Deadlines & Wealth Building

Learn how planning for success with time lines provides  you the opportunity to avoid  explosive mines…

 

As the 2021 tax season came to an end the creator of TheWealthIncreaser.com realized that increased productivity occurred in the area of tax preparation when making excuses or procrastination was absolutely not an option as clients had to get what they wanted (the completion of their tax return) prior to the April 18, 2022 deadline.

 

By kicking activity into a higher gear and making a sincere effort to meet the deadline, the acceleration of tax return preparation was done in a more intense and all-consuming manner in an effort to meet the deadline and help clients avoid the late filing fees and failure to file fees.  It then occurred to the creator of TheWealthIncreaser.com that by setting a deadline and having every intention on reaching that deadline, you can do more and achieve more.

 

In this discussion TheWealthIncreaser.com will discuss the importance of why you must formulate goals and have a deadline for achievement so that you can achieve more and at the same time open a new door.

 

 

It is important that you realize that the timing to do what needs to be done will never be just right

 

In life there will be many obstacles, even so you want to set goals that can benefit you and your family that can make your life more rewarding and enjoyable while you are here on earth.

 

As difficult as it can be to move forward efficiently you must not let procrastination get the best of you!

 

The time to do what needs to be done in your life that can transform your future to that of major success will never be to your liking.  You must make it a priority to give it your best so that you can achieve a higher level of success.

 

The time for you to do just that is NOW–put a serious plan in place now so that you can achieve your credit and financial goals so that you can later say–WOW!

 

By continuing to read this page  and site you will learn how!

 

It is important that “you” formulate goals that are realistic and you believe in

 

You must have a big imagination and  move toward what you truly desire and you must AIM higher so that you can achieve the goals that you truly desire.  Why dream small or not dream at all when you can dream big with something that you are passionate about and pursue what you want with more clout!

 

By dreaming big you open up the possibility to let inspiration in–so that you can win.  By formulating goals that you believe in you are putting your mind and heart “into the mix” and you open up unlimited possibilities to achieve optimally as you move about daily toward the goals and expectations that are uniquely your own.

 

It is important that you have every intention on achieving your goals in an efficient and effective manner

 

It is imperative that you never quit, and by setting deadlines you put yourself in position to give it your all–all the way to the finish line (no pun intended) and achieve goals that are deep inside your heart and mind and in many cases divine.

 

You must know what you want to achieve financially and otherwise while here on earth and you must have the focus, commitment and dedication that is necessary to achieve what you desire in an efficient and highly effective manner and setting deadlines will assist you greatly in achieving that task.

 

Conclusion

 

The key point of this discussion is for you to realize that you should aspire to build wealth and live a more joyous life and by setting deadlines it will force you to activate your mind and heart at a higher level and operate daily at a higher level as you move toward the goals that are most important to you and the goals that are the ones that you really want to see come true.

 

You must realize that you can do what you want to do when you want to do so and possibly achieve your goals or you can choose to set deadlines for accomplishment and leave procrastination in your past.  You must have a “sincere desire” to achieve what you “truly want to see come true” and by putting a timetable for achieving what you desire to achieve on a clock–you can avoid financial shock.

 

By setting deadlines and putting your plan for success in writing you can operate in a more intense manner and the success that you desire can be reached in a shorter time frame!

 

If you set a deadline to set up a budget or cash flow statement, set a deadline to master your understanding of credit and set a deadline to learn how to comprehensively manage all areas of your finances you can achieve far more while here on planet earth for this relatively brief time.

 

By doing so you will pay off or pay down your debt and build your wealth in a way that is more comfortable for you–and worry, anxiety, fear, frustration, lack of effort and excuses will be a thing of your past–as you embark on a new way to take off that will surely be a blast.

 

Isn’t it time that you use the “power of now” to do something significant in your life that really matters!

 

You must leave “procrastination at bay” use your “inspiration to find a better way” and improve your financial condition and move to improve any other situation you face–starting today.

 

Now is the time that you flip the hourglass and transform potential into reality so that you can use your time wisely now–or more appropriately right now to build wealth more efficiently and more effectively!

 

And just as the creator of TheWealthIncreaser.com was forced or activated by a deadline to achieve more–so too can you achieve more in the area that you choose to by setting deadlines for achievement and having every intention on achieving what you desire.

 

All the best to your timely wealth building success…

 

Learn how you can use humor to reach your deadlines more efficiently…

 

 

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Credit Management & Wealth Building During COVID-19

Learn why it is imperative that “you manage your credit effectively yourself” in any economic environment…

 

When it comes to credit management it is important that you realize that it is your responsibility to manage your credit effectively in a proactive manner and not depend on credit repair and other credit improvement companies–when you have the opportunity to do what needs to be done on the front end.

 

Effective credit management (even during the COVID-19 Era) is not as hard as you may think if you make the commitment to get out in front of your credit transactions and learn wise credit and money management strategies on the front end.

 

Even if you have made credit mistakes in your past you can now start on a more effective path as it relates to the management of your credit!

 

In this discussion you will learn how you can take control of your credit management and manage your credit effectively throughout your lifetime, or during the period in your life that you desire to use credit.

 

By learning and applying the following principles, you will have no problem effectively managing your credit from this day forward–thereby ensuring a more prosperous future for yourself, your family, your loved ones and the society at large in which you live.

 

  • You must have a basic understanding of credit

It is important to realize that you don’t have to be a credit expert to manage your credit at a more beneficial level, however you must have a basic understanding of how credit works so that you can make credit work for you as opposed to against you!

 

You must know why you are using credit and you must know the purpose of credit so that you can use credit wisely and achieve more during your lifetime.

 

  • You must know when to use credit

It is important that you realize that whether you have poor credit or great credit you will be bombarded by creditors, advertisers, marketers and others who will promote products and services that may or may not be beneficial to you and your family from a credit perspective.

 

Therefore, you must know when to use credit and how to select the credit that will be in your and your family’s best interest!

 

The key types of questions that you must ask are: 

 

If I make a major purchase using credit cards and purchase a car (financing involved) at this time–what effect will that have “credit wise” on my intention to purchase my first home 18 months from now?

 

If I use credit to make a major purchase, do I know the time frame that I intend to pay off the creditor?

 

If I choose to pay off my current creditor with a “zero promotion” offer from another creditor, have I run the numbers to determine my real savings and my real advantage of doing so “prior to” the balance transfer and payoff–not after?

 

Those, and other relevant questions must be asked and answered appropriately up front–not after the fact!

 

  • You must have an effective payoff plan in place “prior to” your credit use

If you use credit in an advantageous way–you will position your finances in a manner where you can pay off your credit debt on a monthly basis and in the case of balance transfers and promotional offers that you may sign up for–during the promotional period or the zero percent interest period so that you can avoid or eliminate interest or other fees.

 

By having a payoff plan “prior to” your purchase and by adhering to that plan you put yourself in position for more effective credit management as well as maintaining or improving your credit position and hence credit score.

 

  • You must know how the credit scoring system works

It is important to know that there are two scoring systems that are in wide usage (FICO and VantageScore) and others that are used by credit bureaus to a lesser degree.

 

It is important that you learn about the credit scoring system in as relaxed a manner as possible. 

 

While learning you don’t want to be stressed, worried or otherwise distracted as the answer to your concerns could lie in front of you.

 

Although there are differences and similarities in many of them–the key is to know how to keep Negative information off your report, Utilize your credit appropriately, keep older accounts open as Time length is important, have different Types of credit and keep Inquiries (hard pull of your credit) at a low level  and you will have no problem managing and/or improving your credit–regardless of the version or model that is being used!

 

Keep in mind that when it comes to credit scoring models, there are industry specific versions, newer versions, older versions, in-house versions and other versions all on the market at the same time–the key for you is to know which version your creditor (or potential creditor) uses–and then proactively know what is in that version (your score or relevant score range) prior to formally applying for credit.

