Personal Finance Tips

3 Tax Benefits for New York Veterans

Current and former members of the military are eligible for certain tax exemptions.

“These exemptions and credits are one small way we can show our gratitude to the brave and dedicated individuals who currently serve or have served in our military,” said Acting Commissioner of Taxation and Finance Nonie Manion in a 2017 press release.

Photo by Benjamin Faust on Unsplash

Photo by Benjamin Faust on Unsplash

In today’s post, we’ll examine a handful of the exemptions available for New York veterans.

Property Tax 

As many as half a million New York veterans benefit from property tax exemptions, many of which are offered by local governments.

Depending on the circumstance, the property tax burden of a wartime veteran could be up to 15% or even as high as 25% if the veteran serves in a combat zone.  Cold War veterans (between 1945 and 1991) could see up to 15% in exemptions.

If the veteran was disabled in the line of duty, they could see up to 50% off in exemptions.

How do these property tax exemptions work?

In September 2017, Gov. Cuomo signed a bill that allowed the 679 school districts the option to allow exemptions for Cold War veterans for the entirety of the time the veteran owns the property. Prior, it was 10 years.

To find out which of these exemptions applies to you, you’ll need to contact your local assessor’s office. Visit NYS’s Municipal Profiles website to get the contact information you need.

Military Pay  

If your permanent home was in NYS before you entered the military, you don’t have to pay income tax on your active-duty pay. But it isn’t quite that simple.

You have to meet ALL three of the following conditions:

  • Didn’t have a permanent home in NY

  • Maintained a permanent abode outside of NY (this excludes military quarters like barracks, BOQ, etc.)

  • Spent less than 30 days in New York during the year

Basically, you need have not lived in New York almost at all for the entirety of the year to be eligible for this perk. You also had to be living somewhere off-base/ship to not owe income taxes.

Hire a Veteran Credit 

There are two types of hire a veteran credit. They are:

  • Corporations subject to franchise tax

  • Individuals, estates and trusts under personal income tax laws

This credit applies if you or your business:

  • Hires a qualified veteran before January 1, 2020

  • Employees the qualified veteran for 35 hours

If the veteran is disabled, the credit is 15% of the total wages paid during the first full year of employment. That amount can’t exceed $15,000 per veteran.

If the veteran isn’t disabled, the credit is10%  of the total wages paid during the first full year of employment. For nondisabled veterans, the credit is capped at $5,000.

These are just a handful of the tax benefits, credits, and exemptions that veterans can take advantage of. Reach out to one of our tax professionals and we’ll ensure you’re getting the most tax benefits from your service.

 

6 FAQs About 529 College Savings Plans

College is a large expense and one worth planning for, especially if you want your future college graduate to start their lives with minimal debt. One common way to prepare for such an expense is to open a 529 college savings plan.

Photo by Ruijia Wang on Unsplash

Photo by Ruijia Wang on Unsplash

What is a 529 plan?

College savings 529 plans are state-sponsored savings accounts that offer both tax and financial aid benefits.

What states run a 529 program?  

Almost every state has a 529 program, each with different perks and benefits. You can pick based on perks and you don’t need to live in the state you opened the account in.

You can look at 529 plan options using this tool from SavingforCollege.com.

What are the two types of college 529 plans?

There are two types of 529 plans, they are:

  • College savings plans – This plan is similar to a Roth 401k or Roth IRA by allowing you to contribute after-tax income in the form of mutual funds and other types of investments. There are a number of investment options to choose from and the 529 account will go up and down and value according to those investment choices. The money is this account is available for tuition, books, and often housing.

  • College prepaid tuition-  This plan can be used to pre-pay all or part of the costs of an in-state public college education. Sometimes, they can be converted for use at private or out-of-state colleges.

What are the perks of using a 529 savings plan?

