Author: Andrew Marx
Source: download
The Pension Protection Act of 2006 was passed last month and it means the Roth as a 401(k) will exist as a permanent account option, in addition to a traditional 401(k) or 403(b) offered by your employer. That affects how you might put money into retirement accounts going forward.
Did I just lose your attention?
I know for many people, a lot of this information blows right over them like a light breeze. While I don't expect you to jump for joy at hearing about retirement options, you still should have a basic understanding of how the Pension Protection Act can affect your future.
Let me see if I can make it palatable.
As soon as you enter the full time work force, you should begin to contribute towards your retirement. You have options. One is to contribute through your employer's 401(k) or 403(b) plan. The whole point of your employer offering this benefit is that the amount can be withdrawn from your paycheck pre-tax, and in many cases, your employer will contribute their own money to add to your investment funds. That is a spectacularly good deal. My employer's contribution to my 403(b) is around $4,000 annually. That money supplements my paycheck, not now, but when I am ready to retire. That money is not taxable until I retire and make withdrawals from the account.
However, you do not have to go through your employer to contribute towards your retirement. Enter the IRA (Individual Retirement Accounts) and the Roth IRA. Most people can contribute to both the IRA and the 401(k). Traditional IRA accounts are dollars you invest, then get a tax break on those funds at the end of the year and it is the equivalent of a pre-tax investment, like the 401(k).
Roth was created to give you an alternative to traditional IRAs. The principle difference is that Roth contributions are taxed income. Since you pay taxes on it before you invest the funds, you do not have to pay taxes on it when you withdraw the funds at retirement age. The basic concept is that simple. Pay taxes on the contribution now, while your tax bracket is probably lower than it will be, and as long as you follow the rules for the account, do not pay taxes on that same money again.
Roth also exists as a 401(k) account that you can contribute through your employer, an alternative to the traditional 401(k) described earlier. The difference is that the Roth 401(k) uses already taxed dollars to contribute to the plan. The same concept as the Roth IRA, you do not then pay taxes on that contribution when you retire as long as you follow certain rules. The Roth 401(k) was originally designed to phase out after 2010, but the Act makes it a permanent option. That makes it more attractive for employers to offer it, and more employers will do so.
What you should do right now if you are interested in more information is go to your employer's benefit office and find out what kind of retirement plans they offer, most likely a 401(k) or 403(b). Ask them about eligibility criteria for the plans. You can separately contact any number of personal investment companies like Scottrade and Vanguard to open up an IRA or Roth IRA.
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Andrew Marx is a prolific author and his expertise includes the practical and legal aspects of personal finance and higher education. His body of work is published at http://www.smartremarx.com/
Wednesday, October 7, 2009
Monday, October 5, 2009
Shorten Your Journey to Business and Personal Success
Author: Judy Cullins
Source: articleage.com
According to a new survey carried out by Alliance & where ID_NUM=9270;Leicester, one in five small business owners view tax astheir greatest concern. The Chancellor has announced in hislast budget that companies with profits below œ10,000 willnot have to pay any corporation tax with effect from 1 April2002. The question to be asked is: does that announcementmake incorporation a more attractive option compared tobeing a sole trader?The answer is that from a tax point of view, it isadvantageous to trade through a limited company as longas the income is drawn from the company by the owners asdividends from their shares and the amount of dividendsdrawn is restricted below the 40% band rate (i.e. œ31,063for tax year 2002/03). That way, the owners have no furtherpersonal tax ("income tax") to pay. Moreover, dividends arenot subject to national insurance contributions. This isexcellent news of course. But, if dividend income fallswithin the higher rate bracket of income tax (i.e. aboveœ34,515), they will be taxed at 22.5% on the excess, whichof course will increase the tax burden. The company profitsare subject to corporation tax rates. Those are lower thanincome tax rates.The most catastrophic scenario is when the director takeshis reward from the company as salary. Then his/her salaryis taxed at income tax rates (like a sole trader's income).That is because, unlike sole traders, the tax system treatscompanies as separate from their owners because a company isa separate legal entity. The problem is that the incometaxes are higher than corporation tax rates. On top ofthat, they will be subject to employee and employer nationalinsurance contributions, which of course increase the taxburden and render his position worse than even anunincorporated business ("sole trader"), because NIC Class 1on payroll are higher than NIC Class 2 paid by selfemployed.In contrast, a self employed person ("sole trader") is taxedat income tax rates on the profits from his business, whichare added to his other sources of income. As it has alreadybeen mentioned, income tax rates are overall higher thancorporation tax rates. On top of income tax, nationalinsurance contributions class 4 are payable on the businessprofits within a specified band (7% on profits betweenœ4,615and œ30,420). National insurance contributions Class 2are also paid by self-employed people, although those arelower than those payable by company directors on theirsalaries.To illustrate the above, let's take a simple example. Wehave a limited company and a sole trader. They both makeœ60,000 profits each in the