 

Conclusion

 

Your effective use of credit can be made easier if you have a basic understanding of credit, you know how to use credit wisely, you have a realistic payoff plan in advance and you know how the credit scoring system works and how it will affect your usage of credit.

 

You don’t have to be overly concerned about the scoring models as long as you pay on time, you use your credit sparingly (particularly your revolving debt), you pay off your debt in a timely manner, you have a good credit mix or different types of credit–and you keep your inquiries low.

 

By gaining a basic level of credit understanding at this time you put yourself well ahead of those in the general population and your effective credit management will now be made easier if you apply the concepts in this discussion and you are one who desire to manage your credit effectively from this day forward and throughout your lifetime, or the period that you desire to use credit during your lifetime.

 

By responsibly doing what you need to do on a consistent basis your credit score will reflect that responsible use over time and will put you in position to attain your credit goals and what you expect to happen at the various stages of your life.

 

Effective credit management starts with a thought by you, that you really want to manage your credit better and a real desire (by you) to find the best or appropriate way to do just that in a manner and style where excuses are a thing of your past!

 

All the best to your credit management success during COVID-19 and during tougher times ahead that are yet unseen…

 

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Comfort & Wealth Building

Learn why a certain level of discomfort (and comfort) is to be expected as you build wealth….

 

It is important that you make a serious commitment to build wealth in effective a manner as possible so that you can truly reach the goals and expectations that are uniquely your own.

 

As you embark on your wealth building journey you must prepare your mind for a certain level of discomfort and yet you must still have confidence that the wealth building goals that you are pursuing will come into fruition in a time efficient manner–if you put in place a highly efficient plan that can take you toward your goals.

 

In this discussion TheWealthIncreaser.com will attempt to broaden your perspective on how you can achieve wealth building success in a more comfortable manner and in a manner that is more favorable for you and your family.

 

1) Confront Your Finances

It is important that you ask yourself, what can I do to make my life better or easier as it relates to the management of my finances.  The first and often the most uncomfortable time is coming to the conclusion within your mind that you sincerely desire to build your wealth more efficiently and you are determined to do so.

 

Do you find “answers to your financial concerns” worth being discovered?

 

If you do, you are well on your way to confronting your finances in a way that will be uncomfortable in the beginning but will make your journey on earth “more comfortable in the long run” as far as your wealth building and money management activities are concerned.

 

By confronting your financial condition, you are consciously and unconsciously comforting your finances and by “starting the process” you can ultimately turn your financial journey into a trip that allows you to give it your best–and reach a higher level of success!

 

2) Manage Your Credit Effectively

Many consumers find credit management to be difficult and overbearing when in actuality the process of effective credit management is quite simple.

 

The key is that you must get “out in front” of your credit management or another way of looking at it is you must proactively manage your credit.

 

You can do so by experiencing a certain level of discomfort at this time by mastering the 5 credit factors so that you can comfortably manage your credit effectively during your life at a later time.

 

3) Manage Your Overall Finances Effectively

Once you confront your finances and learn how to manage your credit in ways that are more advantageous for you and your family–you are now in position to confront and manage your overall finances in a more effective and comfortable manner.

 

By managing your insurance, investments, taxes, education planning. estate planning/wills and retirement planning at a level that is your absolute best, you put in place what is necessary for you to reach a much higher level of success!

 

Your clear understanding of how your finances interconnect in all areas is a major key to effective management of your finances throughout your lifetime and that understanding can provide you a level of comfort that is immeasurable!

 

Conclusion

If you are one who desire to transform your finances and your future, it is important that you realize that you will experience a certain level of discomfort on the front end before you get to a certain level of comfort on the back-end!

 

Your commitment to stay the course and do what needs to be done even at times when you are not feeling your best is a major key to unlocking new doors of success.

 

By following the three steps above and properly establishing an emergency fund at the earliest time possible you can enjoy life more, reach your retirement goals, take the vacations that you desire and “develop the mindset” to always reach higher.

 

Your effective money management should be a comfortable experience and it is the hope of the creator of TheWealthIncreaser.com that this discussion on wealth building will help make your life more enjoyable, more comfortable and more successful and will sincerely take you to where you desire or need to be in a manner that gives you the clarity that you need–so that you can truly suceed!

 

Isn’t it time you get out of your comfort zone and pursue what you truly desire with the passion, intensity and urgency that is needed that will provide you and your family the wealth building success that can be passed along to future generations!

 

All the best as you enjoy your wealth building activities at a level of comfort that allows you to achieve at a level that will lead you toward unlimited success….

 

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Expectations & Wealth Building

Learn why you must expect wealth building success and have a real commitment to put forward the needed effort at a level that is your absolute best…

 

In the current economy many are letting anxiety and uncertainty about their future lead them toward unhealthy behavior and behavior that may not be in their best interest in the short, intermediate and long-term–in many instances.

 

In this discussion TheWealthIncreaser.com will discuss the importance of why you must expect success, be willing to move to action at a level that is your absolute best–and permanently put the notion of failure to rest!

 

 

When it comes to building wealth your confidence in yourself and your commitment to action is critical.  And as stated in the most recent post that has fast become a blog favorite–you must enthusiastically pursue your wealth building goals at a level that is your absolute best.

 

You must expect positive outcomes in any economic environment, and you must put an effective plan in place to achieve those outcomes.

 

Your knowledge and understanding of how you manage your cash flow, how you manage your credit and how you manage all areas of your finances will to a large degree determine your wealth building future and can realistically provide you a blueprint of how you can achieve your goals efficiently and provide you the clarity in your mind that can convince you that you can meet or exceed your expectations in your future–if you take the right action–consistently!

 

In the following paragraphs TheWealthIncreaser.com will discuss these topics in more detail in an effort to provide you meaningful direction–so that you won’t fail–as you learn what sincerely pursuing your wealth building goals entail.

 

You must realize that it is YOU who lie at the center of achieving real success and it is YOU who truly control actually making your dreams come TRUE!

 

1) Cash Flow Management

Your ability to manage your cash flow on a monthly and annual basis is of paramount importance and if you do it right consistently you can set yourself and your family up for untold success.

 

The yearly vacations that you desire, your membership at your favorite athletic club, your dream car that you always saw yourself driving, that vacation home that you always wanted, your volunteering for and contributing to your favorite cause(s)–and many other goals that you desire can be brought into clear focus if you manage your cash flow effectively and you have an expectation of doing so on a daily basis from this day forward.

 

Do you currently have an effective cash flow management system in place or are you taking whatever life dishes out at you?

 

Effective management of your finances can lead you toward what you want to happen in your future and help ensure a more rewarding and enjoyable future for you and your loved ones–so that you don’t have to do heavy lifting by the tons–as your wealth building success rotates around the suns!

 

2) Credit Management

As you enter the various stages of your life credit advertisements that try to sway you will come on a consistent basis and at many stages of your life you will be bombarded by credit experts (or advertisers and marketers) who are determined to get you to sign up and use credit services.

 

In many instances they may not be in your or your family’s best interest!

 

Do you have a system or the knowledge of how to know when credit will work best for you and do you know how to use credit in a manner that works best for you and your family?

 

If not, are you actively pursuing the knowledge of how you can manage your credit more effectively and are you putting that knowledge into action with the expectation that your credit management will take you toward the goals that you desire in an efficient manner and in a manner that is more favorable for you and your family–not creditors or others who have no real concern for you or your wealth building future?

 

3) Overall Management of Your Finances

Do you have a system that allows you to know at the drop of a hat what you must address effectively in all areas of your financial life–or are you headed toward financial strife by not having the knowledge that is necessary to take you where you need or want to be as far as your wealth building success is concerned–during your life?

 

It is important that you ask yourself the right questions and seek the right answers as you build wealth! 