Each state provides slightly different incentives for its 529 programs. But some of the overall benefits include:

  • Large income tax breaks (for federal and often state taxes)

  • The donor stays in control of the account until its use

  • They’re low maintenance

When can you start them?

You can start one of these savings plans at any time. Most 529 programs are “set it and forget it” meaning the investments come straight out of your paycheck or bank account.

Where can I learn more about college 529 plans?

There are a lot of online resources for comparing and ranking different 529 programs. You can reference one of these, or reach out to your friendly neighborhood tax professionals. We can help you select the best option for you.

*Contact us here*

3 Essential Tips for Financial Planning When You Have a Disability

Having a disability is not quite as rare as many people think. In fact, about 14 percent of adults around the world have a disability of some kind. This includes people who have a physical, mental, intellectual, or sensory limitation at a mild, severe, or moderate level. Also, these disabilities could have happened at birth, in old age, or anywhere in between.

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One thing that remains consistent across all forms of disability, however, is that life generally costs more money for those who have them. Normal expenses such as medical care and food, as well as additional costs such as modified housing and assistive devices and technology, can put a major burden on those with disabilities. That’s why it’s essential to have a financial plan in place. If you have a disability, these three tips will help you prepare and form the financial skills it takes to live your best life, both now and in the future.

Consider Life Insurance

One of the first things you should do when planning your finances is to look into life insurance. If you get a policy that benefits your current situation, it could provide significantly for your family if you were to pass away unexpectedly. And life insurance can help cover things like medical expenses, funeral expenses, and lost income. Moreover, shopping for life insurance is fairly straightforward nowadays, as you can easily purchase it online and use online calculators to figure out the coverage you need.

Set a Budget

Much of your financial planning comes down to making a budget. Not only will your budget serve as a guideline for your spending and saving, the process of making a budget will teach you a lot about your financial situation and the steps you can take to grow. If you’re on a fixed income, start with how much you bring in each month. If you are able to work or already have a job, where does that put your monthly income?

Once you factor in your income, write down all of your expenses; include everything you can think of. This might include normal monthly expenses such as your mortgage payment, home and auto insurance, utilities, food, entertainment, gas, etc. Also, consider your medical expenses: How much do you spend on medical care, assistive devices, or any other medical-related expenses? Furthermore, include any credit card debt you want to pay off.

Once you get these basic costs on paper, see where you stand concerning your income and expenses. Then you can determine what you can cut (entertainment, miscellaneous items, etc,) if necessary. Also, be sure to research all your options when it comes to financial assistance.

Build an Emergency Fund

As it is with anyone, saving money is important when you have a disability. Once you figure out your budget, determine how much you can put away in savings. Building an emergency fund will create a safety net in the event that something unexpected happens — whether it’s a medical incident, major home or car repair, or any other kind of sudden expense. Decide on a set amount to put into a cash jar or savings account, and stick to it as close as you can.

There may be many expenses that come with a disability, but that doesn’t mean you can’t navigate them and make a plan that meets your needs and sets you up to be cared for later in life. Work through your finances and set a budget to guide you through your spending and saving. Find the best life insurance plan for you and your family, and start building an emergency fund today. Being financially prepared will help you overcome a lot of challenges and put you in a better position to live a fulfilling life.

 Written by Ed Carter

5 Common Mistakes When Applying For Financial Aid

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Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

Given the astronomical cost of college, even well-off parents should consider applying for financial aid. A single misstep, however, can harm your child’s eligibility. Here are five common mistakes to avoid:

1. Presuming you don’t qualify. It’s difficult to predict whether you’ll qualify for aid, so apply even if you think your net worth is too high. Keep in mind that, generally, the value of your principal residence or any qualified retirement assets isn’t included in your net worth for financial aid purposes.

2. Filing the wrong forms. Most colleges and universities, and many states, require you to submit the Free Application for Federal Student Aid (FAFSA) for need-based aid. Some schools also require it for merit-based aid. In addition, a number of institutions require the CSS/Financial Aid PROFILE®, and specific types of aid may have their own paperwork requirements.