tax year 2002/03. We assume thatthe company director takes a salary equal to the amount ofhis personal allowances (untaxed income) of œ4,615 and thebalance as dividends. The company will pay corporation taxat 19% equal to œ10,523 and nothing else. The sole traderwill pay income tax œ16,542, National insurance Class 2 œ104and National insurance Class 4 œ1,806. Total œ18,452. Thebottom line is that the person that has incorporated hisbusiness into a limited company will make a tax saving ofœ7,929 compared to a sole trader! Isn't that fantastic?Somebody might be wondering: why is this entire happening?The official explanation is that, this government, to helpthe economy grow, encourages people to leave as much profitswithin their businesses to be reinvested, instead of beingtaken out and spent.The "unofficial line" is that, as a matter of fact, foryears the Inland Revenue has tried to reclassify theself-employed. The 1% in NIC hike on staff salaries abovethe NIC threshold from next April adds to both theemployees' and employers' tax burden and may more thanoffset the saving from the corporation tax zero rate on thefirst œ10,000 of profits.Aren't there any other matters to consider in decidingwhether to incorporate or not?Higher administration costs to comply with company law,payroll and bookkeeping is one factor. Another issue ispension planning. Extracting profits out of the company asdividends rather than salary means that there will be no"net relevant earnings" and therefore pension contributionscan't be made. But the advent of stakeholder pension planshas meant that contributions up to œ3,600 per year can bemade without the need for any earnings. If a person does notwish to transfer funds in existing plans into stakeholderbecause of high charges, there is a way out: the best netrelevant earnings (i.e. salary) in five consecutive yearscan be used for making contributions for the next fiveyears, even if there were no salaries in the remainder fouryears. It is comforting to know that entitlement to basicstate pension is not affected by taking a salary from thecompany at the level of a person's personal allowances i.e.œ4,615.Furthermore, an individual may decide not to bother withpension plans and instead invest in ISA. Often, these can bemore efficient than pensions but that's beside the scope ofthis article. If that option is taken, no salary isnecessary.Another factor is business motoring. It might be taxadvantageous for an unincorporated business that owns manycars not to incorporate because if these cars have someprivate use there will be benefits in kind taxed on theusers. These are generally higher than the straightapportionment between private and business for all carrunning costs in the case of sole traders.The conclusion is that there can be considerable tax savingswaiting the sole trader who decides to go down theroad to incorporation. But, one needs to proceed withcaution and careful planning. And don't forget the biggestadvantage of incorporation, which is Protectionfrom Personal Liability. Incorporating is one of the bestways to protect a business owner from personal liability.Shareholders of a company are generally not liable for theobligations of the company. Creditors of a company may seekpayment from its assets, but not the assets of theshareholders. This means that business owners may engage inbusiness without risking their homes or other personalproperty.Thank you for taking the time to read this Article. I hopeyou've found it useful. If you have, please drop me an emailand let me know what you think.You can email me at...constantinesavva@accamail.comAlternatively, you can visit our website athttp://www.tax-accounting-london.info and read a series ofother full length articles that present the complete pictureon a variety of interesting topics.If you would like to know how to save tax and make sure thatmore of your hard earned cash stays with you to expand yourbusiness and increase your profits, we have a Free SpecialReport addressed to small businesses either starting up oralready in business. This Exclusive Free Special Report isavailable automatically when you subscribe to our regularseries of Free Newsletters on finance advice and taxplanning by visiting our subscription area on our websitewww.tax-accounting- london.info. It is complied from reallife situations dealing with small business tax affairs forover 10 years and it is loaded with down-to-earth advice andpractical, understandable examples.LEGAL NOTICEWhilst every care has been taken in the preparation of thisarticle, the author cannot accept responsibility for anyerrors or omissions. Proper professional advice should betaken at all times.We retain copyright for the contents of this article. Anyunauthorized copying or onward distributions are prohibitedwithout our consent.
Source: articleage.com
According to a new survey carried out by Alliance & where ID_NUM=9270;Leicester, one in five small business owners view tax astheir greatest concern. The Chancellor has announced in hislast budget that companies with profits below œ10,000 willnot have to pay any corporation tax with effect from 1 April2002. The question to be asked is: does that announcementmake incorporation a more attractive option compared tobeing a sole trader?The answer is that from a tax point of view, it isadvantageous to trade through a limited company as longas the income is drawn from the company by the owners asdividends from their shares and the amount of dividendsdrawn is restricted below the 40% band rate (i.e. œ31,063for tax year 2002/03). That way, the owners have no furtherpersonal tax ("income tax") to pay. Moreover, dividends arenot subject to national insurance contributions. This isexcellent news of course. But, if dividend income fallswithin the higher rate bracket of income tax (i.e. aboveœ34,515), they will be taxed at 22.5% on the excess, whichof course will increase the tax burden. The company profitsare subject to corporation tax rates. Those are lower thanincome tax rates.The most catastrophic scenario is when the director takeshis reward from the company as salary. Then