7 Personal Finance Tips From Warren Buffett

Warren Buffett is generally considered to be the best long-term investor of all time, so it’s no wonder many people like to listen closely to Buffett’s words of wisdom, in order to apply them to their own lives. With that in mind, here are seven of the best personal finance lessons I’ve learned from Warren Buffett over the years.

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1. “Someone’s sitting in the shade today because someone planted a tree a long time ago”

The lesson here is to be a forward thinker when it comes to personal finance, whether you’re talking about investing, saving, or spending. When you’re deciding whether to put some more money aside for emergencies, think of a financial emergency actually happening and how much easier your life will be if you have enough money set aside.

Similarly, few people get rich quick by investing, and most people who try end up going broke. The most certain path to wealth (and the one Buffett took) is to build your portfolio one step at a time, and keep your focus on the long run.

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2. “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years”

In addition to this, one of my all-time favorite Warren Buffett quotes is “our favorite holding period is forever,” which is also one of the most misunderstood things he says. The point isn’t that Buffett only invests in stocks he’s going to buy and forget about — after all, Buffett’s company Berkshire Hathaway sells stocks regularly, and for a variety of reasons. Rather, what Buffett is saying is to invest in stable, established businesses that have durable competitive advantages. That is, approach your investments with the long term in mind, but keep an eye on them to make sure your original reasons for buying still apply.

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3. “Price is what you pay; value is what you get”

When you’re buying an investment (or anything else for that matter), the price you pay and the value you receive are often two very different things. In other words, you should buy a stock if you believe its share price is less than the intrinsic value of the business — not simply because you think the price is low.

For example, if a market correction hit tomorrow and a certain stock were to fall by 10% along with the overall market, would the business inherently be worth 10% less than it is today? Probably not. Similarly, if a stock rose rapidly, it wouldn’t necessarily mean that the value of the underlying business had risen as well. Be sure you consider value and price separately when making investing decisions.

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4. “Cash … is to a business as oxygen is to an individual: never thought about when it is present, the only thing in mind when it is absent”

One of the reasons Berkshire Hathaway not only survives recessions and crashes, but tends to come out of them even better than it went in, is that Warren Buffett understands the value of keeping an “emergency fund.” In fact, when the market was crashing in 2008, Berkshire had enough cash on hand to make several lucrative investments, such as its purchase of Goldman Sachs warrants.

Granted, Berkshire Hathaway’s rainy-day fund is probably a bit bigger than yours; Buffett insists on keeping a minimum of $20 billion in cash at all times, and the current total is around $85 billion. However, the same applies to your own financial health. If you have a decent stockpile of cash on the sidelines, you’ll be much better equipped to deal with whatever financial challenges and opportunities life throws at you.

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5. “Risk comes from not knowing what you’re doing”

In Buffett’s mind, one of the best investments you can make is in yourself and the knowledge you have. This is why Buffett spends hours of every day reading, and has done so for most of his life. The better educated you are on a topic, whether it’s investing or anything else, the better equipped you’ll be to make wise decisions and avoid unnecessary risks. As Buffett’s partner Charlie Munger has advised: “Go to bed smarter than when you woke up.”

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6. Most people should avoid individual stocks

This may seem like strange advice coming from Warren Buffett, since he’s widely regarded as one of the best stock-pickers of all time.

However, Buffett has said on several occasions that the best investment for most people is a basic, low-cost S&P 500 index fund, like the one he is using in a bet to outperform a basket of hedge funds. The idea is that investing in the S&P 500 is simply a bet on American business as a whole, which is almost certain to be a winner over time.

To be clear, Buffett isn’t against buying individual stocks if you have the time, knowledge, and desire to do it right. He’s said that if you have six to eight hours per week to dedicate to investing, individual stocks can be a smart idea. If not, you should probably stick with low-cost index funds.

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7. Remember to give back

Warren Buffett is a co-founder of and participant in The Giving Pledge, which encourages billionaires to give their fortunes away. Buffett plans to give virtually all of his money to charity, and since he signed the pledge, he has given away billions of dollars’ worth of his Berkshire shares to benefit various charitable organizations.

Buffett once said, “If you’re in the luckiest one percent of humanity, you owe it to the rest of humanity to think about the other 99 percent.” And even if you’re not a member of the 1%, it’s still important to find ways to give back.

 

 

 

Written By: Matthew Frankel
Source: The Motley Fool

Let’s Go On A Money Adventure

It’s never too early to start teaching kids the value of money, so Ally created a children’s book to help kids learn about money skills as part of their Wallet Wise financial literacy program.

Planet Zeee and the Money Tree is a tool to help parents and educators teach children the fundamentals of learning, saving and growing money. Take your child on an intergalactic adventure with the kids from Planet Zeee as they learn important money lessons from their Earthling friends. It’s never too early to teach children financial responsibility and good money habits.

Download your free copy here!

 

 

 

The Truth About Present-Day Retirement

Times have changed and so has retirement! Nowadays, retirement is no longer what people once expected. If you’re preparing to retire, the way your parents did, you might be stuck in the past and need to face present-day reality. So, what has changed in the last 10 years? Well, the factors below will shift your perspective about how you should be preparing for retirement!

First, with all the advancements of medicine and technology that we’ve had in this last decade, it’s no surprise that people are living longer. In the past, living 30 years after retirement, was actually outside the norm of an adult’s lifespan. Therefore, the 4% safe withdrawal rate that many financial planners followed was a valid rule of thumb. This guideline told retirees that if they took out only 4% of their assets and adjusted to inflation in their retirement portfolio, the risk of running out of money 30 years after they retired was very low.

But it’s no longer the case! If you’re saving conservatively for an amount that would last you around 30 years, disregard the 4% rule. People are now living past the age of 95 and a good amount of them are even retiring early. The average portfolio return for the standard investor has also decreased and is subject to more risk from the impacts of market volatility. The chances of outliving your nest egg is a lot higher these days.

Not only are people starting to live longer, the divorce rate is also significantly higher. You can no longer assume that you’ll still be married once you retire! How is that an issue, you ask? Well, a divorce could be a serious stumbling block for your retirement plan since your income might be cut in half during your golden years. Not to mention, your retirement assets might be split among you and your ex-spouse. Because of a divorce, you’ll most likely have to change your retirement strategy and lifestyle.

Have you noticed that everything costs a lot more than it used to? Some of this increase can be a result of natural inflation in prices. But, according to our government, inflation is very tame and under control. Yet, the cost of everyday goods is a lot higher and will keep outpacing inflation throughout your retirement. And it is not just everyday expenses that you’ll need to factor into your budget, there’s the added healthcare costs as well. Given the fact that there’s a good chance you’ll live longer, there are more medical issues you’ll be susceptible to. Not to mention the fact that your chances of getting injured or breaking something will dramatically increase. This means a lot more medical bills and trips to the doctor’s office! On top of that, the fact that a third of us will require some sort of assistance or nursing care, and you can see how retirement costs can skyrocket! Basically, retirement is not as cheap as it used to be.