3. Missing deadlines. Filing deadlines vary by state and institution, so note the requirements for each school to which your child applies. Some schools provide financial aid to eligible students on a first-come, first-served basis until funding runs out, so the earlier you apply, the better. This may require you to complete your income tax return early.

4. Picking favorites. The FAFSA allows you to designate up to 10 schools with which your application will be shared. Some families list these schools in order of preference, but there’s a risk that schools may use this information against you. Schools at the top of the list may conclude that they can offer less aid because your child is eager to attend. To avoid this result, consider listing schools in alphabetical order.

5. Mistaking who’s responsible. If you’re divorced or separated, the FAFSA should be completed by the parent with whom your child lived for the majority of the 12-month period ending on the date the application is filed. This is true regardless of which parent claims the child as a dependent on his or her tax return.

The rule provides a significant planning opportunity if one spouse is substantially wealthier than the other. For example, if the child lives with the less affluent spouse for 183 days and with the other spouse for 182 days, the less affluent spouse would file the FAFSA, improving eligibility for financial aid.

These are just a few examples of financial aid pitfalls. Let us help you navigate the process and explore other ways to finance college.

Ensuring Your Year-End Donations Are Tax-Deductible

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Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

Many people make donations at the end of the year. To be deductible on your 2017 return, a charitable donation must be made by December 31, 2017. According to the IRS, a donation generally is “made” at the time of its “unconditional delivery.” But what does this mean?

Is it the date you write a check or charge an online gift to your credit card? Or is it the date the charity actually receives the funds? In practice, the delivery date depends in part on what you donate and how you donate it. Here are a few common examples:

Checks. The date you mail it.

Credit cards. The date you make the charge.

Pay-by-phone accounts. The date the financial institution pays the amount.

Stock certificates. The date you mail the properly endorsed stock certificate to the charity.

To be deductible, a donation must be made to a “qualified charity” — one that’s eligible to receive tax-deductible contributions. The IRS’s online search tool, “Exempt Organizations (EO) Select Check,” can help you more easily find out whether an organization is eligible to receive tax-deductible charitable contributions. You can access it at https://www.irs.gov/charities-non-profits/exempt-organizations-select-check. Information about organizations eligible to receive deductible contributions is updated monthly.

Many additional rules apply to the charitable donation deduction, so please contact us if you have questions about the deductibility of a gift you’ve made or are considering making. But act soon — you don’t have much time left to make donations that will reduce your 2017 tax bill.

Beat These 5 Financial Challenges

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Bankrate

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A number of signs indicate the U.S. economy is improving. They include soaring consumer confidence, highs for the stock market, and the low unemployment rate (most recently 4.5 percent).

At the same time, financial obstacles remain for many Americans. A new survey from the National Foundation for Credit Counseling underscores some of these ongoing challenges.

Common financial obstacles and how to overcome them

I picked some of the biggest challenges highlighted in the survey and added some advice on how to fight back if you’re going through them.

Rising credit card debt

Thirty-nine percent of respondents carry credit card debt from month to month, compared with 35 percent last year. Some 16 percent of adults say they carry $2,500 or more in credit card debt every month.

What you should do: Pay off as much as you can now. Benchmark interest rates are on the rise, and the Federal Reserve has indicated that rates are likely heading higher this year. So credit card debt is going to get more expensive. Consider getting a balance transfer card to reduce the interest you’re paying.

Student loan strains

Among respondents, 11 percent wouldn’t recommend student loans to finance college education, the same percentage as last year. Those who said their student loan was a good investment rose a bit to 9 percent, compared with just 6 percent over the previous two years.

What you should do: If you’re saddled with student debt, make larger payments if you can afford it. Also, have a percentage of your income automatically directed toward a college repayment fund so you won’t be tempted to use the money on something else. Check out this calculator that shows you how long it will take you to pay off your student loans based on varying factors.

