cancelled
debt is not considered taxable income.
Accidentally Increase
Your Tax Bill
The 1099-C for
Cancellation of Debt..
This one is sometimes referred to as
the "adding insult to injury" form. If
you're in bad enough financial straits
that a lender forgives all or part of the
debt you owe, on a credit card bill, say,
or a home mortgage, the law generally
demands that you treat the cancelled
debt as fully taxable income and share
some of your "good fortune" with
Uncle Sam.
But there's a major exception when the
mortgage on your home is involved. In
the shadow of the housing crisis that
accompanied the Great Recession,
Congress decided to give homeowners
a break if mortgage debt was forgiven
as part of a foreclosure or a short sale.
In such cases, up to $2 million of
forgiven debt secured by your principal
residence will be ignored by the
taxman.
(Note: This does not apply to vacation
homes or rental properties.) As the law
now stands, this exception to the
cancelled-debt-is-taxable-income rule
expires after 2016.
Even without this rule, you don't have
to report cancelled debt as income if
you are insolvent—that is, your debts
exceed your assets—or if the debt is
cancelled in bankruptcy.
Also, if your home mortgage is "non-
recourse," meaning the lender's only
remedy in case of default is to
repossess the property but not sue you
for unpaid debt, then the cancelled
debt is not considered taxable income.
The 1099-B for Broker and
Barter Transactions.
This 1099 might actually open the door to a
tax-saving loss.
It reports the proceeds of the sale of a
stock, mutual fund shares or other assets.
But the full amount is never taxable.
You get to subtract your "basis"—that's
generally what you paid for the asset. If
that's more than the proceeds, you have a
loss that will offset other taxable income
and reduce your tax bill.
Sometimes, the 1099-B shows your basis in
the asset that was sold; sometimes it
doesn't.
But in any case, make sure you subtract
your basis from the proceeds, so you report
only the real profit or real loss on your tax
return.
Barter Transactions.
This 1099 might actually open the door to a
tax-saving loss.
It reports the proceeds of the sale of a
stock, mutual fund shares or other assets.
But the full amount is never taxable.
You get to subtract your "basis"—that's
generally what you paid for the asset. If
that's more than the proceeds, you have a
loss that will offset other taxable income
and reduce your tax bill.
Sometimes, the 1099-B shows your basis in
the asset that was sold; sometimes it
doesn't.
But in any case, make sure you subtract
your basis from the proceeds, so you report
only the real profit or real loss on your tax
return.
Tax Forms That Can
Accidentally Increase Your
Tax Bill
The 1099-R for Pensions,
Annuities, IRAs...
Distributions reported on a 1099-R might be
fully taxable, such as a payout from a
traditional IRA into which you have never
made nondeductible contributions.
(If you made even a single nondeductible
contribution, part of each distribution is tax
free.) Or, the amount reported could be
partially taxable, such as a payout from a
commercial annuity you have annuitized.
(Each payment also includes a
tax-free return of part of your investment in
the contract.) Or, the distribution reported to
you and the IRS could be completely tax-free,
as is the case if you made a qualified rollover
from one IRA to another.
In this case, you still have to report the
payout on your tax return but, in the section
for the taxable amount, $0.
Accidentally Increase Your
Tax Bill
The 1099-R for Pensions,
Annuities, IRAs...
Distributions reported on a 1099-R might be
fully taxable, such as a payout from a
traditional IRA into which you have never
made nondeductible contributions.
(If you made even a single nondeductible
contribution, part of each distribution is tax
free.) Or, the amount reported could be
partially taxable, such as a payout from a
commercial annuity you have annuitized.
(Each payment also includes a
tax-free return of part of your investment in
the contract.) Or, the distribution reported to
you and the IRS could be completely tax-free,
as is the case if you made a qualified rollover
from one IRA to another.
In this case, you still have to report the
payout on your tax return but, in the section
for the taxable amount, $0.