Finally, if you think about your assets, it’s safe to assume that your home is your most valuable one. You may be able to sell it at a profit, assuming that the value has increased over the years. However, that might be a misconception! In order to determine whether or not you’ll actually get a return on your investment, you’ll need to adjust for inflation and taxes. Also, if we experience any major volatility in the housing market like we did in the past, you might not be able to get as much money for your property as you expected. Like all markets, the real estate market can be unpredictable.

So, with all of these changes, how can one successfully save for retirement? Well, my biggest recommendation for every pre-retiree that I talk to is, BE PREPARED! It’s always better to set your retirement savings goal beyond your expected amount, than below it. With the unpredictability of divorce, age, and the financial markets, it’s better to be safe than sorry. If you aim higher and save more, then your risk of running out of money during retirement will be a lot lower. Part of being prepared is to work closely with a financial planner that can guide your through your Golden Years. This ‘financial coach’ should be able to point out pitfalls that you might not have even thought of. It’s their job to make sure that you’re on track and don’t fall victim to your own wrongdoings. As well as to create a retirement game plan and an investment road-map that takes taxes and your risk tolerance into consideration.

Being prepared for retirement can be a daunting task. Especially given all the unknowns out there. But with proper preparation and guidance from a financial professional, you can glide into retirement knowing full well that you’re ready for the challenge!

How To Avoid A 401(k) Meltdown If The Trump Rally Fizzles

Millions of Americans are asking the wrong questions when it comes to their retirement plans. It’s not “how much should I invest now?” or “is the market safe?” You should invest as much as you can in every kind of market.

So forget about the question of whether the “Trump rally” is over, or taking a pause. If that’s your concern, you’re focused on the wrong thing.

Despite this reality, far too many investors are trying to find the right fund manager who can somehow predict and navigate the rocky seas the market will toss up. In rare cases, some managers get lucky and get in and out at the right time. But most don’t have this ability.

Most of us want to believe that professional money managers know just when to get in and out of stocks. We put a lot of faith in them — and mis-spend some $2 trillion in fees hoping that they’ll be right and protect our money.

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The numbers don’t lie, however. Most managers can’t do better than passive market averages and rarely outperform after you subtract their fees. So if you’re placing your trust in active management, you’re headed for a meltdown sooner or later.

A recent study by Jeff Ptak at Morningstar shows the folly of active management for most investors.

Ptak looked a the relationship between what actively managed funds return to the fees they charge for management. In most cases, expenses will cancel out most significant gains.

“Fees haven’t fallen that steeply, and, as a result more than two-thirds of U.S. stock funds levy annual expenses that would wipe out their estimated future pre-fee excess returns.”

What this means is that active managers who time the market aren’t likely to outperform passive baskets of stocks. When you subtract their fees, you’re not coming out ahead.

Fees take an even bigger bite when overall market returns are lower. If stocks return less than double digits, you’re going to feel the pain even more.

Ptak is blunt in his conclusion: “Many active stock funds are too expensive to succeed. The exceptions are small-cap funds, where it appears fees are still below estimated pre-fee excess returns.”

What can you do to avoid the meltdown of overpriced, actively managed funds? It’s a pretty simple process.

1) Find the lowest-cost index funds to cover U.S. and global stocks and bonds. Expense ratios shouldn’t be more than 0.20% annually (as opposed to 1% or more for active funds).

2) If you still want active funds in your portfolio, they should be highly-rated managers who invest in smaller companies.

3) Make sure that the “active” part of your portfolio is no more than 30% of your total holdings. While this is an arbitrary percentage, it will provide some buffer against market timing decisions.

You should also avoid the error of picking funds based on their past performance, which can never be guaranteed. So, instead of asking how they performed, you should ask “how many securities can they hold for the lowest-possible cost.”

 

20 Hidden Sources Of Income Lying Around Your House

You can sell things online, like dolls, old appliances and books, for cash.

The unused items collecting dust in your home could be worth hundreds or even thousands of dollars. People tend to underestimate the value of their belongings, but buyers often are happy to pay serious cash for rare or limited items, said Jacquie Denny, founder of Everything But The House (EBTH), an online estate sale service. However, even everyday items can find a buyer.

Whether you’re on a cash crunch or want to do some heavy spring cleaning, check around your house. Find out which 20 things you can sell online and elsewhere for extra money.

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1. CLOTHING

Chances are that you and your loved ones have clothing that’s collecting dust in a closet. If these items are gently worn, you might be able to cash in by selling them. One of the easiest ways to unload your used clothing for cash is to sell items on consignment.

I’ve been selling clothes through a local consignment store for years and regularly receive 50 percent of the selling price for items I unload. To earn top dollar, look for upscale consignment stores that enjoy a lot of foot traffic. Additionally, you should find out what brands and items the store accepts and make sure your clothing meets the store’s standards.

You can also sell to an online reseller such as ThredUP.com, which will send you a prepaid package to ship your items. ThredUP sellers can earn up to 80 percent of the marked price of their items.

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2. DESIGNER SHOES AND HANDBAGS

If you paid big bucks for designer shoes or a handbag that you now rarely use, you can reclaim some of your money by selling these items online. Frugal living expert Lauren Greutman said she has sold shoes through Poshmark for up to 50 percent of the retail price.

You can snap a picture of the items you want to sell using the Poshmark app and list them instantly. Poshmark will send a prepaid box to ship items that sell and take a $2.95 commission for sales less than $15 and a 20 percent commission for sales above $15.

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3. JEWELRY

If you have an inherited necklace that isn’t your style, or an engagement ring you no longer wear because you’re divorced, you might want to consider selling these pieces for cash. Fine jewelry can be worth a lot, said Denny.

To make sure you get the full value of your jewelry, consider having items appraised beforehand. You can find an appraiser near you through the American Society of Appraisers’ site, Appraisers.org, or sell online through an auction site such as eBay.com. You can also opt to sell to a jeweler or pawn shop, but it’s important to seek out quotes from several stores before doing so.

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4. COMPUTERS

Many households have $400 to $800 worth of cash in the form of unused laptop computers, said Michele Perry, a consumer tech expert at electronics resale site Gazelle.com. Fortunately, sites such as Gazelle and NextWorth.com make it easy to unload these unwanted laptops for cash.

With Gazelle, sellers can request quotes for their devices. They are then sent prepaid shipping boxes.

“You just send it back with your device, and we’ll send you cash,” Perry said. She went on to remind sellers to erase the data on their computers prior to sending them in.

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5. CELLPHONES

Used cellphones are another tech item you can sell for cash — even if it’s damaged.

“Most devices still have value even if they are broken or damaged, as long as they are fully functional and just have a broken screen or need to replace a battery or button,” Perry said. In fact, sellers can net $75 for a broken iPhone 6S on Gazelle.com. Moreover, they can earn $185 if the item is in good condition with normal wear and tear.