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People saving less

Some 54 percent said they are saving the same as last year, down 4 percentage points from last year. The percentage of those saving more is unchanged at 26 percent. Meanwhile, 68 percent say non-retirement saving has decreased slightly over the past year.

What you should do: First, monitor your spending and make a budget. Then, make sure you’re getting the most from your accounts. Compare rates on savings accounts and CDs to make sure you’re getting a competitive return. Also, set up a direct deposit to transfer funds into your savings account.

Not saving for retirement

Among respondents, 27 percent aren’t saving any portion of household income for retirement. That’s little changed from last year. Asked about what areas of their finances worry them most, the top response was retiring without having enough money set aside.

What you should do: If your employer offers a 401(k) and matches a percentage of your contributions, make sure you’re taking advantage of the full match. Look over your current investments to make sure you’re not being charged high fees. Once a year, increase the amount you contribute by 1 or 2 percentage points at a time.

Need professional advice

A whopping 80 percent of U.S. adults say they could benefit from professional advice and answers to everyday financial questions.

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

Retirement investing through the decades

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Bankrate

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Investing to grow your retirement savings is a long-term project. The earlier you begin, the better, thanks to compounding interest.

You don’t have to worry about saving a lot at first. It’s all about forming a plan you can stick to.

Here are suggestions for retirement planning through the decades.

Your 20s: Open a 401(k) and IRA

You will likely land your first job in your 20s and can begin saving money for retirement. But before doing so, make sure you have enough cash to pay for three to six months’ worth of living expenses, in case an emergency arises. If you set up a retirement account and then withdraw from it to pay for emergency expenses, you may be subject to taxes and a penalty payment.

Once you have emergency savings, start funding a 401(k) if your employer offers one, especially if the company matches some of your contributions. If you turn down the option to contribute to a 401(k) plan that matches, you’re essentially giving away free money. In 2017, you can contribute up to $18,000 in a 401(k).

You also can open an individual retirement account, or IRA. In 2017, you can contribute up to $5,500.

If you can’t save enough to maintain both a 401(k) and an IRA, go for the 401(k) because contributions are automatic, pretax and subject to matching.

Your 30s: Consider a Roth, adjust asset mix

If you open an IRA in your 20s or 30s, you’ll want to consider a Roth IRA. Unlike a regular IRA, you don’t receive a tax deduction for contributions to a Roth. But when you withdraw money from a Roth IRA during retirement, it’s all tax-free. The money you withdraw from a regular IRA is taxed as regular income.

So if your tax rate is likely to be higher when you withdraw money from your IRA than it is now, you’re better off with a Roth IRA.

When it comes to allocating your retirement investments, try to put at least 60 percent in stocks during your 20s and 30s. But it all boils down to your risk tolerance. If you are unwilling to stomach losses, don’t put everything in stocks. The worst thing you can do is buy stocks and then sell them for a big loss.

Your 40s: Stay focused on the long run

Many people purchase homes in their 30s and 40s. It’s important to remember that your house is not part of your retirement plan, says Mick Heyman, an independent financial adviser in San Diego.

“I haven’t seen too many times that somebody buys a great home, sells it at 60 and then lives off the profits,” he says. So don’t spend so much money on a home that you can’t afford to save for your retirement as well.

You also must be realistic in providing for your children. Don’t spend so excessively on your kids that you neglect your retirement savings goals. That may even mean putting retirement plans ahead of your children’s college. Tuition payments can come from many sources, but retirement funds will have to come largely from the parents.

Your 50s: Capitalize on catch-ups

The 50s are the peak earning years for most people, so it’s even more critical to save. The government gives you some assistance, allowing increased contributions to IRAs and 401(k)s through “catch-up provisions.”

For IRAs, people 50 and older can contribute an extra $1,000 this year — $6,500 in total.