Tax Forms That Can
Accidentally Increase Your
Tax Bill
The 1099-R for Pensions,
Annuities, IRAs..
Distributions reported on a 1099-R might be
fully taxable, such as a payout from a traditional
IRA into which you have never made
nondeductible contributions.
(If you made even a single nondeductible
contribution, part of each distribution is tax
free.) Or, the amount reported could be
partially taxable, such as a payout from a
commercial annuity you have annuitized.
(Each payment also includes
a tax-free return of part of
your investment in the
contract.) Or, the distribution reported to
you and the IRS could be completely tax-free,
as is the case if you made a qualified rollover
from one IRA to another.
In this case, you still have to report the payout
on your tax return but, in the section for the
taxable amount, $0.
Accidentally Increase Your
Tax Bill
The 1099-R for Pensions,
Annuities, IRAs..
Distributions reported on a 1099-R might be
fully taxable, such as a payout from a traditional
IRA into which you have never made
nondeductible contributions.
(If you made even a single nondeductible
contribution, part of each distribution is tax
free.) Or, the amount reported could be
partially taxable, such as a payout from a
commercial annuity you have annuitized.
(Each payment also includes
a tax-free return of part of
your investment in the
contract.) Or, the distribution reported to
you and the IRS could be completely tax-free,
as is the case if you made a qualified rollover
from one IRA to another.
In this case, you still have to report the payout
on your tax return but, in the section for the
taxable amount, $0.
Tax Forms That Can
Accidentally Increase Your
Tax Bill
The SSA-1099 for Social
Security Benefits..
One thing is for sure: Part of your Social Security
benefits reported on this form is tax free. For
lower-income taxpayers, in fact, 100% is. For the
higher earners, up to 85% of the benefits are
taxed.
It all depends on how your total income compares
with a base amount for your filing status. And, for
this test, income means your adjusted gross
income not counting any Social Security plus 50%
of your benefits plus any tax-free interest you
earned during the year.
For singles with total income of $25,000 or less,
benefits are completely tax free. The same goes
for married taxpayers filing a joint return whose
total income is $32,000 or less.
As income rises above the base amounts, more
benefits are taxed until the maximum 85% is taxed.
The tax form instructions include a worksheet to
help figure out exactly what's what. Use it to make
sure you don't pay more tax than you have to on
your benefits.
Accidentally Increase Your
Tax Bill
The SSA-1099 for Social
Security Benefits..
One thing is for sure: Part of your Social Security
benefits reported on this form is tax free. For
lower-income taxpayers, in fact, 100% is. For the
higher earners, up to 85% of the benefits are
taxed.
It all depends on how your total income compares
with a base amount for your filing status. And, for
this test, income means your adjusted gross
income not counting any Social Security plus 50%
of your benefits plus any tax-free interest you
earned during the year.
For singles with total income of $25,000 or less,
benefits are completely tax free. The same goes
for married taxpayers filing a joint return whose
total income is $32,000 or less.
As income rises above the base amounts, more
benefits are taxed until the maximum 85% is taxed.
The tax form instructions include a worksheet to
help figure out exactly what's what. Use it to make
sure you don't pay more tax than you have to on
your benefits.
The 3 Biggest Tax Mistakes Retirees
Make..
It's not unusual for seniors to find themselves cash-strapped in retirement.
Once you stop working and move over to a fixed income, you'll probably have
less financial flexibility than you did during your working years.
That's why it's important to be mindful of the impact taxes will have on your
finances. To avoid surprises, be sure to steer clear of these major tax mistakes.
1. Forgetting about taxes in the first place Though there are a number of tax
breaks available to seniors, many are shocked to learn that some, or most, of
their income is taxable in retirement.
Take Social Security, for example. Seniors without much additional income
typically don't pay federal taxes on their benefits, ..
-----
But it's not just Social Security income that's taxable in retirement. Unless you
have a Roth retirement account, withdrawals from your IRA or 401(k) are also
subject to taxes -- ordinary income taxes, in fact.