his/her salaryis taxed at income tax rates (like a sole trader's income).That is because, unlike sole traders, the tax system treatscompanies as separate from their owners because a company isa separate legal entity. The problem is that the incometaxes are higher than corporation tax rates. On top ofthat, they will be subject to employee and employer nationalinsurance contributions, which of course increase the taxburden and render his position worse than even anunincorporated business ("sole trader"), because NIC Class 1on payroll are higher than NIC Class 2 paid by selfemployed.In contrast, a self employed person ("sole trader") is taxedat income tax rates on the profits from his business, whichare added to his other sources of income. As it has alreadybeen mentioned, income tax rates are overall higher thancorporation tax rates. On top of income tax, nationalinsurance contributions class 4 are payable on the businessprofits within a specified band (7% on profits betweenœ4,615and œ30,420). National insurance contributions Class 2are also paid by self-employed people, although those arelower than those payable by company directors on theirsalaries.To illustrate the above, let's take a simple example. Wehave a limited company and a sole trader. They both makeœ60,000 profits each in the tax year 2002/03. We assume thatthe company director takes a salary equal to the amount ofhis personal allowances (untaxed income) of œ4,615 and thebalance as dividends. The company will pay corporation taxat 19% equal to œ10,523 and nothing else. The sole traderwill pay income tax œ16,542, National insurance Class 2 œ104and National insurance Class 4 œ1,806. Total œ18,452. Thebottom line is that the person that has incorporated hisbusiness into a limited company will make a tax saving ofœ7,929 compared to a sole trader! Isn't that fantastic?Somebody might be wondering: why is this entire happening?The official explanation is that, this government, to helpthe economy grow, encourages people to leave as much profitswithin their businesses to be reinvested, instead of beingtaken out and spent.The "unofficial line" is that, as a matter of fact, foryears the Inland Revenue has tried to reclassify theself-employed. The 1% in NIC hike on staff salaries abovethe NIC threshold from next April adds to both theemployees' and employers' tax burden and may more thanoffset the saving from the corporation tax zero rate on thefirst œ10,000 of profits.Aren't there any other matters to consider in decidingwhether to incorporate or not?Higher administration costs to comply with company law,payroll and bookkeeping is one factor. Another issue ispension planning. Extracting profits out of the company asdividends rather than salary means that there will be no"net relevant earnings" and therefore pension contributionscan't be made. But the advent of stakeholder pension planshas meant that contributions up to œ3,600 per year can bemade without the need for any earnings. If a person does notwish to transfer funds in existing plans into stakeholderbecause of high charges, there is a way out: the best netrelevant earnings (i.e. salary) in five consecutive yearscan be used for making contributions for the next fiveyears, even if there were no salaries in the remainder fouryears. It is comforting to know that entitlement to basicstate pension is not affected by taking a salary from thecompany at the level of a person's personal allowances i.e.œ4,615.Furthermore, an individual may decide not to bother withpension plans and instead invest in ISA. Often, these can bemore efficient than pensions but that's beside the scope ofthis article. If that option is taken, no salary isnecessary.Another factor is business motoring. It might be taxadvantageous for an unincorporated business that owns manycars not to incorporate because if these cars have someprivate use there will be benefits in kind taxed on theusers. These are generally higher than the straightapportionment between private and business for all carrunning costs in the case of sole traders.The conclusion is that there can be considerable tax savingswaiting the sole trader who decides to go down theroad to incorporation. But, one needs to proceed withcaution and careful planning. And don't forget the biggestadvantage of incorporation, which is Protectionfrom Personal Liability. Incorporating is one of the bestways to protect a business owner from personal liability.Shareholders of a company are generally not liable for theobligations of the company. Creditors of a company may seekpayment from its assets, but not the assets of theshareholders. This means that business owners may engage inbusiness without risking their homes or other personalproperty.Thank you for taking the time to read this Article. I hopeyou've found it useful. If you have, please drop me an emailand let me know what you think.You can email me at...constantinesavva@accamail.comAlternatively, you can visit our website athttp://www.tax-accounting-london.info and read a series ofother full length articles that present the complete pictureon a variety of interesting topics.If you would like to know how to save tax and make sure thatmore of your hard earned cash stays with you to expand yourbusiness and increase your profits, we have a Free SpecialReport addressed to small businesses either starting up oralready in business. This Exclusive Free Special Report isavailable automatically when you subscribe to our regularseries of Free Newsletters on finance advice and taxplanning by visiting our subscription area on our websitewww.tax-accounting- london.info. It is complied from reallife situations dealing with small business tax affairs forover 10 years and it is loaded with down-to-earth advice andpractical, understandable examples.LEGAL NOTICEWhilst every care has been taken in the preparation of thisarticle, the author cannot accept responsibility for anyerrors or omissions. Proper professional advice should betaken at all times.We retain copyright for the contents of this article. Anyunauthorized copying or onward distributions are prohibitedwithout our consent.