For 401(k) plans, participants 50 and older can put in an extra $6,000 — $24,000 in total.

If you have children who are now out of the house, you might have enough money to finance those catch-up payments.

Your 50s are a good time to opt for more safety in your asset allocation, experts say.

“Somewhere in your 40s and 50s, you want to transfer to more conservative stocks, and make sure you aren’t all in stocks,” Heyman says. “Start having 20 to 30 percent in bonds.” He also recommends orienting your stock holdings toward dividend-paying blue chips. They offer safety and income payments that you’ll appreciate during retirement.

Your 60s: Plan an income strategy

This is the decade in which you may well retire, which means you’ll begin withdrawing from your retirement funds.

The traditional rule of thumb is that you can cash out about 4 percent of your portfolio in each year of retirement. But with low interest rates limiting the amount of income your portfolio will generate, 3 percent may be more appropriate now.

Ideally, you should have two years’ worth of living expenses in cash to avoid having to dump your investments when markets are weak.

Adjust your asset allocation so that bonds account for a larger part of your portfolio, given your need for safety and income.

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

Tax bill too big to pay all at once? Sign up for an IRS payment plan

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Bankrate

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Do you owe the IRS money this year? You have several options for paying your tax online. But if you can’t pay it all at once, the IRS gives you payment plan choices.

Note, however, that your first step must be to file your tax return on time. Failure to do so can result in stiff penalties.

Paying with plastic

Some taxpayers find the easiest way to pay is with a credit card. The IRS has awarded contracts to three companies to accept payments by plastic: Official Payments, Link2Gov and WorldPay. They take American Express, Discover, MasterCard, Visa or a variety of debit cards.

Each company has its own fee schedule that will add to your bill.

IRS

If you do pay a fee, make a note of it for next year’s filing. The IRS has ruled that this amount is deductible as a miscellaneous itemized expense.

Keep in mind that if you don’t pay off your credit card in full, you’ll start racking up interest charges on your account. In some cases, though, your credit card interest charges might fall below IRS penalties and interest you’d owe if you don’t pay on time.

A low-interest credit card may be a good option in this scenario.

Installment plans

If your tax bill is too large for a credit card, the IRS will take monthly payments.

Approval is not automatic unless:

  • You owe less than $10,000.
  • You have paid taxes in a timely way during the past five years without entering into an installment agreement.
  • You can pay the full amount within three years.

To get the program going, you can attach Form 9465, Installment Agreement Request, to the front of your tax return. Or, you can request an installment agreement online at the IRS website if the total amount you owe is not more than $50,000.

Taxpayers who seek an installment plan must provide detailed financial information, including data on equity assets, that the IRS will verify.

Keep in mind that paying over time, even to Uncle Sam, will cost you more.

  • Expect to pay a one-time user fee of $225, up from $120 last year.
  • The fee drops to $107 for direct-debit agreements.
  • Some lower-income taxpayers could pay a reduced fee of $43.
  • Applying online is your best bet: You pay a $149 one-time fee, or only $31 if you agree to a direct-debit plan.

You’ll be billed for any fee when the agency sends you a notice detailing your payment terms. Plus, penalties and interest continue to accrue to your unpaid tax bill. The IRS may also file a federal tax lien against you, which will be released when you pay off your installment loan.

Another way to deal with a large tax bill is with a home equity loan. That way you won’t have to pay IRS penalties and fees.

Offer in compromise

What if you can’t pay off your tax bill, in whole or part, in three years or five years or even longer? Then it might be time to negotiate.

The IRS might be willing to accept a lump-sum payment offer of less than your total tax bill if it is realistic. In these cases, the agency hopes to get some taxpayer money sooner than it would after years of costly collection efforts.

The IRS will review your financial situation and future income potential to determine whether your offer is appropriate. Be warned, however: This program was designed only for extreme cases, and few filers will qualify for the program. If you believe your situation does indeed meet the requirements, you need to file two forms: Form 656, Offer in Compromise, and Form 433-A, Collection Information Statement.