Sellers can also unload old cellphones on sites like Kiiboo.com and NextWorth.com or drop their phones into one of the more than 2,000 ecoATM kiosks located in shopping malls across the nation.

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6. GIFT CARDS

In 2015, $973 million worth of gift cards went unused, according to the professional services firm CEB. If you have gift cards you’re not planning to use, you can sell them for cash on sites such as CardCash.com, Cardpool.com, GiftCardZen.com and Raise.com.

The above sites purchase gift cards for less than face value and then resell them at a discount. For example, you can get back up to 92 percent of a card’s value at Cardpool.com. You also can exchange gift cards for cash at Coinstar Exchange kiosks in grocery stores.

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7. BOOKS

If you have books you know you’ll never read again — or at all — you can easily turn them into cash by selling online. Check to see if you have any first edition books and books autographed by authors to start, said Denny of EBTH, as these items could be good sources of hidden cash.

Greutman recommended selling unwanted books on Amazon. Scan your books using the free Amazon Seller app, which tells you the current value. You can list your books with the app and price them based on Amazon’s pricing suggestions, she said. It’s important to note that Amazon charges 99 cents per item sold.

Additionally, sellers can unload unwanted books through Half.com, which doesn’t charge a listing fee. Start by visiting sites like AbeBooks.com and Biblio.com to see what your books might be worth.

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8. CHILDREN’S TOYS

It’s no secret that children outgrow their toys quickly. Luckily, you can make money selling your kids’ unwanted toys — especially larger items such as kitchen playsets. I made about $50 on a wooden train set for which I originally paid $75 by selling it through a consignment store.

If you have several smaller toys to sell, Greutman advised requesting a box from Swap.com. You can fill it with items and then ship it back to the company for free. Earning $25 to $50 per box is not uncommon, according to Greutman.

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9. COLLECTIBLE DOLLS

If you inherited a collection of porcelain dolls from your grandmother, it might be time to dig them out of storage. In fact, according to Denny, people are willing to pay top dollar for collectible dolls.

Additionally, individuals whose children have old American Girl dolls might be sitting on cash cows. These toys command a high price on eBay.com, said Greutman. For example, a 2014 American Girl Doll of the Year recently had a list price of $399.99 on eBay. This listing is $285 higher than that of the current Doll of the Year sold by American Girl.

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10. FURNITURE

Make some extra cash by selling unwanted furniture that’s occupying space in your garage, attic or storage unit. Along with selling items in consignment stores, which offer owners a percentage of the final price, individuals can opt to advertise locally on Facebook, Craigslist.org or OfferUp.

BudgetsAreSexy.com blogger J. Money has made more than $1,000 selling items on Craigslist, including furniture. When listing an item on the site, he recommended posting several pictures, providing all of the dimensions, using keywords such as brand names in your description and researching prices of similar items. Additionally, you should make yourself available by phone or email to respond to interested buyers.

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11. MUSICAL INSTRUMENTS

That guitar or drum set you bought years ago, because you thought you were going to start a band, can be turned into cash if your dreams of rockstardom never materialized. In fact, J. Money reported selling an electric guitar, amps and accessories on Craigslist for $225. You also can sell musical instruments online through sites such as Reverb.com, which charges a 3.5 percent fee on sales, or at a physical retailer such as Guitar Center.

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12. SPORTING GOODS

Denny said that outdoor sporting goods, such as bicycles, canoes and fishing gear, tend to sell well on EBTH. If you have sporting goods you bought for yourself or your kids, you can sell them on your own through Craigslist or OfferUp.

Additionally, you can take sports gear — such as skis, golf clubs, baseball bats, gloves and football cleats and helmets — to a Play It Again Sports store and receive 30 percent to 50 percent of the selling price.

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13. SPORTS MEMORABILIA

If you collected baseball cards or sports jerseys as a child, you might be able to exchange these items for much-needed cash. Signed sports memorabilia, in particular, can be a big source of income.

“The more famous the player, the higher the prices demanded,” Denny said. For best results, consider having your items appraised to determine how valuable they are.

You can find an appraiser through Appraisers.org or have trading cards professionally authenticated through the Professional Sports Authentication at PSACard.com. One of the best places to sell sports memorabilia is eBay, which many sports enthusiasts use to find collectibles.

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14. ANTIQUES

If you have antiques you’re willing to sell, their value will hinge largely on their condition and whether they are rare or have historical significance, Denny said.

“With antiques, small scratches and evidence of light wear and tear can actually increase the value slightly, but structural damage and other repairs can be costly and dissuade sellers,” she said. “All these complicating factors are part of why it’s important to work with a reputable appraiser.”

The best way to secure top dollar for antiques is to sell them through an auction house, according to Consumer Reports. You can also sell to antique dealers, but be sure to get quotes from a few services before doing so. Additionally, you can sell antiques at EBTH, which offers appraisers who will value individual items or an entire estate.

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15. ARTWORK

Whether you have inherited artwork that isn’t your taste, or pieces you purchased are collecting dust in the attic, you can opt to sell these items for cash. In fact, I’ve sold numerous pieces of art at consignment stores.

For fine art, consider having items appraised before selling. Regional artwork sells particularly well in EBTH sales, said Denny. You can also sell your fine art through auction houses.

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16. CHINA SETS

If formal dining isn’t your style, you can unload that china set you inherited or received as a wedding gift at a local consignment store. Denny said china is a popular item sold on EBTH — especially sets made by Spode, Lenox and modern designers, such as Ralph Lauren. Additionally, sellers can list china sets on Craigslist.

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17. SILVER

If you inherited some sterling silver trays, serving spoons or other items you don’t use, you might be able to earn cash selling them “as is” or for scrap.

“If the silver holds any sort of historical significance, or has any brand association, it will offer a much greater return than if you were to sell it to scrap,” Denny said. However, she acknowledged that the current market for silver is a difficult one.

At the present time, buyers might get more money selling silver pieces for scrap than at a consignment store or through an auction house. For best results, secure quotes from several metals dealers — both online and storefront.

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18. SAVINGS BONDS

You might have received — or even purchased — savings bonds decades ago only to forget about them completely. In fact, billions of dollars’ worth of matured savings bonds have never been cashed in, according to the U.S. Department of the Treasury.

You can use the Treasury Hunt tool at Treasuryhunt.gov to discover whether you have Series E bonds issued after 1974 that are no longer earning interest and can be cashed in. The tool can also help you identify bonds you might have lost and claim them.

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19. APPLIANCE PARTS

Small appliances that are old or broken can still have value, Greutman said. That’s because you can sell their parts on eBay. For example, a used Keurig K-cup holder recently had a list price of $29.90 on eBay.

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20. VIDEO GAMES

You can cash in on those video games you or your kids no longer play by selling them online or at various brick-and-mortar retailers. Sites such as uSell.com and NextWorth purchase used video games and offer free shipping. Additionally, you can sell used video games at retailers such as GameStop, which will pay cash or give you store credit to buy more hours of fun.