 

If you don’t know what areas of your finances that you must address–you are adding stress to your life in ways that you may have never imagined and you make reaching your goals far more difficult than it should (or have) to be.

 

Your effective management of your insurance, investments, taxes, education funding, estate planning/wills and retirement planning along with properly establishing an emergency fund at the earliest time possible is a surefire way for you to attain success and attaining that success must be your expectation from this day forward.

 

Conclusion

In this economy or any economy, you must have an expectation of success.

 

Even though COVID-19 remains a major concern, housing prices and interest rates continue to rise in many areas and inflation and gas prices are on the rise in many countries and with news of wars and rumors of war that have created anxiety and disrupted the usual happenings for many in various parts of the world–along with many other downward spiraling activities that occur at a personal level–and can be disheartening to a large extent–it is still important that you have a vision of success and an expectation of success–if you are one who is truly determined and willing to give it your best to achieve that success.

 

You must expect success at this time, and you must be willing to do what needs to be done on a consistent basis!

 

It is important that you realize that your determination at this time to follow the three steps mentioned above has the potential to change your life for the better in a major way!

 

However, potential means that you have not done it, however by “expecting success” and taking the action steps that are relevant for improving your credit and finances whether by utilizing this site or any other source that works for you–you can turn potential into real results that can propel your and your family’s future for generations to come.

 

It is important that you prepare your mind with the right knowledge that can lead you toward what you desire in the most efficient manner possible!

 

You can choose to make a conscious, deliberate decision at this time and not only create a meaningful path toward the future that you desire–you can also travel on that path in the most efficient manner possible–thereby achieving what you expected to achieve–because by mastering the three steps above–you now truly believe!

 

Throughout your life you must “expect success” and you must know how to manage your money effectively, know how to avoid common wealth building mistakes, know how to manage you credit wisely throughout your lifetime or period that you desire to use credit, know how to avoid common home buying mistakes and know how to manage all areas of your finances effectively and efficiently–as you build wealth.

 

By frequenting this site and knowing your wealth building responsibilities (and acting on those responsibilities in a sincere way) you can change your future for the better–starting today!

 

All the best to your future success as you should “expect” nothing less…

 

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Enthusiasm & Wealth Building in the COVID-19 ERA

Learn why you must have fire in your heart if you are now ready to start building wealth effectively in a manner that will truly set you apart…

 

In the current economy with COVID-19 wreaking havoc, rising prices on many goods and services and other happenings at the local and global level it can be difficult for some to rise above the anxiety that could be inside of their mind and heart and move forward in a manner that can truly take them where they need or want to be as far as reaching wealth building goals that will serve a greater purpose in their life.

 

Even if others don’t want success, you can approach your wealth building efforts with more confidence and that begins by you having a true desire for wealth building success from this day forward–and throughout your lifetime!

 

Even though the creator of TheWealthIncreaser.com has been fighting through the COVID-19 virus over the past few weeks and has been less active in all areas–and enthusiasm or fire for life has been taken down several notches–this discussion is designed not only for you to achieve optimally but also to help the creator of TheWealthIncreaser.com gain back the “enthusiasm” and momentum that was recently taken away, and also to get you and others on a more determined and definite path toward lasting success as you build wealth.

 

By taking to heart the following “3 points” and determining where you can make improvements in your life you can move toward achieving your wealth building goals in a manner that makes more sense, makes your journey less intense and formulating and achieving what you truly desire will be made more relevant.

 

1) Your enthusiasm begins inside of you

It is important that you have a certain level of ambition or true desire to reach your wealth building goals.

 

Your goal is to set yourself apart from the crowd and pursue your wealth building goals with a high level of discipline, commitment and purpose (DCP–yeah you know me) as by doing so you put yourself in a better position for lasting success that allows you to live at a level that is your absolute best.

 

Your action on a daily basis in a disciplined manner, your commitment to action on a daily basis and knowing why you are doing what you are doing lies at the heart of your wealth building success–if you are now determined to give it your absolute best.

 

2) Your enthusiasm must be directed toward a specific goal(s)

As you build wealth it is important that you set meaningful goals that you have every intention on achieving.

 

By doing so you energize your mind and heart to operate at a higher level on a daily basis so that you can WIN the majority of your races!

 

By having a high level of enthusiasm toward paying off your debt, managing your credit optimally and looking at  and addressing your finances in a comprehensive manner,  you put yourself in position to attain successand build wealth in the COVID-19 ERA or any ERA.

 

By setting meaningful goals and pursuing them at your highest level–you position yourself to excel and not fall downward into a never ending well.

 

By reaching higher, you put yourself on a more positive path toward achieving the goals that “you” require and you exponentially increase the odds of achieving what you desire and avoid finding yourself in a financial quagmire that makes your outlook for success–dire!

 

3) Your enthusiasm must never die out

You must pursue the success that you desire with enthusiasm and vigor.  You must see beyond the right now to see what is truly possible if you do what you need to do!

 

And just as the creator of TheWealthIncreaser.com will move forward in 2022 with more enthusiasm and focus in spite of starting 2022 in the worst way possible since being on planet earth due to COVID-19 that slowed down progress and delayed meaningful goals that were set for well over a month–so too must you not let adversity, distractions, emergencies, worry, anxiety, fear, frustration, excuses and not putting forth the required effort hold you back in not only 2022–but the remainder of your existence while here on planet earth.

 

Your mindset must be to “expect success” and “pursue that success” at a level that is your absolute best and permanently put the notion of failure to rest!

 

You must always realize that you have the power within to operate at a higher level and control the direction and outcomes of your future if you are willing to put in the effort and develop a never quit type of attitude that will never die out.

 

Conclusion

Your enthusiasm or “fire on the inside” that you have can be used effectively as you build wealth if you have the right approach.  It is imperative that you pursue your wealth building goals in a disciplined, committed and purposeful manner (remember DCP) if you are one who desire to achieve at your highest level of excellence.

 

Improving your cash flow position, managing your credit effectively and managing all areas of your finances effectively throughout your life can be made easier and more rewarding if you put both your heart and mind into the effort and you “sincerely desire” to achieve the goals that you are pursuing–regardless of what they may be.

 

Always realize that it is easier to change your financial behavior than it is to change your attitude–however, if you are disciplined, truly committed and you know your purpose for life–you can do both and permanently change the trajectory of your future in the strongest way possible.

 

You and your family deserve nothing less!

 

All the best to enthusiastically pursuing your wealth building success in a manner that will allow you to live your life at a level that is your absolute best…

 

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Vision & Wealth Building During COVID-19

Learn why you must see the wealth building success that you desire–so that you can reach higher…

 

It is important that whatever your wealth building goals are–you have a vision of those goals and a clear vision about how you will go about achieving those goals–now during COVID-19 and throughout your lifetime.

 

Whether you desire to pay off your current burdensome debt, create that emergency fund that you know you need and deserve, plan for success by using a blueprint for success that includes creating a cash flow statement, creating an income statement, creating a balance sheet, knowing your net worth in terms certain, mastering your credit and attacking your finances in a comprehensive manneryou must have a vision of it happening–and you must know the steps that you need to take to make it happen!

 

If you have a vision of buying real estate and using the property for rental income or quick turning the property for a profit–you need to see it happening and know how it will happen.

 

You must ask yourself pertinent questions such as does the property that I am considering require repairs and if so how extensive–and what will the cost of doing so be?  When do I expect to finish the project and be on target to rent or sell (holding period) the property?  What is the “average number of days to sell” in the area that I am considering for purchase?  Will I be purchasing in an area with strong schools?

 

Will I be financing or will I make a cash offer?  What is my entry point as far as purchase price?

 

In short, what can I afford–acquisition wise and construction/renovation wise and what do I realistically expect to happen after I make this purchase?