To find out whether you qualify for an offer in compromise before filling out the paperwork, use the IRS’ online pre-qualifier tool. The questionnaire format will let you know if you’re eligible, as well as help determine an acceptable preliminary offer amount.

Options for offers in compromise include:

  • Lump sum cash offer — This must be paid in five or fewer installments within five months after the offer is accepted. You must include 20 percent of the offer amount plus a $186 application fee.
  • Periodic payment offer — This is paid in six or more monthly installments within 24 months after the offer is accepted. You must produce the first proposed installment payment plus $186.

The $186 fee is waived for qualifying low-income taxpayers.

The IRS has created a special website with “what if” scenarios regarding tax and payment issues for taxpayers who are having a hard time making their payments.

Regardless of which payment plan method you choose, make your decision now. Delay will only compound your financial and tax problems since penalties and interest charges will continue to accrue. By sending in any amount when you file your return, at least you’ll ultimately reduce your interest and penalty charges.

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

Beware the costly, complicated AMT, or alternative minimum tax

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Bankrate

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The alternative minimum tax, or AMT, is widely unpopular and has been a perennial punching bag whenever tax reform is discussed. President Donald Trump has vowed to kill the AMT, which cost him $31 million on his 2005 tax return.

This parallel tax calculation method has been around since 1969 to ensure that wealthy taxpayers didn’t use loopholes to escape paying their fair share of taxes. The original target was 155 filers with the then-exorbitant income of $200,000 who avoided paying any federal taxes.

For many decades the AMT wasn’t indexed for inflation, so more and more middle-income taxpayers were subject to the tax. A 2013 law fixed that, so the AMT is now adjusted each year to reflect inflation.

What exactly is the alternative minimum tax?

The alternative minimum tax, commonly referred to as the AMT, has its own set of rates (26 percent and 28 percent) and requires a separate computation that could substantially boost your tax bill.

Basically, it’s the difference between your regular tax bill, figured using ordinary income tax rates, and your AMT bill, figured by filling out more IRS paperwork. When there’s a difference, you must pay that amount, the AMT, in addition to your regular tax.

Common tax breaks disallowed

The AMT rejects or reduces many common tax breaks used every year by individual taxpayers to lower their IRS bills.

For example, under the AMT:

  • You cannot deduct state and local taxes.
  • If you are 65 or older, have lots of itemized medical deductions and fall into the AMT, you’ll lose some of those write-offs.
  • Miscellaneous itemized deductions, which must exceed 2 percent of your adjusted gross income under the regular tax system, are disallowed under the AMT.
  • Personal exemptions may be disqualified.
  • While mortgage interest on your main and second home is still AMT-deductible, home equity loan interest is restricted. It can’t be deducted unless the money is used solely to pay for home improvements.
  • Real estate property taxes also are disallowed as deductions under the AMT.
  • Some tax credits that reduce your regular tax liability do not reduce what you owe under the AMT. Once you add back these disallowed credits and run the numbers, you might be subject to a bigger IRS bill if your taxable income exceeds the annual AMT exemption amount for your filing status.

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Many of the tax breaks not allowed under the AMT system do affect predominantly wealthy individuals or businesses with complicated tax circumstances. These include:

  • Incentive stock options.
  • Intangible drilling costs.
  • Tax-exempt interest from certain private activity bonds.
  • Depletion and accelerated depreciation on certain leased personal or real property.

Considering making a real estate investment?

Do more to pay more

To help sort through the AMT mess, some taxpayers turn to computer software packages, most of which include AMT computation, or hire professional help.

For the past couple of years, the IRS has provided some free AMT calculation assistance. AMT Assistant is an online tool that helps taxpayers determine whether they owe the tax. You just answer a few questions about entries on your draft 1040 and the system does the rest. Based on your entries, the calculator will tell you that either you do not owe the AMT or that you must go further by filling out Form 6251 to find out how much you owe.