 

 

Written by: Cameron Huddleston
Source: GOBankingRates

29 Biggest Tax Problems For Married Couples

Preparing your annual income tax return is a chore. It’s even more complex when you’re married. You might have two sets of income, assets, debts and deductions. Further, if you were separated, widowed or divorced during the year, you might have a thorny tax situation.

A qualified accountant can advise you on the basic tax problems that married couples face. For a brief introduction, read through to see 29 of the most significant tax problems married people might encounter. Understanding these challenges can help you get more tax breaks this year.

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1. YOU’RE NOT SURE OF THE YOUR MARITAL STATUS FOR THE TAX YEAR

When preparing taxes, you first need to determine your marital status. It might seem like a straightforward task. However, life is not always so simple.

The IRS considers you to be married if you were lawfully wed on the last day of the tax year. For example, if you tied the knot at any time in the past and were still married on Dec. 31, 2016, you were married to your spouse for the entire year in the eyes of the IRS. The laws of the state where you live determine whether you were married or legally separated for the tax year.

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2. YOU’RE NOT SURE OF YOUR MARITAL STATUS IN A SAME-SEX RELATIONSHIP

Married, same-sex couples are treated the same as married, heterosexual couples for federal tax purposes. However, same-sex couples in a registered domestic partnership or civil union cannot choose to file as married couples, as state law doesn’t consider those types of couples to be married.

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3. YOU DON’T KNOW WHICH FILING STATUS TO CHOOSE

If you weren’t married on Dec. 31 of the tax year, the IRS considers you to be single, head of household or a qualified widow(er) for that year.

If you were married, there are three filing possibilities:

  • Married filing jointly
  • Married filing separately
  • Head of household

If more than one category might apply to you, the IRS permits you to pick the one that lets you pay the least amount in taxes.

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4. YOU CAN’T DECIDE WHETHER TO FILE JOINTLY OR SEPARATELY

If you’re married and don’t qualify to file as head of household, you typically have two choices: filing jointly or separately. It’s best to choose the one that allows you to pay the least amount in taxes, which all comes down to your particular circumstances.

Sometimes it makes sense to file separately, said Josh Zimmelman, owner of Westwood Tax & Consulting, a New York-based accounting firm. “A joint return means that your finances are linked, so you’re both liable for each other’s debts, penalties and liabilities,” he said. “So if either of you has some financial issues or baggage, then filing separately will better protect your spouse from your bad record, or vice versa.”

If you file jointly, you can’t later uncouple yourselves to file married filing separately. “On the other hand, if you file separate returns and then realize you should have filed jointly, you can amend your returns to file jointly, within three years,” Zimmelman said.

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5. YOU ASSUME MARRIED FILING JOINTLY IS ALWAYS THE BEST OPTION

Even if married filing jointly has been your best choice in the past, don’t assume it will always be that way. Do the calculations each year to determine whether filing singly or jointly will give you the best tax result.

Changes in your personal circumstances or new tax laws might make a new filing status more desirable. What was once a marriage tax break might turn into a reason to file separately, or vice versa.

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6. YOU’RE NOT CLEAR ABOUT HEALTHCARE REQUIREMENTS

The Patient Protection and Affordable Care Act — more commonly known as “Obamacare” — requires that you and your dependents have qualifying health care coverage throughout the year, unless you qualify for an exemption or make a shared responsibility payment.

Even if you lose your health insurance coverage because of divorce, you still need continued coverage for you and your dependents during the entire tax year.

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7. YOU CHANGED YOUR LAST NAME

If you want to change your last name after a marriage or divorce, you must officially inform the federal government. Your first stop is the Social Security Administration. Your name on your tax return must match your name in the SSA records. Otherwise, your tax refund might be delayed due to the mismatched records. Also, don’t forget to update the changed names of any dependents.

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8. YOUR SPOUSE DIED DURING THE TAX YEAR

If your spouse died during the year, you’ll need to figure out your filing status. If you didn’t marry someone else the same year, you may file with your deceased spouse as married filing jointly.

If you did remarry during that tax year, you and your new spouse may file jointly. However, in that case, you and your deceased spouse must file separately for the last tax year of the spouse’s life.

In addition, if you didn’t remarry during the tax year of your spouse’s death, you might be able to file as qualifying widow(er) with dependent child for the following two years if you meet certain conditions. This entitles you to use joint return tax rates and the highest standard deduction amount.

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9. YOU FILE JOINTLY AND YOU’RE BOTH LIABLE

If you use the status married filing jointly, each spouse is jointly and severally liable for all the tax on your combined income, said Gail Rosen, a Martinsville, N.J.-based certified public accountant. “This means that the IRS can come after either one of you to collect the full amount of the tax,” she said.

“If you are worried about your spouse and being responsible for their share of their taxes — including interest and penalties — then you might consider filing separately,’ she said.

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10. YOU FILE SEPARATELY AND LOSE TAX BENEFITS

Although filing separately might protect you from joint and several liabilities for your spouse’s mistakes, it does have some disadvantages.

For example, people who choose the married filing separately status might lose their ability to deduct student loan interest entirely. In addition, they’re not eligible to claim the Earned Income Tax Credit and they might also lose the ability to claim the Child and Dependent Care Credit or Adoption Tax Credit, said Eric Nisall, an accountant and founder of AccountLancer, which provides accounting services to freelancers.

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11. YOU DON’T MEET THE MEDICAL EXPENSE DEDUCTION THRESHOLD

To include non-reimbursed medical and dental expenses in itemized deductions, the expenses must meet a threshold of exceeding 10 percent of your adjusted gross income. However, when you file jointly — and thus report a larger combined income — it can make it more difficult for you to qualify.

A temporary exception to the 10 percent threshold for filers ages 65 or older ran through Dec. 31, 2016. Under this rule, individuals only need to exceed a lower 7.5 percent threshold before they are eligible for the deduction. The exception applies to married couples even if only one person in the marriage is 65 or older.

Starting Jan. 1, 2017, all filers must meet the 10 percent threshold for itemizing medical deductions, regardless of age.

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12. YOU DON’T TAKE ADVANTAGE OF THE MARRIAGE BONUS

Many people complain about the marriage tax penalty. “Married filing jointly may result in a higher tax bill for the couple versus when each spouse was filing single, especially if both spouses make roughly the same amount of income,” said Andrew Oswalt, a certified public accountant and tax analyst for TaxAct, a tax-preparation software company.

However, you might have an opportunity to pay less total tax — a marriage tax break — if one spouse earns significantly less. “When couples file jointly with largely differing income levels, this may result in a ‘marriage tax benefit,’ potentially resulting in less tax owed than when the spouses filed with a single filing status,” Oswalt said.

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13. YOU’RE DIVORCED BUT STILL NEED TO FILE A FINAL MARRIED RETURN

If your divorce became official during the tax year, you need to agree with your ex-spouse on your filing status for the prior year when you were still married. As to whether you should file your final return jointly or separately, there is no single correct answer. It partially depends on your relationship with your ex-spouse and whether you can agree on such potentially major financial decisions.