 

Do I have a contingency fund (10% or more over what I expect to spend on repairs/renovations) in case there are costs that are not anticipated?

 

Unforeseen and unexpected renovation costs–usually have a cost associated with them and you want to know and plan for this on the front end!

 

Always consider your timeline of ownership as a factor as holding period can eat into your expected return.  Will outside forces slow you down or do you have a contingency plan?

 

Are you pursuing a 30% return or a 20% return?  It is important that you know what return you want and can realistically get–on the front end!

 

You also want to know what is going on in the neighborhood so that you can avoid the pitfalls that have negatively affected many home buyers.  It is important that you use your common sense on what needs to be repaired on the front end–and be aware of contractors and others who may be out to get you–financially speaking!

 

By looking at the property and doing a walk-through–you want to know whether window replacement, garage door replacement, roof replacement, hardwood floor repairs or replacement (in other words you need to know the basics) and other concerns need to be made “prior to making an offer” on the home that you intend to purchase for rental purposes, quick turn for a profit or even if you plan on using as your personal residence!

 

In short you must have a “vision of what must be done” to the property and a vision of how you will acquire the property!

 

Likewise, you must also have a vision of what needs to be done in all areas of your finances if you are to achieve at your highest level of excellence while here on planet earth.

 

Conclusion

Regardless of what you visualize to achieve–you don’t want to make mistakes on the front end if you can avoid them.  You can reduce your odds of making mistakes by frequenting this site, other helpful sites and proactively approaching your finances by having a yearning for success–and by getting out in front of your finances and not seeking knowledge after you have made a bad choice or decision!

 

Your vision of success must start by seeing the light–and the first step toward lasting success is to get your credit and finances right–whether during daylight–or at night!

 

By doing so you enhance the probability of success in your wealth building efforts and in ALL endeavors that you will pursue–including those goals named above that you may have or other goals that are particular to your and your family’s future success and desires.

 

Whether you have a vision of improving your insurance position, investment position, tax position, education planning position, estate planning/wills position and/or retirement planning position–it is important that you align with someone who provides a blueprint for success so that you can avoid common mistakes that are all too common (no pun intended)!

 

Where appropriate, you also want to select professionals of high integrity who can further assist you when and where necessary.

 

Although you may be one who likes to do it yourself in other areas of your life–your finances in many areas can also be done by you–if you learn in advance what you need to do.

 

However, in some areas professional advice may be warranted as some areas of finance are nuanced–and if managed effectively may have the potential to provide you additional and more beneficial success opportunities throughout your life–therefore it may be crucial that you get it right so that you can avoid financial strife!

.

Unforeseen, unexpected and unexplained events that you did not plan for will occur throughout your lifetime and it is important that you prepare for those events in advance.  Even so, you still want to plan appropriately so that you can still attain your vision and do what you need to do so you can achieve if you take consistent action over a number of years.

 

Your vision of success means that you will not make excuses and you will proactively attack your finances so that even when adversity occurs–there can be no other outcome other than the success that you desire–whether in the COVID-19 environment–or any environment.

 

Ultimate success must be a part of your process or theme as you reach higher to achieve your dream!

 

You must have a back-up plan in case your vision needs adjusting–and your drive toward your vision must be a true thing!

 

You truly are the determining factor for achieving the vision that you see–and being who you were truly put on earth and meant to be.

 

All the best to your vision of success as you now should expect nothing less if you are at this time willing to give it your absolute best…

 

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Retirement Planning & Wealth Building

Learn the importance of properly preparing for your retirement years so that you can build wealth more effectively…

 

It is important that you plan for a prosperous retirement at the earliest time possible.  In addition to knowing your cash flow position at this time and how you can use financial statements to achieve more–you also need to have an awareness of your “financial retirement number” that you will need to reach at a later time so that you can live out your retirement years in a dignified manner.

 

Regardless of whether you contribute to a 401k, 403b, thrift plan, railroad retirement plan, social security, IRA’s or other retirement funding vehicles, you must have a target amount that you need to hit to make your retirement years enjoyable and more beneficial.

 

There are a number of retirement funding vehicles and strategies that you can use to reach your “retirement number” once you get a handle on what that number is!

 

If you are conservative, and you desire to create a diversified portfolio, you can use a United States total market index fund, a United States total market bond fund, and a broad-based international fund.

 

You can simplify your choices even more by selecting a balanced fund or target date funds to reach your goals.  If you are more riskier, you can use Exchange Traded Funds, Mutual Funds, Stock Portfolios and other more exotic investment vehicles to reach your goals.

 

The key is you must have a plan at some level–and the sooner you get started–the better the odds are that you can reach your retirement number and live out your retirement years in the manner that is best for you and your family!

 

In this discussion TheWealthIncreaser.com will discuss the importance of planning appropriately for your retirement years so that you can “achieve your goals” and live out your retirement in the manner that you choose so that you can have more enjoyment during your golden years.

 

It is imperative that you have a basic understanding of retirement planning at a minimum and you have a willingness to learn more as you approach your retirement years.

 

Common Types of Income During Your Retirement Years

 

Social Security

In retirement you will have social security if you reside in the U.S. and worked and contributed at a level that allows you to collect benefits during your retirement years.  You can generally start receiving social security in your mid 60’s and the payments would continue throughout your lifetime.

 

Pension

Although pensions are a distant memory and thing of the past for most, some companies still provide them and if you now receive one or are on track to receive pension income in the future you must know what to expect and when to expect this stream of income.  There are also 401k ROTHs, Simplified Employee Pensions, solo 401ks and other retirement products on the market that may be appropriate for you–depending on your unique financial position.

 

401k, 403B, Thrift Plans and others

By contributing to retirement plans during your working years you can use pre-tax contributions to build your retirement nest egg in a more efficient manner.  There may be an employer match component to the plan and if so, you can use effective investing to achieve your goals even more efficiently.

 

IRA’s

You may be able to contribute to IRA’s (Traditional or ROTH) if you qualify and build a sizable nest egg that you can have available to fund your living conditions during your retirement years if you contribute to the max “and” you have a decent rate of return and choose a fund with low management fees.

 

There are tax and compounding advantages of using these retirement vehicles and they are worth real consideration if you qualify.

 

Railroad Retirement Benefits

If you work for the railroad system in the United States you could be eligible for a retirement plan that is generally more generous than that of the social security system.

 

Home Sale, Refinance, Home Equity Loan or Reverse Mortgage

If you were to sell your personal residence and downsize you could possibly be eligible for a $250,000 exclusion on the gain if you were single and you otherwise qualified–or $500,000 if you were married and otherwise qualified.  You can also refinance your personal residence (or your rental properties if you had any) to pull money out, get a home equity loan or home equity line of credit–or if your situation was dire (you failed to save appropriately during your working years) and you exhausted all other possibilities–possibly a reverse mortgage.

 

Keep in mind that when using any of the above approaches–you must do so strategically as your financial position is uniquely your own and what may be effective for others–may not be effective for you.

 

Investment Income

If you invested during your working years outside of your retirement accounts and reinvested you could have also possibly built a large nest egg that could be used during your retirement years to help fund your lifestyle.

 

Keep in mind an Exchange Traded Fund is more efficient for investing than a mutual fund when you are investing outside of your retirement as you will not have capital gains that would be taxable on an annual basis.  Other investments held outside of your retirement accounts may or may not be taxable.  Municipal bonds, individual stocks that are not sold may avoid or defer the payment of taxes.

 

Conclusion

You have the option of planning now for a more effective and rewarding retirement regardless of the life stage that you are now in.  Whether you invest in a traditional manner or you invest in cryptocurrency and other more exotic investment vehicles–you must have a plan to reach a level of success that allows you to not outlive your income sources–but also live comfortably and possibly leave something behind for your heirs or other causes that are dear to your heart.