Sunday, October 4, 2009
Life Insurance Available With Tax Relief
Author: Michael Challiner
Source: articleage.com
At last you can buy life insurance and get tax relief. The breakthrough results from changes in the Gordon Browns' latest Budget speech but the tax relief is only available on a new special sort of life insurance policy. You can't get tax relief on your existing life insurance policies.These new policies exploit a loophole in the new Finance Bill and should result in savings of between 5% and 15% for standard taxpayers and around 30% for higher taxpayers.But there are strings attached! You can't add extras on to your life policy such as critical illness cover and the insured sum must be a fixed sum. Neither can you have a joint policy. Basically, it has to be a bog standard, level term, single beneficiary, life insurance policy.Then there are more restrictions, but quite honestly, these are unlikely to pose a problem to anyone unless they're very wealthy! You can't have one of these special life policies if the annual contributions you pay into your pension plus the life insurance premiums, exceed 215,000 per year. Furthermore, if the value of your pension fund plus the payout on your life policy exceeds 1,500,000, the current limit set by the Chancellor, then the excess will be taxed at 55%. Conventional life insurance policies are excluded from this calculation.Tax relief on the premiums is automatically collected by the life insurance company so you pay a premium which is already reduced by standard rate tax relief. If you're a higher rate taxpayer, you'll have to claim the extra tax through your self-assessment tax return. However, once you've told your taxman about your premiums, they should automatically continue to give you the tax relief through your tax code.So why are the savings less than the value of the tax relief? Well, the reason is that the life companies have to administer the tax relief and there are certain operational restrictions imposed by the Inland Revenue on the insurance company. This means that the basic cost of these policies is a little more than conventional life insurance - but after the tax relief you should save.As with all these loopholes, you must be aware that the Chancellor could remove the tax relief. Having said that, it is rare for a future tax change to be applied retrospectively so you are likely to be safe. Your income could also change and move you into a lower tax bracket. This would reduce your savings.This new type of life policy is now available from most of the big UK insurers and specialist life insurance brokers. However, you won't be able to get an online quotation - you'll have to speak on the phone to a Life Insurance Adviser.And just to confuse matters these policies are known under a range of names: Pension Term Insurance, Life Insurance with Tax Relief, Life Protection with Tax Relief - but they all mean the same thing.Oh yes, let me confirm one miss-understanding. No, you don't have to buy a pension at the same time!Scrouge Online specialise in Life Insurance Quotes , Mortgage Rates and Loans online
Source: articleage.com
At last you can buy life insurance and get tax relief. The breakthrough results from changes in the Gordon Browns' latest Budget speech but the tax relief is only available on a new special sort of life insurance policy. You can't get tax relief on your existing life insurance policies.These new policies exploit a loophole in the new Finance Bill and should result in savings of between 5% and 15% for standard taxpayers and around 30% for higher taxpayers.But there are strings attached! You can't add extras on to your life policy such as critical illness cover and the insured sum must be a fixed sum. Neither can you have a joint policy. Basically, it has to be a bog standard, level term, single beneficiary, life insurance policy.Then there are more restrictions, but quite honestly, these are unlikely to pose a problem to anyone unless they're very wealthy! You can't have one of these special life policies if the annual contributions you pay into your pension plus the life insurance premiums, exceed 215,000 per year. Furthermore, if the value of your pension fund plus the payout on your life policy exceeds 1,500,000, the current limit set by the Chancellor, then the excess will be taxed at 55%. Conventional life insurance policies are excluded from this calculation.Tax relief on the premiums is automatically collected by the life insurance company so you pay a premium which is already reduced by standard rate tax relief. If you're a higher rate taxpayer, you'll have to claim the extra tax through your self-assessment tax return. However, once you've told your taxman about your premiums, they should automatically continue to give you the tax relief through your tax code.So why are the savings less than the value of the tax relief? Well, the reason is that the life companies have to administer the tax relief and there are certain operational restrictions imposed by the Inland Revenue on the insurance company. This means that the basic cost of these policies is a little more than conventional life insurance - but after the tax relief you should save.As with all these loopholes, you must be aware that the Chancellor could remove the tax relief. Having said that, it is rare for a future tax change to be applied retrospectively so you are likely to be safe. Your income could also change and move you into a lower tax bracket. This would reduce your savings.This new type of life policy is now available from most of the big UK insurers and specialist life insurance brokers. However, you won't be able to get an online quotation - you'll have to speak on the phone to a Life Insurance Adviser.And just to confuse matters these policies are known under a range of names: Pension Term Insurance, Life Insurance with Tax Relief, Life Protection with Tax Relief - but they all mean the same thing.Oh yes, let me confirm one miss-understanding. No, you don't have to buy a pension at the same time!Scrouge Online specialise in Life Insurance Quotes , Mortgage Rates and Loans online
Ben Franklin Didn't Quite Get it Right
Author: Terry Mitchell
Source: download
When Ben Franklin said "a penny saved is a penny earned", he didn't quite get it right. Actually, a penny saved is worth more than a penny earned. Do you find this statement shocking? I am about to prove to you that what I'm saying is true.Most people erroneously believe the best way to strengthen their financial health is to increase their income. On the contrary, saving money by cutting costs will get you there quicker. You see, it's very simple. When your income increases (with some exceptions like the part of it you put into your 401k), that extra money is taxed. On the other hand, any amount you save by cutting costs is not taxed. Therefore, $20 saved by cutting costs is worth more than a $20 increase in income.The following (although over-simplified) example will illustrate this principle. Let's suppose that Jack and Cindy have identical jobs and incomes. Let's also suppose they shop at the same grocery store and pay about the same amount for groceries each week. Now, Jack gets a $20 per week pay increase and Cindy does not. However, at about that same time, Cindy finds a new grocery store where she is able to save $20 per week on her grocery bill. Assuming nothing else has changed, Cindy is now better off financially than Jack, even though she did not get a raise and he did.How can this be? It's because Jack has to pay taxes on his $20 raise but Cindy does not have to pay taxes on her $20 grocery discount. Assuming Jack is in the 25% federal tax bracket (and disregarding any possible increase in his state or local taxes), he will be able to put only $15 into his piggy bank each week whereas Cindy will be able to put the whole $20 a week into hers!Bottom Line: It is more blessed to receive a discount than to receive an equal amount in a pay increase!Terry Mitchell is a software engineer, freelance writer, and trivia buff from Hopewell, VA. He also serves as a political columnist for American Daily and operates his own website - http://www.commenterry.com - on which he posts commentaries on various subjects such as politics, technology, religion, health and well-being, personal finance, and sports. His commentaries offer a unique point of view that is not often found in mainstream media.