But the IRS plans to retire the tool after the close of this filing season. Fewer people need it since it’s easy to figure out whether you owe the tax by using tax preparation software, including through the IRS’ Free File, which automatically calculates any tax owed.

If you find you must pay the AMT, the extra money you owe is never welcome. But dealing with it now is better than the alternative: letting the IRS discover that you should have paid it. Then you’ll owe interest and penalties, too.

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

7 Milestones In Life That Trigger Taxes: Birth, Marriage, Work, Homeownership and More

 

 

 

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Bankrate

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You were blissfully unaware of it, but taxes became a part of your life on the day you were born.

From that beginning as a spanking-new tax break for Mom and Dad, taxes have had an important role in all your major life events, from getting a job, saying “I do,” buying and selling homes, having kids of your own and even retiring.

In some cases, the involvement of the IRS is not such a good thing.

But in many ways, the tax code can be your best friend. You just need to know how it applies to your personal circumstances so you can take advantage of it. Read on to learn more about tax breaks for life’s big events.

Getting Your First Job

Uncle Sam gets a portion of your paycheck via payroll taxes. You do, however, have a bit of a say in how much comes out of your pay by adjusting your withholding.

If you have too much withheld, you’ll get a refund when you file. That’s not necessarily bad, but wouldn’t you rather have your own money year-round instead of giving the IRS an interest-free loan?

On the other hand, if you don’t have enough taken out, you could face a major tax bill, and possible underwithholding penalties, at filing time. Ask your boss for a new Form W-4 so you can run the numbers and adjust your withholding. You can change your withholding amount as often as you need to get your tax amount just right.

Your job likely offers several tax breaks. If your employer provides health care coverage, your medical insurance is a tax-free benefit to you. You’ll find out how much that’s worth on your W-2 earnings statement.

A flexible spending account, or FSA, also might be part of your job benefits. Here you can save pretax dollars to pay for medical care not covered by insurance.

You also want to take advantage of your workplace’s tax-deferred 401(k) retirement plan.

And if you move to take a job, even your first one, you can write off many of your relocation costs.

Getting Married

Uncle Sam probably wasn’t a guest at your wedding, but he becomes a big part of your life when you are a married taxpayer.

Most couples filed jointly because it generally produces the best tax result.

If both partners work, coordination of employer fringe benefits after marriage is key, says Mark Luscombe, principal federal tax analyst for Wolters Kluwer Tax & Accounting.

Reassess your individual retirement accounts. Your new combined income could affect your retirement contributions. Income limits apply to tax-free Roth accounts and also to how much of a traditional IRA contribution you can deduct if you or your spouse put money into a workplace retirement plan.

Marriage also is one of the changes in family circumstances that allows you to revisit your tax-favored FSA. Newlyweds also should reevaluate how much each has withheld from their paychecks.

And what about your once-in-a-lifetime honeymoon? The tax code’s annual gift exclusion amount for 2017 is $14,000, the same as it was for 2016. It’s usually adjusted annually for inflation.

That means both a well-to-do mom and dad could give each newlywed $28,000 or a combined total of $56,000 to the wedded couple. That definitely would pay for an extravagant post-ceremony getaway.

Having Children

Congratulations on your new baby. Let Uncle Sam help cover some of your growing family’s costs.

A dependent youngster is an added exemption. Kids also allow parents to claim the child-tax credit as long as the youngster was 16 at the end of the tax year. Large families might be able to get money back from the IRS via the refundable additional child-tax credit.

If your family grew via an adoption, there’s a tax credit to cover some of the many costs of that process.

Working parents can use the child- and dependent-care credit to pay for some of the costs of caring for their kids while they are on the job.