 

When investing for your retirement years there are a number of key concerns that you should be aware of and you want to avoid common mistakes that many have made in the past by being aware on the front end and not being complacent during your working years.

 

You particularly want to be aware of fees that you pay and you want to minimize those fees on the front end because at retirement time it would be too late!  Look for no-load funds that don’t charge a percentage of your upfront investment.  Also choose a fund with a low expense ratio, which includes management fees and other costs of running the fund.

 

You can generally find this information on the funds website or in advertising brochures.

 

It is not uncommon to see retirees who invest $100,000 over a 30-year period with high fees end up with tens of thousands less than those who invest in funds with a low expense ratio.

 

You can change the direction that you are now on to that of real success if you now decide to plan appropriately–and give it your best.

 

You must analyze the sale of your home and the tax consequences (basis, depreciation, exclusion from taxes on gain must be analyzed) prior to and after you retire on the front end to ensure that you make the best decision for the short and long run regardless of where you are now at in your life stage.

 

Even if you have to pay for good advice, the value will more than likely be greater than the cost as you can avoid costly mistakes at the wrong time that have held so many back as they were building wealth.

 

It is important that you do all that you can to fund your retirement so that you can reach your retirement number and live at a level of comfort that you desire or need to live at.  Also keep in mind that with many retirement vehicles you will have mandatory withdrawals beginning at age 72.

 

If you project monthly income of $8,000 and monthly expenses of $5,000 and you are age 65 and you plan on living until at least age 95 you must hit the target number that will allow you to have “for a 30 year period” the $8,000 monthly income when all sources are added up.  You also want to know the tax implications and the effects of inflation on your retirement income so that you are “not surprised” during your retirement years.

 

Isn’t it time you try a new informative, powerful, revolutionary and results oriented approach to wealth building as opposed to the same tired approach that has been presented by many others in the finance industry over the years?

 

When it comes to retirement planning and wealth building  reaching your retirement number and having streams of income that are stable, reliable and predictable during your retirement years should be your primary goal.

 

When you combine your social security benefits, pension, other retirement income and all other sources of income during your retirement years, will it provide you with what you need to live out your retirement years in comfort?

 

By being particular, precise, clear and concise–about what you expect to happen during your retirement years–you set yourself up to avoid financial fears and eliminate financial tears during your golden years!

 

All the best to your retirement wellness and a lifetime of success as you are now in position to proactively give it your absolute best…

 

 

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Estate Planning/Wills & Wealth Building

Learn why you must look out into the future and plan for your loved ones and what will happen after you no longer inhabit planet earth…

 

It is important that you plan effectively for your future and planning for your heirs after you are no longer here on planet earth is at the top of the list when it comes to effective financial planning.

 

Although we all like to live as long as possible, the hard reality is that we will all transition at some point.  Therefore you want to address how your affairs will be handled at this time as best you can–so that YOU can determine what happens after your transition.

 

At the time of this discussion the creator of TheWealthIncreaser.com is battling COVID-19, and the topic of Estate Planning/Wills is a topic of real concern.   Regardless of where you are now at in your life stage, you want to take a serious look at your current estate and determine ways that you can transfer your assets more appropriately.

 

Furthermore, with this week being the one year mark since the transition of the mother of the creator of TheWealthIncreaser.com and one week since the creator of TheWealthIncreaser.com recovered (ok, partially recovered) from COVID-19, the topic of estate planning is more important than ever for not only the creator of TheWealthIncreaser.com, but also you and your family if you have not addressed what will happen with your finances and assets after you transition.

 

Know your financial standing at this time

A basic starting point for improving your finances is to determine where you are now at on a monthly and annual basis so that you can determine your net worth and determine the best type of asset transfer approach that is the best for you and your family.

 

At a minimum (regardless of your net worth) you want to create a will and if you have a high net worth a trust and more sophisticated planning may be necessary.

 

Determine the best products that will serve your and your family before and after your transition

There are a number of estate planning products and services that are available to help you as you go about your affairs in life.

 

Without getting into the practice of law, a number of concerns will be outlined below that could help you plan better and help you strategically manage your estate during your lifetime–and even after you transition.

 

1) beneficiary/deed designation

2) will

3)  power of attorney

4) health care directive

5) trust

6) insurance/annuities

7) other (products unique to your financial and life situation)

 

Review and update as necessary at the various stages of your life

Throughout your life changes will occur, whether it is the birth of a child, the transition of family members, job loss, various emergencies and adversity that was not planned for and other happenings, therefore you want to remain flexible and update your documents as necessary.

 

However, depending on your unique financial position and changes that occur during your lifetime, there may be much more to include in your estate planning to make certain all of your assets are transferred seamlessly to your heirs upon your death to help ensure that your intended wishes are carried out.

 

Conclusion

 

Planning for what will happen after you are no longer here on earth must be addressed with the utmost care and concern.  It is important that you contact an attorney and/or at a minimum create a will so that you can have peace of mind at this time and not have your loved ones quarrel after you transition and cause undue stress and hardship for your family.

 

By creating a will you can name a personal representative of your choice to represent your estate after your transition and that representative would file a final tax return on your behalf and the refund if any could be payable to the estate (legatee or beneficiary would receive).  Your personal representative that you designate would go to the courthouse after your transition and would get “letters of administration” giving the personal representative that you designate the legal authority to file your tax return and inquire about life insurance proceeds.

 

By taking the time now to address your finances in a comprehensive manner you are putting yourself and your family on a more successful track whether you have a low net worth or you are worth millions.  Your family will be in a better position for success after you transition and family disputes can be minimized–in large part due to your planning at this time–so that your intended wishes will materialize at a future time.

 

When it comes to estate planning/wills you want to look at all of your options on the front end–not after you transition–because it is impossible to do so at that time!

 

All the best to longevity and strategically planning your future in a way that will lead to your absolute success…

 

 

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Securing Your Education Funding as You Build Wealth

 

Learn how you can fund your children’s (or your own) education so that you can enjoy life in a more bountiful manner…

 

In the current economy, educational costs continue to rise, and for those who fail to plan appropriately it comes as a total surprise.   Therefore, when it comes to education planning, timing is critical, and it is very important that you put together a plan to meet or exceed your or your loved one’s educational costs as the rise in costs have continued to increase for several decades–and by all signals will continue to increase.

 

In this discussion TheWealthIncreaser.com will look at ways that you can ease your burden of funding educational costs that you may have in the coming years.  It is important to get out in front of your future educational costs as inflation and other economic occurrences in particular, can make affordability difficult if not impossible without proper planning.

 

In the paragraphs below you will learn three steps that you can take to help lighten your educational costs in your future if you are now at a point where you desire to address your or your loved one’s future educational costs in a manner that is more favorable to your–and your households successful outcome.

 

1) Know your cash flow position now

When it comes to effective education planning, it is imperative that you take inventory of your current financial condition so that you can reach a starting point to determine which way you can or need to go–so that you can invest wisely and make your money grow.

 

You must know if you have discretionary income available on a monthly basis and at what amount!

 

Therefore, you must put together a formal outline of what you take in on a monthly basis and what you send out on a monthly basis so that you know what you have left over for educational planning investments and other goals that you may have.

 

2) Plan for the educational costs in as accurate a manner as possible

When planning for educational costs you want to plan in a way that you can avoid borrowing or using your current income while attending your or your child’s school of choice.

 

There are many educational funding vehicles that are available–and it is your responsibility to know what is available and how to best use those vehicles to drive toward your and/or your loved one’s educational costs in a manner that is the most favorable based on your cash flow position and future goals.

 

Whether you choose to use a 529 savings plan, pre-paid tuition plans, Coverdell savings plan, IRA savings plan or any other savings vehicle-you want to ensure that when they are all totaled–the higher education costs that you have been saving for will be funded appropriately (100% funding is the goal) so that you can avoid borrowing altogether or borrow at a lower level.