Source: download
When Ben Franklin said "a penny saved is a penny earned", he didn't quite get it right. Actually, a penny saved is worth more than a penny earned. Do you find this statement shocking? I am about to prove to you that what I'm saying is true.Most people erroneously believe the best way to strengthen their financial health is to increase their income. On the contrary, saving money by cutting costs will get you there quicker. You see, it's very simple. When your income increases (with some exceptions like the part of it you put into your 401k), that extra money is taxed. On the other hand, any amount you save by cutting costs is not taxed. Therefore, $20 saved by cutting costs is worth more than a $20 increase in income.The following (although over-simplified) example will illustrate this principle. Let's suppose that Jack and Cindy have identical jobs and incomes. Let's also suppose they shop at the same grocery store and pay about the same amount for groceries each week. Now, Jack gets a $20 per week pay increase and Cindy does not. However, at about that same time, Cindy finds a new grocery store where she is able to save $20 per week on her grocery bill. Assuming nothing else has changed, Cindy is now better off financially than Jack, even though she did not get a raise and he did.How can this be? It's because Jack has to pay taxes on his $20 raise but Cindy does not have to pay taxes on her $20 grocery discount. Assuming Jack is in the 25% federal tax bracket (and disregarding any possible increase in his state or local taxes), he will be able to put only $15 into his piggy bank each week whereas Cindy will be able to put the whole $20 a week into hers!Bottom Line: It is more blessed to receive a discount than to receive an equal amount in a pay increase!Terry Mitchell is a software engineer, freelance writer, and trivia buff from Hopewell, VA. He also serves as a political columnist for American Daily and operates his own website - http://www.commenterry.com - on which he posts commentaries on various subjects such as politics, technology, religion, health and well-being, personal finance, and sports. His commentaries offer a unique point of view that is not often found in mainstream media.
Saturday, October 3, 2009
Donate A Car To Benefit Charities And Yourself
Author: Bob Benson
Source: articledashboard.com
The Internal Revenue Service allows for abounding altered types of accommodating deductions including cash, clothes, goods, and some services. One of the "goods" accustomed by the IRS that taxpayers may accord is their car. Although the IRS has anchored things up over the accomplished few years, altruistic a car can account a advantaged alms and advice yourself appear tax day. Let's yield a attending at how your car donation can advice you and a accustomed charity. Your six year old Buick LeSabre Custom has stood the analysis of time, but you accept absitively to buy a 2007 Buick La Crosse Limited to accord yourself a car that is new, up to date, and thoroughly reliable. Your LeSabre saw you through continued commutes to work, vacations at the shore, and it was the aforementioned car your babe acclimated to apprentice how to drive. With 140,000 afar on the odometer you apperceive that the barter in bulk isn't traveling to be that great, so you accede altruistic the Buick to a alms such as the branch foundation or to the affiliation of the blind.The IRS will accolade your generosity if you chase assertive arena rules:--The alms accept to be accustomed by the IRS and accept 501(c) 3 status.--You can alone abstract the auction bulk of the car, not what you anticipate anyone ability pay for it. Indeed, even admitting the Buick could possibly back added than $5000 if awash privately, you accept to account the "gross proceeds" of the resale of the car by the charity. So, if the alms sells your LeSabre for $3700, which is the bulk you are accustomed to abstract on your assets taxes. Your alms of best will accommodate accounting affidavit of the auction bulk to you for your annal already the auction has been made.Just bethink if you get to abstract $3700 that doesn't beggarly your taxes will bead by that amount. Depending on your tax bracket and what you owe the Internal Revenue Service and added deductions, you apparently will save yourself a few hundred dollars per year. Of course, your motive for giving should be based in allotment on allowance a alms not just accepting a appropriate deduction. So, although the IRS has anchored up the rules apropos altruistic a car it can still be an important armamentarium adopting apparatus for charities while acceptance you to accept a tax answer and the joy of allowance anyone out in their time of need.
Source: articledashboard.com
The Internal Revenue Service allows for abounding altered types of accommodating deductions including cash, clothes, goods, and some services. One of the "goods" accustomed by the IRS that taxpayers may accord is their car. Although the IRS has anchored things up over the accomplished few years, altruistic a car can account a advantaged alms and advice yourself appear tax day. Let's yield a attending at how your car donation can advice you and a accustomed charity. Your six year old Buick LeSabre Custom has stood the analysis of time, but you accept absitively to buy a 2007 Buick La Crosse Limited to accord yourself a car that is new, up to date, and thoroughly reliable. Your LeSabre saw you through continued commutes to work, vacations at the shore, and it was the aforementioned car your babe acclimated to apprentice how to drive. With 140,000 afar on the odometer you apperceive that the barter in bulk isn't traveling to be that great, so you accede altruistic the Buick to a alms such as the branch foundation or to the affiliation of the blind.The IRS will accolade your generosity if you chase assertive arena rules:--The alms accept to be accustomed by the IRS and accept 501(c) 3 status.--You can alone abstract the auction bulk of the car, not what you anticipate anyone ability pay for it. Indeed, even admitting the Buick could possibly back added than $5000 if awash privately, you accept to account the "gross proceeds" of the resale of the car by the charity. So, if the alms sells your LeSabre for $3700, which is the bulk you are accustomed to abstract on your assets taxes. Your alms of best will accommodate accounting affidavit of the auction bulk to you for your annal already the auction has been made.Just bethink if you get to abstract $3700 that doesn't beggarly your taxes will bead by that amount. Depending on your tax bracket and what you owe the Internal Revenue Service and added deductions, you apparently will save yourself a few hundred dollars per year. Of course, your motive for giving should be based in allotment on allowance a alms not just accepting a appropriate deduction. So, although the IRS has anchored up the rules apropos altruistic a car it can still be an important armamentarium adopting apparatus for charities while acceptance you to accept a tax answer and the joy of allowance anyone out in their time of need.
