Mike's weekly post usually concentrated on tax saving strategies.
Surprise! The Mutual Fund Tax Trap
Too often taxpayers receive a tax surprise at year-end due to actions taken by a mutual fund they own. What can add insult to injury is the unsuspecting taxpayer who recently purchases the shares in a mutual fund only to be taxed on their recent investment. How does this happen and what can you do about it?
Reducing the Savings Account Tax Burden
Money you place in traditional savings accounts is already taxed by both the Federal and State governments. These after-tax deposits lower the amount you have available for savings. Lower deposit amounts also mean lower earnings potential. Then Interest earned on your savings is also taxed. What can you do to lessen this tax burden?
1. Leverage tax-advantaged retirement accounts. Use 401(k), 401(b) and similar programs to deposit pre-tax money into retirement accounts. This way your initial deposits are larger because they have not yet been subject to income tax. This will provide higher earnings on your savings because of the pre-tax contributions. The downside? Your benefits and contributions will be taxed when you withdraw the funds.
Businesses that want to adopt a SIMPLE retirement plan for 2014 generally have until October 1 to do so.
Don't incorporate your business without first checking the long-range tax and nontax considerations. Call us for details.
If you hold a capital asset for more than one year, your gain or loss is long-term. If held for one year or less, it is short-term.
Almost everything you own and use for personal or investment purposes is a capital asset and taxable if sold at a gain.
You can't deduct job hunting expenses if you are looking for your first job or for a job in a different line of work.
If you moved this summer, be sure to update your address with the IRS. Use Form 8822 "Change of Address."
Social Security: know the variables . Do your math
Determining the best time and best way to take Social Security Benefits can make a big difference in the amount you receive over the balance of your lifetime. Your personal Social Security benefits strategy often has no one right answer. What is prudent, however, is running calculations prior to making your benefit decision. Here are some things to consider.
Full retirement age. Your full Social Security Retirement benefit can be claimed when you reach your target retirement age. This is age 66 for those born between 1943 and 1954. Those born after 1954 have their full retirement age increase by two months per year until full retirement age becomes 67 years old for those born in 1960 or later.
The tax code is filled with tax breaks to offset the cost of education. This includes programs like the Lifetime Learning Credit, the American Opportunity Credit, the Saver’s Credit, student loan interest deductibility, and the on-again off-again Tuition Deduction. Lost in all these options is the long-standing Coverdell Education Savings Account (ESA). Is it worth considering in your educational funding mix?