 

3) Make improvements and adjustments as necessary

When the political, regulatory, economic social, technological and legal environment changes during the time that you are saving for your educational costs–you want to make the best adjustments that you can along the way.

 

You want to review your educational returns on an annual basis to see if you are still on target toward meeting your educational funding goals.  It is important that you start your educational saving at the earliest time possible in your life stage–whenever possible (no pun intended) so that you give yourself a longer time horizon for investing and therefore increasing the odds that you will reach the educational number that allows you to not borrow at all–or borrow a much lower amount.

 

By reviewing your educational investment returns on at least an annual basis you can determine if you need to make additional contributions to reach your goals or scale back on your investments and invest those funds toward your retirement and/or other goals that you may have.

 

Finally, you want to encourage yourself, your loved ones, and all whom you come into contact with–to excel at the highest level possible in all areas of their life!

 

By doing so scholarships (academic and/or athletic) may be awarded that could allow you to spend less on higher education costs and divert those funds to other areas so that you could continue to increase your net worth as you build your wealth.

 

Conclusion

Now is the time to avoid student loan debt

When it comes to effective educational planning, you want to know your educational costs upfront as best you can, avoid borrowing or using other sources while you or your child pursue higher education–and have an expectation of successfully reaching your “educational number” by having a written plan of action and a highly focused approach toward reaching that “educational number” so that you avoid burdensome debt.

 

By looking at your finances at this time (you may need to get more income/cut expenses or do a combination of the two), making improvements when necessary and investing at a level that allows you to attain the growth that would be needed to fund your or your child’s educational number–you make funding your (or your loved one’s) education and avoiding burdensome debt a real possibility.

 

When inflation and other variables are put into the equation, you can continue your educational endeavors from a position of strength and not be bogged down financially in the future due to poor planning!

 

If you are forced to borrow due to ineffective planning or facing emergencies or adversity that was unforeseen–you want to borrow from a position of strength, therefore you want to have your credit profile in the best position possible based on your income and credit knowledge base.

 

If you now at this time or in your future need to borrow and you have or will get a private loan you may be able to lower your rate by refinancing or utilizing your effective credit management to find a credit card(s) that you can use to lower your interest rate or pay off or pay down your student loan at zero percent if you plan effectively and your outstanding debt is at an acceptable level that makes doing so financially feasible.

 

If you now at this time or in your future need to borrow and you have or will get a public loan (U.S. Department of Education Loan), you may be able to lower your rate by refinancing or utilizing your effective credit management to find a credit card(s) that you can use to lower your interest rate or pay off or pay down your student loan at zero percent if you plan effectively and your outstanding debt is at an acceptable level that makes doing so financially feasible.

 

Also, keep in mind that debt forgiveness on your public loan in the United States may possibly be forgiven (at some level) or you may have other options available than those who have a private loan, therefore you want to be cautious in refinancing, transferring or paying off student loan debt that is publicly financed.  As of December 26, 2021, Student Loan payments for U.S. Department of Education Loans have been paused yet again for 90 days, (undoubtedly due in part to inflation and the COVID-19 crisis) and borrower’s are not required to make payments until May of 2022–barring a further extension.

 

Always remember that “education and wealth building” involves more than just a formal education–you must think outside the box and find new, more engaging ways of learning–when and where it serves your and your family’s best interest.

 

All the best to your educational success as you give it your absolute best…

 

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Reducing Your Taxes & Wealth Building

 

Learn what you need to know (and do) to reduce your taxes and make your net worth grow…

 

In the current economy many consumers and taxpayers are trying to find ways to reduce or eliminate various taxes–when and where possible.

 

It is important that you have an understanding of what taxes may apply to you and your family (a comprehensive overview) so that you can know all areas of your taxes that may possibly need to be addressed in a more effective way.

 

Although taxes can be a broad and overwhelming concern for many, it can also be presented in a manner and style that can be readily understood and applied by you in a practical manner–and in a manner that could be more beneficial to you and your family at the various stages in your life.  In this discussion TheWealthIncreaser.com will focus on a number of tax concerns that many (those who earn $400,000 or less) face and could possibly be addressed from a more beneficial angle.

 

If you make over $400,000, that is a good problem (ok, it’s not really a problem) to have, just keep in mind that there may be other tax options available that can help you reduce your taxes in ways that may not be covered in this discussion.

 

When it comes to effective tax management, you don’t have to be a tax expert, however it is important that you know what areas of taxes that you need to address as well as areas where you can make improvements so that you can take the right action that can benefit you and your family for this tax year and throughout your lifetime.

 

Keep in mind that this discussion on taxes will be longer than most that you will encounter on the web, however your understanding of the content on this page can get you off to a solid understanding or enhance your current understanding of your taxes and help position you and your family for a lifetime of wealth building success.

 

Let’s take a look at areas of taxation that you may need to address now (or in the near future) and further explore ways that you can reduce your taxes in the coming years so that you can live a more bountiful life–and one without financial strife.

 

After-Tax Income versus Before Tax-Income

We start this discussion on reducing your taxes by presenting why you MUST understand the difference and importance of distinguishing between after-tax income and before tax-income so that you can truly build wealth more efficiently.

 

Your after-tax income is often used for daily living and to fund IRA ROTH accounts and IRA traditional accounts and other investment accounts that are outside of your retirement accounts.   In the case of a ROTH IRA, you would receive tax free distributions in the future (based on certain conditions) and in the case of a traditional IRA you could possibly deduct the contributions (up to a limit and based on certain conditions) when you file your federal taxes.

 

Your other after-tax income could be used for daily living and if you had discretionary income after the payment of your monthly bills, you could use that income to build wealth more efficiently.

 

Your before-tax income is often used for funding retirement accounts such as 401k, 403b, Thrift Savings Plans, health care accounts, health savings accounts, flexible spending accounts and the like–and those contributions have the effect of lowering your taxable income that would be stated on your w-2–thus lowering your overall taxes at the federal level and possibly state level as well.

 

Business Income & Deductions

If there is a connection between any income that you receive and your business if you had one, the income is business income.  A connection exists if it is clear that the payment of income would not have been made if you did not have the business.

 

The business income and deductions that follow are discussed from the vantage point of a schedule C, sole proprietor, and would be filed on your personal income taxes.

 

Other forms of business formation also exist and could be more beneficial to you from a tax, liability and financial point of view.  However, they are beyond the scope of this discussion on tax reduction strategies, but it is important that you know that they are available and may suit your needs better if you are–or desire to become a business owner.

 

By utilizing the schedule C, you qualify for the QBI pass-through credit where you can reduce your taxable income from the business by 20 percent, and if you have losses in your early years, you can use those losses to offset your personal income–thus reducing your personal taxes whether you have income or a loss on a qualified business!

 

Income from work that you perform on the side (in addition to your regular job) could be business income.

 

It includes amounts that you would receive that were properly shown on Forms 1099-MISC, including amounts reported as non-employee compensation in box 7 of the form, amounts received from customers or clients in the course of doing business and other income that was created as a result of the business.

 

Regardless of the amount of time you spend in a self-employed activity, you must file a tax return if your gross income is at least as much as the filing threshold for your filing status and age.

 

In addition, you must also file Form 1040 Schedule SE, Self-Employment Tax, if:

 

  • Net earnings from self-employment, excluding church employee income, were $400 or more; or

 

  • The taxpayer had church employee income of $108.28 or more.

 

Business expenses are the costs of operating your business. These expenses are costs that you don’t have to capitalize or include in the cost of goods sold but can deduct in the current year.

 

If you are involved in a partnership, S-corporation, or C-corporation, your income may also be taxable, however that is beyond the scope of this discussion on taxes.

 

Business Deductions

Your unadjusted basis immediately after acquisition (UBIA) of qualified property held by your trade or business is taken into account in determining the § 199A deduction (Qualified Business Income deduction).