Thursday, October 1, 2009
<B>College Families Overpaid The IRS - Again!</B>
Author: Reecy Aresty
Source: articleage.com
College families who made their best guess as to which of the Education Tax Incentives would save them the most on their income taxes have put their 2004 tax returns to bed. However, for many, a sigh of relief may be a bit premature and inappropriate. Countless families, even some assisted by professional tax preparers, chose incorrectly and have significantly overpaid the IRS - AGAIN! Mark Twain once said, "No man's life, liberty, or property are safe while the legislature is in session," and never have truer words been spoken!On June 6, 2001, President Bush signed HR 2014 into law. This created The Tuition and Fees Deduction, based on Senator Charles E. Schumer's (D-NY) Make College Affordable Act. However, Congress presented and the President signed a watered down version of the Senator's proposal and consequently, it doesn't work for the families who need it the most!Senator Schumer had been tirelessly championing legislation that would allow families, including independent students, to deduct a portion of their college expenses on their taxes. The Senator's Make College Affordable Act, as originally proposed, would have given millions of American families the opportunity to deduct up to $12,000 per year from their total incomes to help reduce the rising costs of college tuition and related expenses. Unfortunately, and to the detriment of untold numbers of taxpayers with students in college, the Tuition and Fees Deduction allows a mere deduction of $3,000 for tax years 2002-2003, and $4,000 for tax years 2004-2005. The Deduction sunsets after 2005.To many families, an annual eight or nine thousand dollars could mean the difference of being forced to settle for a local community college as opposed to sending their student to a state school. Arguably, America's future rests with its educated youth, and this is no way to treat those who will hold the fate of our country in their hands.The drastic slashing by Congress of Senator Schumer's proposed bill and President Bush's failure to send it back to them is the case in point substantiating that the government of the United States doesn't give a hoot in hell about the financial struggle the average American parent endures in their endless pursuit of the American dream for their children! Effective legislation to make college expenses tax deductible is long overdue and began with the Tax Payer Relief Act of 1997, which Senator Schumer also supported and voted for. The Act created two education tax credits, the HOPE Scholarship Credit (maximum $1,500 a year for 2 years), and the Lifetime Learning Credit (maximum $1,000 increasing to $2,000 in 2003).Note: A tax deduction lowers taxable income, and the savings depends on the filer's tax bracket. A tax credit directly lowers taxes by the amount of the credit, dollar for dollar, regardless of the filer's tax bracket.Although it certainly was a step in the right direction, the Tax Payer Relief Act of 1997 fell far too short in providing major tax relief for America's college families, especially in view of soaring tuition costs and other related expenses that families endure year after year to send their kids to college. Nonetheless, the real tragedy for America is the Tuition and Fees Deduction, which, when taken by taxpayers who qualify for The HOPE Scholarship Credit or The Lifetime Learning Credit, will actually cause them to overpay their taxes by hundreds of dollars each year!Affluent single and head of household taxpayers whose incomes exceed $51,000, and joint filers whose incomes exceed $102,000, will not qualify for the HOPE Scholarship or Lifetime Learning Credit, and are therefore, the only ones who actually benefit from taking the Tuition and Fees Deduction. Thus, camouflaged as tax relief to offset college costs for all of America's college families, all Congress actually did was Robin-Hoodwink most lower and middle income families by taking from them and giving to the rich! The wisdom of Mark Twain's words cannot be denied.This is one of a series of articles by college admissions and financial aid expert, Reecy Aresty, based on his book, "Getting Into College And Paying For It!" For further information including how to obtain the complete SPECIAL REPORT on the Tuition And Fees Deduction with refund eligibility, please visit www.thecollegebook.com.