And the tax code also offers several ways to save and pay for higher education costs, including 529 college savings plans, the Coverdell Education Savings Account and the American opportunity and lifetime learning tax credits.

Starting a Business

Once you decide it’s time to break out of the corporate cubicle and start a new business, the tax code can help.

Filing is relatively easy for sole proprietors. They report their income as part of their annual individual tax filing by attaching Schedule C to Form 1040. Schedule C also offers many ways for individual entrepreneurs to write off many of their business expenses.

Among the deductible small-business costs are home office expenses. Business use of a vehicle also is deductible, as are health insurance premiums and contributions to self-employed retirement plans. New businesses also are allowed to deduct thousands in certain startup costs.

If you have kids, putting them to work in your sole proprietorship could be a tax-smart move. Depending on how much you pay them, they might not owe income taxes and you can deduct the salary as a business expense.

But starting a business is not all about tax breaks. Sole proprietors also must pay self-employment taxes. These are the equivalent of the payroll taxes collected from wage-earning employees. As both the employer and employee, a sole proprietor has to pay the boss and worker components of Social Security and Medicare taxes.

And running your own business usually means you must file more tax forms, including estimated tax payments four times a year.

Buying a Home

Your home is probably your biggest investment. Homeownership also provides many tax breaks.

Interest paid on a primary residence mortgage up to $1 million is deductible as an itemized expense. If you take out a home equity loan or line of credit, interest on those loans up to $100,000 also is deductible. Even the interest on a second home is tax-deductible.

Property tax you pay on your main house — and any other residences you own — also is deductible.

The tax benefit of a home is even better when you sell it. Up to $250,000 in sales gain ($500,000 for married joint filers) on your home is tax-free, as long as you owned the property for two years and lived in it for two of the five years before the sale.

Many home improvements, such as structural additions, kitchen modernization and landscaping, can increase the basis in your home. This is essentially your investment in the home. A larger basis means less profit that might be taxable.

And some home upgrades, such as installing solar energy systems, also will get you an immediate tax credit to help offset the high cost of this type of improvement.

Dealing with Divorce

As with marriage, your filing status is determined on the last day of the tax year. If your divorce is final on Dec. 31, then you are considered unmarried for the full year.

One of the stickiest divorce issues is child custody. The parent who has physical custody of the children for most of the year usually gets to claim them as dependents. That means that parent gets the exemption, child-tax credit and child-care tax credit savings.

One spouse typically is granted sole ownership of the family home. This could, however, pose a problem for the solo owner. When the lone ex sells the property, the amount of profit exempt from capital gains is just $250,000 versus the $500,000 that married filing jointly homeowners can exclude. Because of that, some couples sell the house before they divorce and split the tax-free profits.

Similarly, take into account the cash the recipient partner will net after taxes when dividing other marital assets.

And note that alimony has tax implications for both ex-spouses. It is taxable income to the recipient and can be deducted by the paying ex. Child support, however, offers no tax breaks to the paying ex, as it is not deductible. However, to the recipient, it isn’t taxable.

Retiring

Your golden years will be more enjoyable if you take advantage of the many tax breaks afforded by retirement plans.

A traditional IRA contribution could produce a tax deduction when you file your tax return. Remember, though, that you’ll have to pay taxes on this account when you start taking out money in retirement.

With a Roth IRA, you put in already-taxed money, but that means eventual distributions from a Roth are tax-free. The biggest drawback to a Roth is that you can’t open or contribute to a Roth if you make a lot of money. However, regardless of your income, you can convert a traditional IRA to a Roth.

Workplace retirement plans, usually known as 401(k)s or Roth 401(k)s, offer similar retirement saving options, but with a nice bonus. Many employers match some of your plan contributions, which helps your retirement savings grow more quickly.

Social Security benefits generally are tax-free as long as you don’t have a lot of other income.

And if you do have to file a tax return when you’re older, you can claim a larger standard deduction amount simply because you’re age 65 or older.

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.