If you fail to factor taxes into the equation when taking withdrawals, you could
wind up with a hefty IRS bill. And if you don't have the money on hand to pay that
bill,
you may need to resort to withdrawing extra money from your retirement
account to cover it and then paying additional taxes on that added withdrawal.
Ouch.
To avoid this situation, plan to be taxed on your retirement income from the
get-go and set aside money to pay whatever taxes you might end up owing. If
you're not yet retired, another option is to open a Roth account or convert your
non-Roth account into one.
Roth withdrawals are always taken tax-free in retirement, and they're not subject
to required minimum distributions, which, as you'll see next, can be another
major tax trap for seniors.
2. Neglecting required minimum distributions
While required minimum distributions (RMDs) don't apply to Roth accounts, if
you have a traditional IRA or 401(k), you'll need to start taking minimum
withdrawals once you turn 70 1/2.
The exact amount you'll need to take will be based on your account balance and
life expectancy at the time, but if you fail to make that withdrawal, you'll lose out
big time.
Specifically, you'll be hit with a 50% tax penalty on whatever amount you neglect
to remove from your account. So if your RMD for the year is $5,000 and you don't
take it, you'll be kissing $2,500 goodbye.
It's important to pay attention to RMD deadlines so you don't get slapped with
that penalty. Your initial RMD will need to be taken by April 1 of the year
following the calendar year in which you turn 70 1/2.
So if you turn 70 in May 2017 and 70 1/2 in November 2017, you'll need to take
your first RMD by April 1, 2018. Following that initial withdrawal, you'll have until
Dec. 31 of each calendar year to take your RMD.
Make..
It's not unusual for seniors to find themselves cash-strapped in retirement.
Once you stop working and move over to a fixed income, you'll probably have
less financial flexibility than you did during your working years.
That's why it's important to be mindful of the impact taxes will have on your
finances. To avoid surprises, be sure to steer clear of these major tax mistakes.
1. Forgetting about taxes in the first place Though there are a number of tax
breaks available to seniors, many are shocked to learn that some, or most, of
their income is taxable in retirement.
Take Social Security, for example. Seniors without much additional income
typically don't pay federal taxes on their benefits, ..
-----
But it's not just Social Security income that's taxable in retirement. Unless you
have a Roth retirement account, withdrawals from your IRA or 401(k) are also
subject to taxes -- ordinary income taxes, in fact.
If you fail to factor taxes into the equation when taking withdrawals, you could
wind up with a hefty IRS bill. And if you don't have the money on hand to pay that
bill,
you may need to resort to withdrawing extra money from your retirement
account to cover it and then paying additional taxes on that added withdrawal.
Ouch.
To avoid this situation, plan to be taxed on your retirement income from the
get-go and set aside money to pay whatever taxes you might end up owing. If
you're not yet retired, another option is to open a Roth account or convert your
non-Roth account into one.
Roth withdrawals are always taken tax-free in retirement, and they're not subject
to required minimum distributions, which, as you'll see next, can be another
major tax trap for seniors.
2. Neglecting required minimum distributions
While required minimum distributions (RMDs) don't apply to Roth accounts, if
you have a traditional IRA or 401(k), you'll need to start taking minimum
withdrawals once you turn 70 1/2.
The exact amount you'll need to take will be based on your account balance and
life expectancy at the time, but if you fail to make that withdrawal, you'll lose out
big time.
Specifically, you'll be hit with a 50% tax penalty on whatever amount you neglect
to remove from your account. So if your RMD for the year is $5,000 and you don't
take it, you'll be kissing $2,500 goodbye.
It's important to pay attention to RMD deadlines so you don't get slapped with
that penalty. Your initial RMD will need to be taken by April 1 of the year
following the calendar year in which you turn 70 1/2.
So if you turn 70 in May 2017 and 70 1/2 in November 2017, you'll need to take
your first RMD by April 1, 2018. Following that initial withdrawal, you'll have until
Dec. 31 of each calendar year to take your RMD.