Source: articleage.com
College families who made their best guess as to which of the Education Tax Incentives would save them the most on their income taxes have put their 2004 tax returns to bed. However, for many, a sigh of relief may be a bit premature and inappropriate. Countless families, even some assisted by professional tax preparers, chose incorrectly and have significantly overpaid the IRS - AGAIN! Mark Twain once said, "No man's life, liberty, or property are safe while the legislature is in session," and never have truer words been spoken!On June 6, 2001, President Bush signed HR 2014 into law. This created The Tuition and Fees Deduction, based on Senator Charles E. Schumer's (D-NY) Make College Affordable Act. However, Congress presented and the President signed a watered down version of the Senator's proposal and consequently, it doesn't work for the families who need it the most!Senator Schumer had been tirelessly championing legislation that would allow families, including independent students, to deduct a portion of their college expenses on their taxes. The Senator's Make College Affordable Act, as originally proposed, would have given millions of American families the opportunity to deduct up to $12,000 per year from their total incomes to help reduce the rising costs of college tuition and related expenses. Unfortunately, and to the detriment of untold numbers of taxpayers with students in college, the Tuition and Fees Deduction allows a mere deduction of $3,000 for tax years 2002-2003, and $4,000 for tax years 2004-2005. The Deduction sunsets after 2005.To many families, an annual eight or nine thousand dollars could mean the difference of being forced to settle for a local community college as opposed to sending their student to a state school. Arguably, America's future rests with its educated youth, and this is no way to treat those who will hold the fate of our country in their hands.The drastic slashing by Congress of Senator Schumer's proposed bill and President Bush's failure to send it back to them is the case in point substantiating that the government of the United States doesn't give a hoot in hell about the financial struggle the average American parent endures in their endless pursuit of the American dream for their children! Effective legislation to make college expenses tax deductible is long overdue and began with the Tax Payer Relief Act of 1997, which Senator Schumer also supported and voted for. The Act created two education tax credits, the HOPE Scholarship Credit (maximum $1,500 a year for 2 years), and the Lifetime Learning Credit (maximum $1,000 increasing to $2,000 in 2003).Note: A tax deduction lowers taxable income, and the savings depends on the filer's tax bracket. A tax credit directly lowers taxes by the amount of the credit, dollar for dollar, regardless of the filer's tax bracket.Although it certainly was a step in the right direction, the Tax Payer Relief Act of 1997 fell far too short in providing major tax relief for America's college families, especially in view of soaring tuition costs and other related expenses that families endure year after year to send their kids to college. Nonetheless, the real tragedy for America is the Tuition and Fees Deduction, which, when taken by taxpayers who qualify for The HOPE Scholarship Credit or The Lifetime Learning Credit, will actually cause them to overpay their taxes by hundreds of dollars each year!Affluent single and head of household taxpayers whose incomes exceed $51,000, and joint filers whose incomes exceed $102,000, will not qualify for the HOPE Scholarship or Lifetime Learning Credit, and are therefore, the only ones who actually benefit from taking the Tuition and Fees Deduction. Thus, camouflaged as tax relief to offset college costs for all of America's college families, all Congress actually did was Robin-Hoodwink most lower and middle income families by taking from them and giving to the rich! The wisdom of Mark Twain's words cannot be denied.This is one of a series of articles by college admissions and financial aid expert, Reecy Aresty, based on his book, "Getting Into College And Paying For It!" For further information including how to obtain the complete SPECIAL REPORT on the Tuition And Fees Deduction with refund eligibility, please visit www.thecollegebook.com.
How Much Should You Borrow?
Author: P Miller
Source: articledashboard.com
There's little doubt that we're borrowing more and there's also little doubt that credit is one of the great conveniences of modern life. That said, like Goldilocks you want to borrow the amount that's just right -- and no more. So what's the right level of debt? The loan qualification standards used by mortgage lenders are an important guideline. You can typically get that old standby -- the fixed-rate, 30 year mortgage -- if no more than 28 percent of your gross monthly income goes for mortgage principal and interest, property taxes and property insurance (PITI). In addition, as much as 36 percent of your gross monthly income can go to regular monthly costs -- PITI plus car payments, credit card debt, school costs, etc. In addition, because they have more liberal qualification standards, you can often borrow more with other loan programs such as FHA, VA and adjustable-rate financing. But no matter what type of mortgage financing you consider, the real question should be not how much can you borrow, but rather how much can you borrow comfortably. In other words, financial sanity counts. Unfortunately the term "financial sanity" is an expression without a definition. The economics that work for the Webbers plainly may not work for the Johnsons. We each have different incomes as well as different interests, expenses and preferences. Given this background one might ask: What makes financial sense for me? The answer looks like this: If you're living from paycheck to paycheck, if monthly costs are a burden, if savings are small or non-existent, if you do not have health insurance then it's time to re-think debt burdens. The richest person I ever met, someone who started with nothing and created jobs for more than 50,000 people, once offered this advice: "The key to financial success is saving, and nothing is harder than saving that first $10,000. After that, it's easy." In other words, it's entirely possible to have a substantial salary and to fail the financial sanity test. The waiting rooms in every bankruptcy court are filled with people who once had big incomes and bigger debts. One day the numbers didn't work and away went the trophy houses and the big cars. So how do you begin the savings process? The first step, literally, is to open a savings account. The very nice people who provide checking accounts and credit cards will also be happy to hold your savings. The second step is to go after every nickel and dime you can find. The economics of savings resemble gravity: Little pieces brought together in one place produce big results. Here's an example: Imagine that you usually spend $2.50 per day on little things -- coffee, candy or whatever. Instead, you set the money aside in an account that pays 6 percent interest. The result? After 30 years there's almost $77,000 in your account. There are any number of strategies to save money, but let me suggest a practical approach. Look at your debts. Pick the one with the lowest balance, say a small credit card that requires monthly payments of $25. Save and pay it off. Then identify the next remaining debt with the smallest balance. You now have $25 a month extra that can be applied to the second obligation. Save and pay off the second debt. Maybe with the second obligation you can save $50 a month. After the second debt is repaid, you have an additional $75 a month to attack the third debt. During this process there are other steps to take. Bring lunch to work. Have one car (hard in some areas, but not impossible). Collect change at the end of the day and deposit rolls of coins every month or so. Eat out -- but not often. Stay away from credit cards. Avoid late fees and maintain good credit by paying bills in full and on time. As this process continues you'll notice several interesting results. First, borrowing for real estate becomes easy as debts decline and qualification scores rise. Second, better credit results in reduced interest rates that can save you big money. Save a half percent as a result of good credit on a $300,000 mortgage and you'll cut costs in the first year of the loan by nearly $1,500. Third, there's no tax on "savings." If you have $1,000 in credit card debt and auto costs each month, that money is available only after taxes are paid. To get that $1,000 in cash you may have to earn $1,300 or $1,400, depending on your tax bracket and location. If you pay off your bills and don't have to pay that $1,000 a month, Uncle Sam does not raise your taxes and you gain the equivalent of a huge raise. When you speak with lenders about your ability to borrow, consider that with good credit you likely can borrow as much as you need if not more. But also consider that as a matter of financial sanity you have a personal obligation to save. If you can buy a home, pay general expenses and still save 5 or 10 percent of your gross monthly income, the odds are overwhelming that borrowing will not be an undue burden now or in the future.