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14. YOU HAVE TO DETERMINE THE STATUS OF DEPENDENTS AFTER A DIVORCE

Tax laws about who qualifies as a dependent are quite complex. Divorcing parents might need to determine which parent gets to claim the exemption for dependent children.

Normally, the custodial parent takes the deduction, Zimmelman said. “So if your child lives with you more than half the year and you’re paying at least 50 percent of their support, then you should claim them as your dependent,” he said.

In cases of shared custody and support, you have a few options. “You might consider alternating every other year who gets to claim them,” said Zimmelman. Or if you have two children, each parent can decide to claim one child, he said.

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15. YOU DEDUCT VOLUNTARY ALIMONY PAYMENTS

If you want to deduct alimony payments you made to a former spouse, it must be in accordance with a legal divorce or separation decree. You can’t deduct payments you made on a voluntary basis.

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16. YOU DEDUCT CHILD SUPPORT PAYMENTS

Even if you don’t take the standard deduction and instead itemize your deductions, you can’t claim child support payments you paid to a custodial parent.

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17. YOU CLAIM CHILD SUPPORT PAYMENTS AS INCOME

Do not report court-ordered child support payments as part of your taxable income. You don’t need to report it anywhere on your tax return. On the other hand, you must report alimony you receive as income on line 11 of your Form 1040.

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18. YOU DON’T CLAIM ALIMONY YOU PAID AS A DEDUCTION

Unlike child support that isn’t tax deductible, you are permitted to deduct court-ordered alimony you paid to a former spouse. It’s a deduction you can take even if you don’t itemize your deductions.

Make sure you include your ex-spouse’s Social Security number or individual taxpayer identification number on line 31b of your own Form 1040. Otherwise, you might have to pay a $50 penalty and your deduction might be disallowed.

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19. YOUR SPOUSE DOESN’T WORK AND MISSES TAX SAVINGS

Saving for retirement is important. Contribute to a 401k plan and you will both save money for your golden years and lower your taxable income now. If your employer offers a 401k plan, you can contribute money on a pretax basis, subject to certain limits.

However, nonworking spouses can’t contribute to a 401k because they don’t have wages from an employer.

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20. YOU MISS QUARTERLY TAX PAYMENTS

Single or married, you might have to pay quarterly tax payments to the IRS, especially if you are self-employed. Make sure you know how to calculate estimated taxes. If you are required to make such payments but do not do so, you might have to pay an underpayment penalty, Rosen said.

All taxpayers must pay in taxes during the year equal to the lower of 90 percent of the tax owed for the current year, or 100 percent — 110 percent for higher-income taxpayers — of the tax shown on your tax return for the prior year, Rosen said. “The problem for married couples is that often they do not realize they owe more taxes due to the combining of the two incomes,” she said.

You should be proactive each year. “To avoid owing the underpayment penalty, make sure to do a projection of your potential tax for 2017 when you finish preparing your 2016 taxes,” she said, adding that you should make sure to comply with the payment rules outlined above.

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21. YOU PHASE OUT OF PASSIVE LOSSES

Crystal Stranger — a Los Angeles-based enrolled agent, president of 1st Tax and author of “The Small Business Tax Guide” — said she sees a lot of married couples who have issues with passive loss limitation rules.

“With these rules, if you have a passive loss from rental real estate or other investments, you are allowed to take up to $25,000 of passive losses against your other income,” she said. “But this amount phases out starting at $100,000 (of) adjusted gross income, and is fully lost by $150,000 (of) adjusted gross income.”

Married filers lose out, as the phaseout amount is the same for a single taxpayer as for a married couple. “This is a big marriage penalty existing in the tax code,” Stranger said. “It gets even worse if a married couple files separately. The phaseout then starts at $12,500, meaning almost no (married filing separately) filers will qualify.”

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22. YOU CLAIM A CHILD AS A DEPENDENT, BUT YOUR INCOME IS HIGH

You are not obligated to claim your kids as dependents on your own tax return. In fact, it might be beneficial not to claim them.

“High earners lose the personal exemption after crossing certain income thresholds,” said Nisall. So in some cases, it might make more sense to let working children claim the exemption for themselves on their own return, he said.

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23. YOU MISS OUT ON THE CHILD TAX CREDIT

Married couples might be able to claim the Child Tax Credit up to a limit of $1,000 for each qualifying child.

“The Child Tax Credit phases out starting at $55,000 for couples electing to use the married filing separately filing status, and (at) $110,000 for those choosing the married filing jointly status,” said Oswalt. “But married couples receive twice the standard deduction that individuals receive, so the phaseout limitations may not negatively impact a married couple’s return if they choose to file jointly.”

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24. YOU NEGLECT THE TAX BREAK FROM A HOME SALE

The IRS provides a tax break when you sell your home, subject to certain conditions. Generally, you must meet a minimum residency period by owning and living in the house for two of the five years previous to the sale.

A single person who owns a home that has increased in value can qualify to exclude up to $250,000 in gains from income, said Oswalt. However, married people can exclude up to $500,000 in gains. This rule can become tricky if one person in the couple purchased the house prior to marriage.

“If you are married when you sell the house, only one of you needs to meet the ownership test for the $250,000 exclusion,” Oswalt said. “You both must meet the residency period to exclude up to the full $500,000 of gain from your income, however.”

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25. YOU DON’T CLAIM THE CHILD AND DEPENDENT CARE CREDIT

Married tax filers might be eligible for the Child and Dependent Care Credit if they paid expenses for the care of a qualifying individual so that they could work or look for work. The rules for who can be a dependent and who can be a care provider are strict. This credit is not available if you file separately.

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26. YOU CAN’T DEDUCT STUDENT LOAN INTEREST

If you’re paying back student loans, you might be looking forward to taking the student loan interest deduction. However, if you’re married, it might not be so easy to do that.

“For a single filer, the deduction begins to phase out when the taxpayer’s adjusted gross income is greater than $65,000,” said Oswalt. “This amount is doubled to $130,000 when filing jointly.”

“So if both spouses are making $65,000 or less, then their deduction will not be affected by the phaseout,” he explained. “However, if one is making $60,000 and the other $75,000, the deduction begins to phase out, which will ultimately result in a larger tax bill.”

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27. YOU INCORRECTLY ACCOUNT FOR GAMBLING WINS AND LOSSES

Imagine a married couple where both spouses like to gamble in Las Vegas. He’s not so lucky and has losses, while she has winnings. If they file a joint return, they might have to report the gambling winnings as taxable income. Meanwhile, the losses might be deductible if the couple itemizes their deductions instead of taking the standard deduction.

However, they can’t take the amount of gambling winnings, subtract the losses and claim the net amount as winnings. Instead, they must report the entire amount of gambling winnings as income, whereas the losses are reported as an itemized deduction up to the amount of the winnings. The IRS requires you to keep accurate records of your winnings and losses.

