3 Tax Investments that I can make AFTER 12/31?

3 Tax Investments that I can make AFTER 12/31?

by | Feb 18, 2019 | Investment & Income, Tax Planning

3 Tax Investments that I can make AFTER 12/31? 

Tax Investements,Let us consider that you have some idle cash lying in your bank account. Where would you invest them, so as to get tax benefits and make the most of the money? With so many options out there, it can be a bit overwhelming.

Of course, you can go on a trip or buy something new for the house. But would it be the ideal way to utilize your funds? Certainly not. To make matters easier for you, we have come up with a list of smart tax investments that you can make post 31st of December.

HSA

The HSA or Health Savings Account is a good way to park any additional cash that you might have in your possession. Here are some of the crucial details.

  • The IRA allows you to park about $10,000 per year in HSA.
  • The HSA account is available for families that have health plans with high deductibles.
  • Your investment amount sits in the HSA account and grows until you decide to withdraw the money.
  • You can withdraw the HSA found once you reach the age of 65 without any penalties, thus allowing you to even use the funds for retirement.
  • The contributions that you make towards HSA can be deducted for taxes.
  • The money in the account grows tax-free and so is the withdrawal.

Roth IRA

A lot of individuals qualify for Roth IRA but do not utilize the available option. Roth IRA is a great investment option for the following reasons.

  • You can contribute as much as $6,000 per year or $7,000 if you are above 50 years old.
  • The investments in Roth IRA are post-tax dollars.
  • The money grows tax-free in Roth IRA.
  • When you withdraw the money in retirement, it is tax-free since you would have already paid taxes on the contributions made.
  • There are certain earning thresholds which bar individuals to invest in Roth IRA directly. For example, the phaseout for Roth IRA for 2019 begins at $122,000 for single taxpayers and $193,000 for married filing jointly.
  • Importantly, you can continue investing in both Roth IRA and 401(k).

Traditional IRA

Investments in traditional IRA is similar to that of Roth IRA baring some differences. In the end, it is your personal preference when it comes to choosing which IRA is better. The following details should help you choose better.

  • You can contribute $5,000 per year into the traditional IRA.
  • Claiming traditional IRA will bring down your adjusted gross income and thus your tax liability.
  • The contributions can grow tax-deferred and you can even withdraw the funds without paying any taxes if they are done a bit late.
  • You can set up a traditional IRA, even if you have another retirement plan in place.
  • You have the option to pass on the assets to beneficiaries after death.
  • The age limit for contributing to the traditional IRA is 70 1/2 years.
  • While everyone can open a traditional IRA, the tax deductions vary. Single taxpayers who already have an employer-based retirement plan and earn $56,000 or less are eligible for a full deduction. Married filing jointly status individuals have a similar threshold of $89,000.

These investment options let you save money in the form of taxes and yet allow your assets to grow over time. In the year 2017, HSA grew by $8.3 Billion. In numbers perspective that is about 22% year on year growth. You can also invest and let your corpus grow.

4 Tax Benefits that you should not miss if YOU ARE PARENT

4 Tax Benefits that you should not miss if YOU ARE PARENT

by | Feb 11, 2019 | Investment & Income, Tax Planning, Tax Refund

4 Tax Benefits that you should not miss if YOU ARE PARENT?

4 Tax Benefits ,Being a parent is not easy and not is it cost-effective.  Tax creditRight from the moment of birth, you must endure expenses such as diapers, baby food, toys and other essentials. It is possible that one might get a bit exhausted and hope for a quick break.

Well, the quick break is there for your taking in the form of tax benefits.You can claim your parenting related expenses, which will in turn lower your liable taxes via deductions and tax credits. Here is a list of few tax benefits that you as a Parent should not miss or ignore.

  • Child Tax Credit

Tax credits essentially lower your taxes dollar for every dollar spent. If you have a few kids, you can use these tax credits to lower your taxes by a considerable margin. However, you can claim the credits for only qualifying children. Here are a few conditions.

  • You children must be below 18 years of age.
  • Your children must be a citizen of the USA, or a resident alien or a national.
  • You must declare your children as dependent on your tax claims.
  • Your children must be living with you for at least half of a financial year.
  • You can declare your own children, step children, foster children, half brother or sister, or a dependent such as grandchildren as your dependents.

You can claim the credits for several children, as long as you declare them as dependent and they are not listed as dependenton anyone else’s tax filing.

  • Adoption Tax Credit

With the help of adoption tax credit, you can easily offset some of the expenses related to adopting a child. Of course, there are few limitations when it comes to income and amount that you can claim per child. Here are a few expenses that you can claim under this clause.

  • Travel expenses related to court.
  • Food expenses related to court.
  • Attorney and court related fees.

In the event that you adopt a child with special needs, you can claim the entire Adoption tax credit. Irrespective of whether or not it surpasses your actual expenses. Since it is non-refundable, you must ensure that it doesn’t exceed your actual tax liability.

  • Higher Education Credits

Sending your kid for higher education is not cheap these days. Here are two credits that you can avail.

  • Lifetime Learning Credit (LLC)
  • American Opportunity Tax Credit (AOTC)

You can use the AOTC for up to four years, whereas the LLC can be carried forward as long as your kid pursues education.

The following expenses qualify for the above credits.

  • Tuition fees
  • Enrollment related fees
  • Expenses related to school materials

There are certain clauses in AOTC, which allows you for tax credit even if that results in zero tax liabilities.