 

Income earned as an employee or through a C Corporation, however, is ineligible for the deduction.

 

Furthermore, eligibility for the pass-through deduction authorized by the Tax Cuts and Jobs Act does “not” require that you itemize tax deductions.

 

However, the pass-through deduction is not available for Specified Service Trade or Business (SSTB ) if the taxpayer’s taxable income is equal to or greater than the applicable threshold amount plus $100,000 in the case of a taxpayer filing a joint tax return or the applicable threshold amount plus $50,000 for all other taxpayers.

 

In laymen’s term, if you are a SSTB and exceed a certain income level you cannot take the 20% income exclusion.

.

Home Office Deduction (you have 2 ways to calculate)

  1. Simplified method

 

When calculating the home-office deduction using the simplified method, the deduction is equal to the area of your home used for a qualified business use (not exceeding 300 square feet) multiplied by the prescribed rate.

 

The current prescribed rate is $5, but the Internal Revenue Service and the Treasury Department may update the prescribed rate at any time.  Therefore, the maximum deduction as of 2021 tax year would be 300 * $5 = $1,500.

 

If you elected to use the simplified method of determining your home-office deduction, neither depreciation nor any actual expenses other than those not related to use of the home, may be deducted.  If you had business expenses not related to the use of your home such as office expenses, computer purchases etcetera, they would continue to be deductible!

 

2.  Actual expense method

When using the actual expense method for figuring the home-office deduction, you or your tax professional must determine:

  • The nature of the expense, i.e., whether the expense is – A direct expense–An indirect expense, or–An unrelated expense; and

 

  • The percentage of the home used for business purposes.

 

Expenses that are deductible by all homeowners, whether or not the home is used for business purposes, include the following:

  • Real estate taxes, within prescribed limits

 

  • Deductible mortgage interest; and

 

  • Casualty losses from a federally declared disaster

 

If you qualify for the home-office deduction, these amounts should be multiplied by the percentage of your home used for business purposes to figure your total deduction for business use of the home.

 

The home-office deduction is not unlimited!

 

If you use the actual expense method for claiming a home-office deduction, the deduction of otherwise nondeductible expenses—expenses such as insurance, utilities and depreciation allocable to the business—is limited to the taxpayer’s gross income from the business use of the home minus the sum of the following:

 

1. The business portion of expenses that you could deduct even if you did not use the home for business purposes.

 

Those expenses include eligible mortgage interest, real estate taxes (not exceeding prescribed limits), and net qualified disaster losses allowable as itemized deductions on Schedule A (Form 1040); and

 

2. The business expenses that relate to the business activity carried on in the home but not to the home itself.

 

Those expenses include the costs of business telephone, supplies, and equipment depreciation.   If you are a self-employed taxpayer, you should not include the deductible one-half of self-employment tax in the business expenses that must be subtracted from gross income.

 

If you used the actual expense method to figure your home-office deduction in a previous year and you had an expense carryover because the deduction was limited in that year, no portion of the carried-over amount may be deducted in any year in which you used the simplified method.

 

In such a case, you would continue to carry over the disallowed amount to the next year in which you used actual expenses to figure your home-office deduction.

 

If you have expenses such as mortgage interest, real estate taxes and casualty losses—such expenses must be treated as personal expenses when using the simplified method of determining the home-office deduction.

 

Business Meals

The Consolidated Appropriations Act, 2021 provides for temporarily increased deductions for business meals.

 

Pursuant to the Act, businesses are permitted a 100% tax deduction for business meals—up from the current 50%—if the food or beverages are provided by a restaurant.  The increased business meal deduction is available for 2021 and 2022.

 

179 Expense Deduction

The dollar limitation on the value of property that may be expensed (written off or deducted in the current tax year) in the year in which it is placed in service is $1,050,000 for the 2021 tax year.

 

  • The phaseout threshold for your ability to expense eligible property is $2,620,000 (2021).

 

The definition of Code Section 179 property is “expanded” to include – Depreciable tangible personal property used principally to furnish lodging, such as:

 

  • Furniture

 

  • Appliances

 

  • Other equipment for use in the living quarters

 

  • Certain improvements to nonresidential real property, including

 

  • Roofs

 

  • Heating, ventilation and air-conditioning property

 

  • Fire protection and alarm systems, and

 

  • Security systems

 

It is important to note that improvements will not qualify if they are attributable to other than the building’s interior. 

 

Therefore, improvements attributable to:

 

  • Enlarging the building,

 

  • The internal structural framework of the building; or

 

  • An escalator or elevator–do not qualify for immediate expensing

 

Depreciation:

The 100% expensing permitted under the TCJA declines by 20% each year for qualified property purchased and placed in service after December 31, 2022.  Accordingly, the bonus depreciation deduction is reduced.

 

The bonus depreciation under the TCJA ends after 2026!

 

The additional “bonus” first-year depreciation deduction does not apply to a passenger car placed in service by you if you:

 

• Did not use the passenger automobile during 2020 more than 50% for business purposes.;

 

Elected out of the additional first-year depreciation deduction for the class of property including passenger automobiles

 

• Acquired the passenger automobile used and the acquisition of it failed to meet the acquisition requirements of section 168(k)(2)(e)(ii); or

 

Acquired the passenger automobile before September 28, 2017, and placed it in service after 2019.

Luxury Passenger Car Depreciation Caps

 

The depreciation caps for a luxury passenger car placed in service in 2021 are:

 

  • $10,200 for the first year without bonus depreciation
  • $18,200 for the first year with bonus depreciation

 

  • $16,400 for the second year

 

  • $9,800 for the third year

 

  • $5,860 for the fourth through the sixth year

 

A “luxury vehicle” is a four-wheeled vehicle regardless the cost of the vehicle, used mostly on public roads, and which has an unloaded gross weight of no more than 6,000 pounds.  It includes vehicles not normally considered “luxury” vehicles on the basis of their price.

 

The term “listed property,” as used in the tax law, is personal property used in a business which can also be used for personal purposes but no longer includes computers, peripherals and cell phones.

 

Because listed property can have application for both personal and business uses, the IRS wants to ensure that you are using the property for business, therefore you must have sufficient evidence to prove the property’s use in the business and the amount/date of the expense.

 

Thus, property considered listed property is subject to increased documentation and scrutiny so keep good records to prove your deduction.

 

Under prior tax law, listed property included:

 

• Passenger automobiles

 

• Other property used as a means of transportation

 

• Any property generally used for purposes of entertainment, recreation or amusement and

 

• Computers and related peripheral equipment (taken off list)

 

Cancelled Debt

Cancelled debt is generally taxable and if you anticipate having your debt cancelled be sure you know the tax ramifications upfront.  Cancelled mortgage debt continues to receive favorable tax (excluded from taxation) treatment as of the 2021 tax year.  If, at this time cancelled mortgage debt applies to you, the stars in the sky are much brighter going into tax year 2022.

 

Capital Gains

If the transaction involves personal use property, in contrast to property held for investment, any gain realized by you upon the sale of the property is a capital gain; however, “any loss” that results from the sale of personal use property cannot be deducted!

 

Most assets owned by you for personal purposes, pleasure or investment are referred to as “capital assets,” and the sale or exchange of a capital asset may result in a capital gain or loss!

 

If the sale or trade of investment property results in a gain or loss, such gain or loss is generally a capital gain or loss!

 

Capital losses can be used to offset capital gains (up to $3,000 per year) and unused losses can be carried forward!

 

Capital gains and losses are reported on Schedule D, Capital Gains and Losses, attached to your IRS Form 1040 or Form 1040-NR.  However, before completing Schedule D, one or more IRS Forms 8949, Sales and Other Dispositions of Capital Assets, normally need to be completed and attached to the IRS Form 1040 or 1040-NR along with Schedule D.