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28. YOU BECAME A VICTIM OF TAX IDENTITY THEFT

Identify theft is a financial nightmare, no matter how it happens. Tax identity theft happens when someone files a tax return using one or both of the spouse’s Social Security numbers in hopes of scooping up your legitimate refund. If this happens to you, “contact the IRS immediately and fill out an identity-theft affidavit,” said Zimmelman. “You should also file a complaint with the Federal Trade Commission, contact your banks and credit card companies, and put a fraud alert on your and your spouse’s credit reports.”

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29. YOU CAN’T GET YOUR 2015 RETURN

The IRS and state tax agencies work to develop safeguards to avoid identity theft related to tax returns. In 2017, they will be particularly concerned about the implications of taxpayers who file using tax software.

The IRS has alerted taxpayers that they might need to have their 2015 adjusted gross income handy if they are changing software products this year. This number might be required to submit your return electronically.

Getting your 2015 adjusted gross income might be difficult if you are a member of a divorced couple that is not on positive terms, or that hasn’t even been in contact the past few years.

However, you still have options. You might be able to get the information if you go to the IRS website and use the Get Transcript service.

 

 

Written By: Valerie Rind
Source: GOBankingRates

The 10 Most Commonly Googled Tax Questions — Answered

Taxes can be confusing. We’re here to help. To find out what people’s most burning questions about taxes are, MONEY asked Google for a list of its top tax-related queries—and assembled the information you need.

1. When are taxes due?

It’s April 18 this year. Usually, it’s the 15th — you can read why you get an extra three days here. (If you file for an extension, you get until Oct. 16 to file your return, because Oct. 15 is a Sunday. You must still pay what you estimate you owe by April 18, though.)

2. How to file taxes

This IRS page has links to online forms you can print as well as a locator tool where you can find an office if you prefer to pick up forms in person or don’t have access to a printer. You might also find tax forms at your local library or post office.

If you make less than $64,000, the IRS has a page where you can file your taxes electronically at no charge under the Free File program. If you plan to file with a simple form like a 1040A or 1040EZ, some tax preparation companies like TurboTax, H&R Block, Jackson Hewitt and TaxAct have their own platforms you can use to do your taxes online for free.

If you’re not sure which form you should use, the IRS spells out the differences here. Not sure how to file state taxes? This IRS page has links to all of the state governments, including tax departments.

3. When can you file taxes?

The IRS began accepting electronic returns for 2016 on Jan. 23, 2017.
You technically have until 11:59:59 p.m. on April 18 to file your taxes if you’re filing online, according to TurboTax, but waiting until the last second is a bad idea: A pokey computer could cost you big in penalties. If you’re using U.S. mail, you have to have your return and payment postmarked by April 18. Some post offices stay open late for Tax Day; you can find out which ones have extended hours here.

If you (or your accountant) file your taxes electronically, you have the option of paying online using the IRS’s Electronic Funds Withdrawal function (which is free). You can also pay via credit or debit card (which will cost you a convenience fee of a bit under $3 if you use a debit card, or around 2% of the charge if you use a credit card).

4. How to file a tax extension

If you procrastinated and April 18 is looking like a long shot, experts say you should file for an extension. This doesn’t get you out of paying any taxes you owe by the deadline, but it gives you an extra six months to file. An extension will keep you from getting hit with a late-filing penalty of 5% of the unpaid taxes for each month or part of a month you’re late, up to 25%.

That’s in addition to a late-payment penalty of 0.5% of the unpaid taxes for each month or part of a month—plus interest at a rate of the federal short-term interest rate plus 3%.
If you expect a refund, you obviously have an incentive to get your return in as soon as possible to get those dollars in your pocket. If you file for an extension thinking you’ll get a refund and instead find that you owe, you’ll have to tack on the late-payment charges.

Don’t forget about state taxes. A handful of states will automatically give you an extension if you request one through the IRS, while others require a separate request to that state’s tax department. In some cases, the rules are different depending on whether you owe money or are due a refund.

5. How much do you have to make to file taxes?

There are various thresholds, depending on your filing status, age, and the type of income you receive. For instance, if you’re single, under 65 and your income was below $10,350 last year, you generally don’t need to file federal taxes. This IRS tool can help you figure out if you need to file a tax return.

Even if appears you don’t have to file, experts say it’s generally a good idea to fill in the blanks on a return and see what your bottom line would be. About 70% of Americans are expected to qualify for refunds this year, according to the IRS, but many people never file to collect. The average unclaimed refund is nearly $700. Especially for lower-income Americans, a number of credits and deductions could make you eligible for a refund.

6. How long to keep tax records

The IRS says you should hang onto your tax documents for three years; if you get audited, that’s generally the look-back period they’re allowed to cover. However, if they suspect fraud or underpayment of income tax, or if you’ve written off worthless securities, they can request up to seven years’ worth of tax records. Hang onto documents like receipts that justify deductions like business expenses, charitable donations and so on.

7. When is the last day to do taxes?

Yeah, there are clearly a lot of procrastinators out there. As explained above in No. 1, the filing deadline is pushed back a few days from the usual April 15 this year to the 18th. You have until midnight local time—but if you’re going to put it off that long you should consider just filing for an extension.

8. Is Social Security taxed?

It’s possible. Depending on your income, up to 85% of Social Security benefits may be taxable. If you’re a single filer and your combined income—that is, adjusted gross income, nontaxable interest from municipal bonds and half of your Social Security benefits—is more than $25,000, you will have to pay taxes. If you’re married and file jointly, the threshold is $32,000.

9. How long does it take to get taxes back?

The answer this year might be “longer than usual.” To combat tax fraud, the IRS is taking extra time checking filers’ tax information if they claimed either the Earned Income Tax Credit or the Additional Child Tax Credit. Under a new law, the agency is holding back refunds claiming those credits until at least Feb. 15, and people aren’t likely to see those refunds until the end of February at the earliest. On top of that, “New identity theft and refund fraud safeguards put in place by the IRS and the states may mean some tax returns and refunds face additional review,” the agency warns. For everybody else, the IRS says refunds should be issued in its standard window of 21 days from the time it get your return.

10. Why do I owe taxes?

The first income tax in the U.S. was authorized by Congress in 1861 and levied the following year, to help pay for the Civil War, according to the Civil War Trust, but taxes have been around nearly as long as civilization itself. Historians have found tax records that go back to 6,000 B.C. in what is now Iraq, and the ancient Greek, Egyptian and Chinese cultures all had their own versions. In Biblical times, Roman emperor Caesar Augustus established rules around some personal and inheritance taxes that the English later used to create similar taxes centuries later, according to the Handbook on Tax Administration. Ironically, modern-day Italy has the lowest rate of income-tax compliance out of 10 major developed nations, with less than two-thirds of citizens giving the tax man his due.

And although plenty of Americans have argued in court that they shouldn’t have to pay taxes, the IRS has a helpful 71-page paper that methodically debunks these claims, The Truth About Frivolous Tax Arguments, (which might be equally helpful as a cure for tax-season-induced insomnia.)