Source: articledashboard.com
There's little doubt that we're borrowing more and there's also little doubt that credit is one of the great conveniences of modern life. That said, like Goldilocks you want to borrow the amount that's just right -- and no more. So what's the right level of debt? The loan qualification standards used by mortgage lenders are an important guideline. You can typically get that old standby -- the fixed-rate, 30 year mortgage -- if no more than 28 percent of your gross monthly income goes for mortgage principal and interest, property taxes and property insurance (PITI). In addition, as much as 36 percent of your gross monthly income can go to regular monthly costs -- PITI plus car payments, credit card debt, school costs, etc. In addition, because they have more liberal qualification standards, you can often borrow more with other loan programs such as FHA, VA and adjustable-rate financing. But no matter what type of mortgage financing you consider, the real question should be not how much can you borrow, but rather how much can you borrow comfortably. In other words, financial sanity counts. Unfortunately the term "financial sanity" is an expression without a definition. The economics that work for the Webbers plainly may not work for the Johnsons. We each have different incomes as well as different interests, expenses and preferences. Given this background one might ask: What makes financial sense for me? The answer looks like this: If you're living from paycheck to paycheck, if monthly costs are a burden, if savings are small or non-existent, if you do not have health insurance then it's time to re-think debt burdens. The richest person I ever met, someone who started with nothing and created jobs for more than 50,000 people, once offered this advice: "The key to financial success is saving, and nothing is harder than saving that first $10,000. After that, it's easy." In other words, it's entirely possible to have a substantial salary and to fail the financial sanity test. The waiting rooms in every bankruptcy court are filled with people who once had big incomes and bigger debts. One day the numbers didn't work and away went the trophy houses and the big cars. So how do you begin the savings process? The first step, literally, is to open a savings account. The very nice people who provide checking accounts and credit cards will also be happy to hold your savings. The second step is to go after every nickel and dime you can find. The economics of savings resemble gravity: Little pieces brought together in one place produce big results. Here's an example: Imagine that you usually spend $2.50 per day on little things -- coffee, candy or whatever. Instead, you set the money aside in an account that pays 6 percent interest. The result? After 30 years there's almost $77,000 in your account. There are any number of strategies to save money, but let me suggest a practical approach. Look at your debts. Pick the one with the lowest balance, say a small credit card that requires monthly payments of $25. Save and pay it off. Then identify the next remaining debt with the smallest balance. You now have $25 a month extra that can be applied to the second obligation. Save and pay off the second debt. Maybe with the second obligation you can save $50 a month. After the second debt is repaid, you have an additional $75 a month to attack the third debt. During this process there are other steps to take. Bring lunch to work. Have one car (hard in some areas, but not impossible). Collect change at the end of the day and deposit rolls of coins every month or so. Eat out -- but not often. Stay away from credit cards. Avoid late fees and maintain good credit by paying bills in full and on time. As this process continues you'll notice several interesting results. First, borrowing for real estate becomes easy as debts decline and qualification scores rise. Second, better credit results in reduced interest rates that can save you big money. Save a half percent as a result of good credit on a $300,000 mortgage and you'll cut costs in the first year of the loan by nearly $1,500. Third, there's no tax on "savings." If you have $1,000 in credit card debt and auto costs each month, that money is available only after taxes are paid. To get that $1,000 in cash you may have to earn $1,300 or $1,400, depending on your tax bracket and location. If you pay off your bills and don't have to pay that $1,000 a month, Uncle Sam does not raise your taxes and you gain the equivalent of a huge raise. When you speak with lenders about your ability to borrow, consider that with good credit you likely can borrow as much as you need if not more. But also consider that as a matter of financial sanity you have a personal obligation to save. If you can buy a home, pay general expenses and still save 5 or 10 percent of your gross monthly income, the odds are overwhelming that borrowing will not be an undue burden now or in the future.
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