12/25/2006 - College savings plans are now permanent
One of the most popular ways to save for college is with a Section 529 plan. These plans offer a great combination of flexibility and tax benefits. Until recently, the tax benefits were scheduled to expire after 2010. But this year’s Pension Protection Act made the benefits permanent, removing some concerns.
12/11/2006 - Consider bunching your itemized deductions
We all face one question at tax time: to itemize deductions or take the standard deduction? For 2006, the standard deduction is $10,300 for married couples and $5,150 for single filers. If you’re on the borderline, consider a “bunching” strategy.
11/27/2006 - Know the tax rules when disaster strikes
Hurricanes, tornadoes, earthquakes, wildfires, floods, storms. Few parts of the country escape the risk of natural disaster. If you’re an unlucky victim, you may receive help from insurance and federal disaster aid. But the tax code also offers some relief. You may be able to take an itemized deduction for part of your loss. In tax terms, it’s a “casualty loss,” and it can also apply to events such as a car crash, a house fire, or theft. Here are the basics:
11/20/2006 - New law creates a charitable donation opportunity
The Pension Protection Act recently passed by Congress has an interesting tax break for older taxpayers. It offers the chance to donate to charity and reduce taxes at the same time. But like many good deals, it’s a limited time offer. You have only this year and next to take advantage of it.
10/30/2006 - Not all capital gains are created equal
If you sell shares of stock, your house, or other items you own, you’ll probably have a capital gain or loss. Generally, that’s the difference between what you paid and what you receive. Most capital gains are taxable and some capital losses are deductible. But did you know that not all capital gains are taxed equally?
10/23/2006 - Save on energy; save on taxes
Winter is approaching, energy costs are high, and you’re thinking about conservation. Don’t forget that cutting your energy use can cut your tax bill, too. Make the right energy-saving improvements and you can earn tax credits. These directly offset the taxes you owe. But remember, most credits are available only for 2006 and 2007.
10/16/2006 - Do you face this IRA deadline?
Did you reach age 70½ this year? If so, you may have a decision to make before year-end. That’s because if you have a traditional IRA, you must start taking required distributions each year once you reach that age. But a special rule allows you to postpone making your first withdrawal. That’s where the decision comes in.
10/9/2006 - Do an investment review as part of your tax planning
This is a good time of year to review your investments. If you’re not meeting your financial goals for the year, there’s still time to make changes. Make sure your portfolio is appropriately balanced among stocks, bonds, and other investments. Keep it well diversified, without too much at risk in any one sector. And you’ll want to weed out investments with poor future prospects.
9/4/2006 - No change in the estate tax, but don't postpone your planning
Last month Congress failed to pass a major tax bill that would have changed the rules on estate taxes. To encourage passage, the bill included a raise in the minimum wage and extension of a number of expired tax breaks for businesses and individuals. But in an election year, the bill proved too controversial and did not pass. So where does that leave estate taxes and your tax planning?
8/28/2006 - Consider this retirement planning opportunity
Usually tax planning aims to reduce next April’s tax bill. But if you’re willing to look ahead to 2010, the recently enacted tax law introduced a new tax-saving opportunity. The new provision removes the income limit on converting a traditional IRA to a Roth IRA, starting in year 2010. Also, if you convert in 2010, you’ll be able to spread the tax over two years.
8/21/2006 - Manage your AGI to save your tax breaks
One number on your tax return has special importance. You’ll find it at the bottom of the first page. It’s called “adjusted gross income” or AGI for short. Why is it important? Because your AGI controls your qualification for numerous deductions and credits. It can even affect your eligibility for retirement plans.
8/7/2006 - Did you make a mistake? When to amend your tax return
You’ve filed your return, you’ve received your refund check, and you don’t want to think about last year’s taxes again. Oops! You discover you made a mistake on your return. You might have overlooked a big deduction, you might find a missing receipt, or come across a dividend check that you didn’t report. Don’t worry. You can correct the mistake by filing an amended return.
7/31/2006 - The alternative minimum tax: Don’t relax yet
Are you at risk for the alternative minimum tax (AMT) in 2006? This “parallel” tax system has caught more and more middle-income taxpayers in recent years, often showing up as a nasty, last-minute tax surprise. The recently signed Tax Act provided some relief, but only for this year. And the relief provisions won’t help everyone escape the tax. That’s why it pays to plan ahead and see whether you might be liable this year or next.
7/24/2006 - New “kiddie tax” covers more kids
Do your children have savings accounts or other investments held in their own name? If so, the tax on those investments could change. That’s because of a change in recent tax legislation, which expanded the “kiddie tax” to cover children up to age 18. Previously it applied only up to age 14. And the change is retroactive to the beginning of 2006.
7/17/2006 - Work a summer job — start an IRA
Are your children working at summer jobs this year? Many high school and college students take a summer job to earn pocket money or save for next year’s college costs. A summer job can be a good thing for children — it helps instill a responsible work ethic and teaches them about the workplace. But there’s another little-known benefit. If you can come up with the cash, you can use it to boost their lifetime savings. How? By giving them the encouragement and funds to open an IRA.
7/10/2006 - Plan your annual tax-free giving
It’s not too early to plan your tax-free gift program for 2006. Each year, you can make gifts of up to $12,000 each to as many people as you want, free of any gift tax liability. Your spouse has a similar limit, so as a couple you can give up to $24,000 to each person each year.