 

 

Written By: Martha C. White
Source: MONEY

2017 Tax Planning Guide

During this Tax Season, we want to provide you with a great Tax Planning Guide to help you evaluate your options and outline tax planning strategies with your accounting professional.

In addition to referencing this guide during the tax season, it can also be a helpful year-round tool. Staying actively involved in these and other underlying areas of tax planning will keep you in a position to preserve and create longer-term wealth for yourself and your family.

Click Here for your Free 2017 Tax Planning Guide

 

 

Tax Changes for 2017: A Checklist

Welcome, 2017! As the New Year rolls around, it’s always a sure bet that there will be changes to current tax law and 2017 is no different. From health savings accounts to tax rate schedules and standard deductions, here’s a checklist of tax changes to help you plan the year ahead.

Individuals

For 2017, more than 50 tax provisions are affected by inflation adjustments, including personal exemptions, AMT exemption amounts, and foreign earned income exclusion.

While the tax rate structure, which ranges from 10 to 39.6 percent, remains the same as in 2016, tax-bracket thresholds increase for each filing status. Standard deductions and the personal exemption have also been adjusted upward to reflect inflation. For details see the article, “Tax Brackets, Deductions, and Exemptions for 2017,” below.

Alternative Minimum Tax (AMT)

Exemption amounts for the AMT, which was made permanent by the American Taxpayer Relief Act (ATRA) are indexed for inflation and allow the use of nonrefundable personal credits against the AMT. For 2017, the exemption amounts are $54,300 for individuals ($53,900 in 2016) and $84,500 for married couples filing jointly ($83,800 in 2016).

“Kiddie Tax”

For taxable years beginning in 2017, the amount that can be used to reduce the net unearned income reported on the child’s return that is subject to the “kiddie tax,” is $1,050 (same as 2016). The same $1,050 amount is used to determine whether a parent may elect to include a child’s gross income in the parent’s gross income and to calculate the “kiddie tax.” For example, one of the requirements for the parental election is that a child’s gross income for 2017 must be more than $1,050 but less than $10,500.

For 2017, the net unearned income for a child under the age of 19 (or a full-time student under the age of 24) that is not subject to “kiddie tax” is $2,100.

Health Savings Accounts (HSAs)

Contributions to a Health Savings Account (HSA) are used to pay current or future medical expenses of the account owner, his or her spouse, and any qualified dependent. Medical expenses must not be reimbursable by insurance or other sources and do not qualify for the medical expense deduction on a federal income tax return.

A qualified individual must be covered by a High Deductible Health Plan (HDHP) and not be covered by other health insurance with the exception of insurance for accidents, disability, dental care, vision care, or long-term care.

For calendar year 2017, a qualifying HDHP must have a deductible of at least $1,300 for self-only coverage or $2,600 for family coverage and must limit annual out-of-pocket expenses of the beneficiary to $6,550 for self-only coverage and $13,100 for family coverage.

Medical Savings Accounts (MSAs)

There are two types of Medical Savings Accounts (MSAs): the Archer MSA created to help self-employed individuals and employees of certain small employers, and the Medicare Advantage MSA, which is also an Archer MSA, and is designated by Medicare to be used solely to pay the qualified medical expenses of the account holder. To be eligible for a Medicare Advantage MSA, you must be enrolled in Medicare. Both MSAs require that you are enrolled in a high-deductible health plan (HDHP).

  • Self-only coverage. For taxable years beginning in 2017, the term “high deductible health plan” means, for self-only coverage, a health plan that has an annual deductible that is not less than $2,250 and not more than $3,350 (same as 2016), and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $4,500 (up $50 from 2016).
  • Family coverage. For taxable years beginning in 2017, the term “high deductible health plan” means, for family coverage, a health plan that has an annual deductible that is not less than $4,500 and not more than $6,750 (up $50 from 2016), and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $8,250 (up $100 from 2016).

Penalty for not Maintaining Minimum Essential Health Coverage

For calendar year 2017, the dollar amount used to determine the penalty for not maintaining minimum essential health coverage is $695.

AGI Limit for Deductible Medical Expenses

In 2017, the deduction threshold for deductible medical expenses remains at 10 percent (same as 2016) of adjusted gross income (AGI). Prior to January 1, 2017, if either you or your spouse were age 65 or older as of December 31, 2016, the 7.5 percent threshold that was in place in earlier tax years continued to apply. That provision expired at the end of 2016, however, and starting in 2017, the 10 percent of AGI threshold applies to everyone.

Eligible Long-Term Care Premiums

Premiums for long-term care are treated the same as health care premiums and are deductible on your taxes subject to certain limitations. For individuals age 40 or younger at the end of 2017, the limitation is $410. Persons more than 40 but not more than 50 can deduct $770. Those more than 50 but not more than 60 can deduct $1,530 while individuals more than 60 but not more than 70 can deduct $4,090. The maximum deduction is $5,110 and applies to anyone more than 70 years of age.

Medicare Taxes

The additional 0.9 percent Medicare tax on wages above $200,000 for individuals ($250,000 married filing jointly), which went into effect in 2013, remains in effect for 2017, as does the Medicare tax of 3.8 percent on investment (unearned) income for single taxpayers with modified adjusted gross income (AGI) more than $200,000 ($250,000 joint filers). Investment income includes dividends, interest, rents, royalties, gains from the disposition of property, and certain passive activity income. Estates, trusts, and self-employed individuals are all liable for the new tax.

Foreign Earned Income Exclusion

For 2017, the foreign earned income exclusion amount is $102,100, up from $101,300 in 2016.

Long-Term Capital Gains and Dividends

In 2017 tax rates on capital gains and dividends remain the same as 2016 rates; however threshold amounts are indexed for inflation. As such, for taxpayers in the lower tax brackets (10 and 15 percent), the rate remains 0 percent. For taxpayers in the four middle tax brackets, 25, 28, 33, and 35 percent, the rate is 15 percent. For an individual taxpayer in the highest tax bracket, 39.6 percent, whose income is at or above $418,400 ($470,700 married filing jointly), the rate for both capital gains and dividends is capped at 20 percent.

Pease and PEP (Personal Exemption Phaseout)

Both Pease (limitations on itemized deductions) and PEP (personal exemption phase-out) have been permanently extended (and indexed to inflation) for taxable years beginning after December 31, 2012, and in 2017, affect taxpayers with income at or above $261,500 for single filers and $313,800 for married filing jointly.

Estate and Gift Taxes

For an estate of any decedent during calendar year 2017, the basic exclusion amount is $5,490,000, indexed for inflation (up from $5,450,000 in 2016). The maximum tax rate remains at 40 percent. The annual exclusion for gifts remains at $14,000.

Individuals – Tax Credits

Adoption Credit

In 2017, a non-refundable (only those individuals with tax liability will benefit) credit of up to $13,570 is available for qualified adoption expenses for each eligible child.