  • Student Loan Deduction

You can avail deductions in your tax filing based on the payments that you have made for student loans. Since it is a deduction, you can reduce your net taxable income and thus lower the taxes.Here are a couple of conditions that are applicable.

  • A student loan should come from a qualified institution.
  • The loan should not be from any relative.
  • There are certain income limits that apply to deductions.
  • Your child’s enrollment for the degree should be more than half of the duration.

For the fiscal year 2016, as many as 19,273,883 taxpayers had opted for child tax credit. You can be one of them and save your hard earned money.

5 Tax Benefits you should avail when you are MOVING for JOB / BUSINESS Purposes

5 Tax Benefits you should avail when you are MOVING for JOB / BUSINESS Purposes

by | Feb 8, 2019 | Deduction & Credits, New Business

5 Tax Benefits you should avail when you are MOVING for JOB / BUSINESS Purposes?

Changing jobs is a part and parcel of life. One can either look for better job opportunities or could be unfortunately part of corporate downsizing. In either case, there could be quite a few tax implications and impacts on your Tax  benefits.

Being aware of them will help you overcome such situations gracefully. Here are the top tax benefits that you should not forget while switching jobs or businesses.

Withholding Tax

A vast majority of employees have a lot of taxes deducted from their paycheck. In fact, the number stands at about 100 million people receiving a fat refund cheque. With a new job, you have the option to set it right.

  • With your new employer, it is time to revisit your W4 form.
  • Allowances section in the form determines the amount of taxes that you will have to pay or the amount that is withheld from your income.

Moving Expenses

Changing jobs at times might lead to a change of location as well. If you have undergone a similar experience, you can claim the amount. Here is all that you should be aware of.

  • The expenses should be reasonable and associated with transportation of personal and household items to the new location.
  • In the event that you are unable to move immediately, you can claim expenses related to storage unit up to 30 days.
  • The claim can include your as well as other members of the family’s travel expenses.
  • Should you decide to drive to the new location, you can include fuel costs, parking bills, tolls, etc.
  • If the distance is far and you end up using trains or flights, you can claim them as well.
  • You can claim for these expenses in your current year using IRS’s Form 3903 and attach it with your tax returns.

Expenses related to Job Hunting

The IRS always allowed for job hunting-related expenses. Here are a few facts that you should be aware of.

  • But prior to 2018, the same deductible as a miscellaneous expense, provided you itemize it under Schedule A.
  • The expenses had to be in excess of 2% of your adjusted gross income.
  • You can now claim itemized deductions for job hunting even if the outcome was not favorable.
  • It is important that the line of work remains the same while doing the job search.
  • The usual expenses covered include any fees paid to employment services or agency, travel-related expenses or costs for mailing or printing out resumes.

Selling your house

There is a feeble possibility that you might plan to sell your house owing to a change in job location. In such cases, capital gains taxes will come into the picture. The following points will aid you.

  • Capital gains up to $250,000 on the sale of a house or $500,000 if married filing jointly, is non-taxable, provided you have stayed in the house for at least two years.
  • The gains reduce to half if you have stayed for one year only. The corrected tax-free gains would remain $125,000 for individuals and $250,000 for married filing jointly status.

Retirement Savings

Changing jobs usually means a lot of confusion and chaos related to retirement savings. Employees usually take this opportunity to withdraw their 401(k) money. You must keep in mind that withdrawing the amount before you turn 55 would result in a 10% penalty. It is recommended to transfer the amount rather than withdrawing.

The above are some tax benefits that you should not overlook while moving job or business.

Phase out limits for Adoption credit

Phase out limits for Adoption credit

by | Feb 5, 2019 | Tax Planning, Tax Preparation

Phase out limits for Adoption credit

Qualified expenses generally include adoption credit fees, court costs, attorney fees, and travel expenses that are reasonable, necessary and directly related to the child’s adoption, and they may be for both domestic and foreign adoptions; however, expenses related to adopting a spouse’s child are not eligible for this credit. When adopting a child with special needs, the full credit is allowed, whether or not any qualified expenses were incurred. The credit is phased out for higher-income taxpayers. For 2018, the AGI (computed without foreign-income exclusions) phase-out threshold is $207,140, and the credit is completely phased out at the AGI of $247,140. Unlike most phaseouts, this one is the same regardless of filing status. However, taxpayers filing as married filing separately cannot claim the credit.

Annual Gift Tax Limitations

Annual Gift Tax Limitations

by | Jan 23, 2019 | tax limitations, Tax Payers, tax savings, Taxtips

Sec. 529 plan is tax-free accumulation, so the sooner the account is established and funded, the better. A special provision of Sec. 529 allows those who are concerned with the annual gift tax limitations, currently $15,000, to contribute five years’ worth of contributions ($75,000) up front. These limitations apply to each contributor, but if there are multiple contributors, such as parents, grandparents, aunts and uncles, huge amounts can be contributed up front and provide the greatest long-term growth. While it is no secret that resident Indians have to pay taxes for a fiscal year. However,  all NRI  investors must also pay taxes for a fiscal year if applicable. Irrespective of whether they earned the money directly or indirectly, if they are liable, they must pay taxes on the same. As long as the income is generated in India. Any income that is generated as a part of their investments or assets or business interests, is liable to taxes. The presence of tax laws means that there are different avenues to save money from tax liabilities as well. If you are an NRI and are looking for tax-related tips, here are some that you might find to be quite useful.