6/26/2006 - Hybrid Update: Don’t miss out on your tax credit
Is your next auto purchase going to be a hybrid? If so, you might want to put your order in soon. That’s because the tax credit you’ll receive for buying a hybrid phases out after each manufacturer sells a certain number of vehicles. Based on recent sales figures, the tax credit for at least one popular model could be cut in half later this year.
5/29/2006 - Marriage calls for a tax review
Are wedding bells in your future this summer? If so, add tax updates to the long list of things to do. It's not very exciting, but you should at least take care of some paperwork to keep your tax situation in order.
5/22/2006 - Know the tax impacts of remodeling
Walk around your neighborhood and you're likely to see homes being remodeled. Perhaps you, too, are considering a new deck, kitchen or bathroom this spring. If so, understand the tax consequences.
5/15/2006 - Are you eligible for the child care tax credit?
Do you pay for child care so you can go to work? If so, you might be eligible for a tax credit based on the amount you pay. It’s called the "child and dependent care credit," and it doesn’t just apply to costs for child care. It can apply to the cost of caring for an elderly parent or a disabled spouse, among others.
5/8/2006 - Don't overlook tax benefits when you buy a house
If you buy a house this year, you’ll close the deal by signing a mind-numbing stack of papers. When that’s finished, don’t just file the documents away in a drawer. Hidden in there are some deductions you might be able to take this year, and others that could increase your profit when you sell.
5/1/2006 - The kiddie tax threshold goes up for 2006
Beginning this year, your young children can earn more investment income before the "kiddie tax" kicks in. The kiddie tax rule applies to the investment earnings of a child under age 14. It says that income above a certain threshold amount will be taxed at the parents' top marginal tax rate. The intent is to discourage "income shifting." This happens when parents try to reduce taxes by transferring investments to their young children or other family members who are in a lower tax bracket.
4/24/2006 - Buy early to maximize hybrid tax credit
Last year’s Energy Bill had some good news for those planning to buy a hybrid car in 2006 – a new tax credit of up to $3,400. But there’s a catch. The credit begins to phase out after the number of hybrid vehicles sold by a manufacturer reaches a certain limit. For some big manufacturers, that could start to happen later this year. So to receive full credit, you might want to plan your purchase of a hybrid vehicle earlier rather than later.
4/10/2006 - Estate taxes fall – but you still need a plan
There’s good news if you’re concerned about estate taxes. Beginning this year, the value of your estate that’s excluded from tax increased from $1.5 million to $2 million. And the top rate on taxable estates fell to 46%. Generally, you won’t start paying at that rate until your estate tops $4 million. (Note that lifetime gifts above the annual exclusion amount count as part of your estate, and the exclusion for them remains at $1 million.)
4/3/2006 - Tax filing: Don’t procrastinate – but if you do, it just got easier!
It’s usually better to file your personal tax return earlier rather than later. You’ll get your hands on your refund sooner, you’ll have less time to misplace your tax records, and it’s one more job out of the way. But sometimes it’s just not possible to be ready by April 15 (April 17 this year because April 15 is a Saturday). And in those cases, the IRS just made it easier to obtain a six-month extension.
3/20/2006 - Don't overlook these miscellaneous tax deductions
When you itemize deductions, it’s easy to remember the big three — mortgage interest, state and local taxes, and charitable contributions. You might also be able to deduct medical expenses, but only when they exceed 7.5% of your adjusted gross income (AGI). And if you’re unlucky enough to have casualty or theft losses, you can deduct those too.
3/13/2006 - Don’t miss this April 3 deadline
April 3, 2006, could be an important date for some retirees. If you reached age 70½ last year, it’s the last day to take your first required minimum distribution (RMD) from your traditional IRAs. Miss the deadline and you could face a 50% excise tax on the amount you should have withdrawn.
3/6/2006 - You still have time to contribute to last year’s IRA
Don’t forget you still have time to make a 2005 contribution to an IRA. If you didn’t reach the maximum for last year, you have until April 17 this year to make up the difference. It’s a great opportunity to boost your tax-advantaged retirement savings and possibly save on your 2005 taxes at the same time. Then you can make another contribution for 2006!
1/30/2006 - Improve your home’s energy efficiency and earn a tax break
Starting this month, you can improve your home’s energy efficiency and reap a double reward. You can trim your energy bills and your tax bill at the same time. During 2006 and 2007, you’ll receive tax credits if you make specified energy-saving improvements in your home. Remember that tax credits offset your tax liability dollar for dollar.
1/23/2006 - Standard or itemized: Know the difference
"I can't itemize any more." It sounds like a refrain from a country music ballad. But it’s a statement made by more and more taxpayers every year. In fact the IRS estimates that nearly two out of three filers now take the standard deduction. Part of the reason is that the amount of the standard deduction has increased in recent years. It increases each year to keep pace with inflation. Also, in 2003 the standard deduction for married filers increased sharply to help reduce the marriage penalty.
1/9/2006 - What’s new for 2006?
Expect a number of tax changes for 2006. You’ll have the chance to claim new tax credits, but some old deductions have disappeared. There are also the usual inflation adjustments in retirement contributions, tax brackets, and other amounts.
1/2/2006 - Check out the new Roth 401(k)
If you participate in a 401(k) plan, you may now have a new investment option to consider. Starting this year, 401(k) plans may include a Roth account. Here are the key features.
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