Earned Income Tax Credit

For tax year 2017, the maximum earned income tax credit (EITC) for low and moderate income workers and working families rises to $6,318, up from $6,269 in 2016. The credit varies by family size, filing status, and other factors, with the maximum credit going to joint filers with three or more qualifying children.

Child Tax Credits

For tax year 2017, the child tax credit is $1,000 per child. The enhanced child tax credit was made permanent this year by the Protecting Americans from Tax Hikes Act of 2016 (PATH). In addition to a $1,000 credit per qualifying child, an additional refundable credit equal to 15 percent of earned income in excess of $3,000 has been available since 2009.

Child and Dependent Care Credit

If you pay someone to take care of your dependent (defined as being under the age of 13 at the end of the tax year or incapable of self-care) in order to work or look for work, you may qualify for a credit of up to $1,050 or 35 percent of $3,000 of eligible expenses in 2017.For two or more qualifying dependents, you can claim up to 35 percent of $6,000 (or $2,100) of eligible expenses. For higher income earners the credit percentage is reduced, but not below 20 percent, regardless of the amount of adjusted gross income.

Individuals – Education

American Opportunity Tax Credit and Lifetime Learning Credits

The American Opportunity Tax Credit (formerly Hope Scholarship Credit) was extended to the end of 2017 by ATRA but was made permanent by PATH in 2016. The maximum credit is $2,500 per student. The Lifetime Learning Credit remains at $2,000 per return; however, the adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $112,000, up from $111,000 for tax year 2016.

Interest on Educational Loans

In 2017 (as in 2016), the $2,500 maximum deduction for interest paid on student loans is no longer limited to interest paid during the first 60 months of repayment. The deduction is phased out for higher-income taxpayers with modified AGI of more than $65,000 ($135,000 joint filers).

Individuals – Retirement

Contribution Limits

The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains at $18,000. Contribution limits for SIMPLE plans remain at $12,500. The maximum compensation used to determine contributions increases to $270,000 (up from $265,000 in 2016).

Income Phase-out Ranges

The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by an employer-sponsored retirement plan and have modified AGI between $62,000 and $72,000, up from $61,000 to $71,000.

For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by an employer-sponsored retirement plan, the phase-out range increases to $99,000 to $119,000, up from $98,000 to $118,000. For an IRA contributor who is not covered by an employer-sponsored retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s modified AGI is between $186,000 and $196,000, up from $184,000 and $194,000.

The modified AGI phase-out range for taxpayers making contributions to a Roth IRA is $118,000 to $133,000 for singles and heads of household, up from $117,000 to $132,000. For married couples filing jointly, the income phase-out range is $186,000 to $196,000, up from $184,000 to $194,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

Saver’s Credit

In 2017, the AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low and moderate income workers is $62,000 for married couples filing jointly, up from $61,500 in 2016; $46,500 for heads of household, up from $46,125; and $31,000 for married individuals filing separately and for singles, up from $30,750.

Businesses

Standard Mileage Rates

The rate for business miles driven is 53.5 cents per mile for 2017, down from 54 cents per mile in 2016.

Section 179 Expensing

The Section 179 expense deduction was made permanent at $500,000 by the Protecting Americans from Tax Hikes Act of 2016 (PATH). For equipment purchases, the maximum deduction is $510,000 of the first $2,030,000 million of qualifying equipment placed in service during the current tax year. The deduction is phased out dollar for dollar on amounts exceeding the $2 million threshold (adjusted for inflation beginning in tax year 2017) amount and eliminated above amounts exceeding $2.5 million. In addition, Section 179 is now indexed to inflation in increments of $10,000 for future tax years.

The 50 percent bonus depreciation has been extended through 2019. Businesses are able to depreciate 50 percent of the cost of equipment acquired and placed in service during 2015, 2016, and 2017. However, the bonus depreciation is reduced to 40 percent in 2018 and 30 percent in 2019.

Work Opportunity Tax Credit (WOTC)

Extended through 2019, the Work Opportunity Tax Credit has been modified and enhanced for employers who hire long-term unemployed individuals (unemployed for 27 weeks or more) and is generally equal to 40 percent of the first $6,000 of wages paid to a new hire.

Research & Development Tax Credit

Starting in 2017, businesses with less than $50 million in gross receipts are able to use this credit to offset alternative minimum tax. Certain start-up businesses that might not have any income tax liability will be able to offset payroll taxes with the credit as well.

Employee Health Insurance Expenses

For taxable years beginning in 2017, the dollar amount is $26,200. This amount is used for limiting the small employer health insurance credit and for determining who is an eligible small employer for purposes of the credit.

Employer-provided Transportation Fringe Benefits

If you provide transportation fringe benefits to your employees, in 2017 the maximum monthly limitation for transportation in a commuter highway vehicle as well as any transit pass is $255 and the monthly limitation for qualified parking is $255. Parity for employer-provided mass transit and parking benefits was made permanent by PATH.

While this checklist outlines important tax changes for 2017, additional changes in tax law are more than likely to arise during the year ahead.

 

 

 

Source: Abedian & Totlian

6 Ways to Nail Your Resolution This Year

Cheers to the New Year! And the new you. It’s one thing to make a resolution, but it’s another thing to actually keep it, right? To keep you on track, here are some foolproof ways to help keep you from falling off the wagon this year. Let’s do this New Year’s thing right!

1. Make it to March 7th and Your Golden

Not like gold rush golden, but you’re in pretty good shape. It takes march-7two months for a habit to stick—66 days if you’re really counting. So write down March 7th on the back of your hand or your calendar or somewhere. Because you’re 80% more likely to keep with it after that day.

2. Dig Deep – Like Real Deep

Basically, try not to generalize. Yeah, that shovel
means “I want to save more money” isn’t cutting it this year. Figure out what you’re saving for, what the goal is, when you want it saved by, and set mini targets along the way.

3. Two’s Better Than One… Kinda Like Chopsticks

Yeah, it’s like teamwork–try eating rice with one chopstick. No, chopsticksactually, don’t. Just take our word for it. Same with resolutions. It’s way easier to keep one if you’ve got a buddy to keep you accountable–then you guys can guide each other.

4. Get Up When You Slip Up

Falling hurts. It hurts a lot. But you don’t let a slip-up banana-pkeep you down. Get back up and keep going–it builds character. And the more times you pick yourself up, the more likely you are to keep with it.

5. Get Your Tape Out – It’ll Help

No, not that kind of tape. Something that measures. Doesn’t matter if duct
you’re using centimeters, inches, marbles, or whatever–if you can measure it, you have a better chance of making it. So track your progress.

6. One Word… Megaphone

Ok, fine, so one word wasn’t quite enough. What we mean is, tell people.Megaphone Show off your resolution. Be proud of it. And one way you can do that is by taking The Relentless Resolutions Challenge. Take it and share your progress along the way.

 

 

 

 

 

 

 

Source: Ally Bank