 

If all Forms 1099-B received by you show that basis was reported to the IRS and no correction or adjustment is required, you may not need to file Form 8949; instead, the totals may be entered directly on Schedule D, lines 1a or 8a, as appropriate (discussed above).

 

You need to file as many Forms 8949 as required to report all transactions!

 

Schedule D provides a summary of the transactions reported on IRS Form 8949 in addition to certain other information. Thus, if an IRS Form 8949 is completed for you, each of the columns (d), (e) and (h) should be totaled and the totals for all Forms 8949 should be shown in Schedule D on the following lines:

 

  • 1a, 1b, 2 and 3 for short-term capital gains and losses; and

 

  • 8a, 8b, 9 and 10 for long-term capital gains and losses.

 

In addition, any distribution of net realized long-term capital gains from a mutual fund should be shown on line 13.  Distributions of net realized short-term capital gains are shown on Form 1099-DIV issued by the mutual fund as ordinary dividends.   Schedule D should then be completed. If the amount shown on Schedule D, line 16 is a loss, the smaller of the following should be entered on Form 1040 or Form 1040-NR,” Capital gain or (loss)”

 

Be aware of the 3.8% additional tax on capital gains if you are a high-income earner such as single filers who make more than $200,000 and married couples who make more than $250,000, as well as certain estates and trusts. 

 

The net investment income tax (NIIT) is a 3.8% tax on investment income such as capital gains, dividends, and rental property income. 

 

Child and Dependent Care Credit

You may be eligible for a dependent care credit if you pay to have care for your children or other qualifying dependent.

 

Deductions

Standard Deduction

Taxpayers who are ineligible to take the standard deduction are the following:

 

  • Taxpayers whose filing status is “married filing separately” and whose spouse itemizes deductions

 

  • Taxpayers who are filing a tax return for a short tax year due to a change in their annual accounting period; and

 

  • Taxpayers who were nonresident aliens or dual-status aliens during the year

 

Standard Deduction Amounts for 2021 are:

 

  • $25,100 for married couples whose filing status is “married filing jointly” and surviving spouses;

 

  • $12,550 for singles and married couples whose filing status is “married filing separately”; and

 

  • $18,800 for taxpayers whose filing status is “head of household.”

 

A taxpayer who can be claimed as a dependent is generally limited to a smaller deduction, regardless of whether the individual is actually claimed as a dependent.    For 2021 returns, the standard deduction for a dependent is:

 

  • $1,100; or

 

  • The dependent’s earned income from work for the year plus $350 (but not more than the standard deduction amount, generally $12,550).

 

A taxpayer who can be claimed as a dependent is generally limited to a smaller standard deduction, regardless of whether the individual is actually claimed as a dependent.

 

The additional standard deduction for a blind taxpayer—a taxpayer whose vision is 20/200 or poorer with glasses/contact lenses or whose field of vision is 20 degrees or less—and for a taxpayer who is age 65 or older at the end of the year is:

 

  • $1,350 for married individuals; and

 

  • $1,700 for singles and heads of household.

 

For example, a 65-year-old single blind taxpayer would add $3,400 to his or her usual standard deduction: $1,700 for being age 65 plus $1,700 for being blind.  (Therefore, his or her standard deduction would normally be $15,950 ($12,550 + $3,400 = $15,950).

 

Standard deductions and other deductions have the effect of lowering your taxable income and thus increasing your tax refund or decreasing the amount of taxes that you owe, and the reduction amount is dependent on your tax bracket.

 

A tax credit–on the other hand–if you are eligible is dollar for dollar and is generally more valuable than a deduction.

 

ITEMIZED DEDUCTIONS

7.5% AGI limit for medical expense deductions

 

The medical deduction limit is 7.5% for 2021 tax year.  Be sure to keep adequate records for your medical premiums, out of pocket medical costs including hearing, eye and dental services as well as your mileage to and from medical providers if you plan to itemize when you file your taxes.

 

You are limited in the deduction amount meaning if your AGI is $100,000 for the year–you deduct amounts over $7,500 that you paid toward medical expenses.

 

Charitable Deduction

Charitable contributions made by you with payroll deductions, checks, cash and donations of goods and clothing are all deductible.

 

It is not unusual to forget about or overlook your charitable contributions, therefore from this day forward you want to establish a reliable record keeping system–as your charitable contributions can often add up over the course of a year and provide additional deductions so that you can reduce your taxes.

 

You generally need to itemize to claim a deduction, and since the 2017 tax reform nearly doubled the standard deduction, many people who once itemized, now choose not to itemize.

 

However, the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, allows taxpayers who don’t itemize to deduct cash donations of up to $300 ($600 if MFJ) made before Dec. 31, 2020.

 

The maximum amount of charitable contribution a taxpayer is permitted to deduct in any year may be limited by the taxpayer’s contribution base—in most cases the contribution base is an amount equal to the taxpayer’s adjusted gross income— and further limited depending on the type of property contributed.

 

However, any charitable contribution exceeding the applicable tax deduction limit may be carried over to the following five years.

 

The TCJA increased the limit on your deductible charitable cash contributions from 50% under prior tax law to 60% of the taxpayer’s contribution base for qualified organizations to which the 50% limit normally applies.

 

The increased limitation for cash contributions applies to contributions made in any taxable year beginning after December 31, 2017 and before January 1, 2026. The CARES Act temporarily suspends some of the limitations imposed by the Internal Revenue Code with respect to certain individual taxpayer cash contributions.

 

In general, qualified contributions are disregarded in applying IRC section 170 as it pertains to percentage limits  and carryovers of excess contributions.

 

The TCJA eliminates the exception to a contemporaneous written acknowledgment of a donor’s gift, effective for gifts made after December 31, 2016. (Note: The effective date of the elimination of the exception to a contemporaneous written acknowledgment is retroactive to gifts made on and after 2016).

 

Record Keeping and Documentation of Deductions

The IRS advises that the length of time that you should keep a document, including the documentation of deductions, depends on the action, expense, or event which the document records.

 

As a general rule, you must keep records that support an item of income, deduction or credit shown on your tax return until the period of limitations for that tax return runs out–roughly 3 years from filing or three years from the tax year filing deadline excluding extensions.

 

The period of limitations is the period of time in which you can amend your tax return in order to claim a credit or refund, or the time that the IRS can assess additional tax.

 

As mentioned earlier, as a result of the CARES Act (and extended by The Taxpayerypayer Relief Act of 2021) provision, a non-itemizing taxpayer can now take an above the-line deduction of up to $300 ($600 for married couples) for charitable cash contributions made in taxable years beginning in 2020.

 

A deduction that is “above the line” reduces AGI and can help lower your taxes and can be taken even if you don’t itemize deductions.

 

State and Local Tax Deduction

State and local taxes paid by an itemizing taxpayer have generally been a deductible item on the taxpayer’s federal income tax return without limit. The TCJA limits the federal income tax deduction for state and local taxes to $10,000 ($5,000 for married taxpayers filing separately) beginning in 2018.

 

Property taxes and sales taxes cannot exceed $10,000 when itemizing on schedule A.

 

Home Mortgage Interest, Home Equity Loans and Indebtedness Refinancing

The tax treatment of refinanced existing mortgage debt is treated, for purposes of the applicable dollar limits, as incurred on the date the original indebtedness was incurred, but only to the extent the amount of the indebtedness resulting from the refinancing does not exceed the amount of the refinanced indebtedness.

 

Mortgage Interest deduction limit reduced from 1 million to $750,000 as a result of the Tax Cuts & Jobs Act of 2017.

 

Sales and real estate tax deduction capped at $10,000.

 

Itemized deduction for mortgage insurance premiums and exclusion from income” of qualified principal residence when debt cancellation, occurs continues for the 2021 tax year.

 

Mortgage Insurance Premiums Deduction when mortgage lenders require the additional security of having its loan secured not only by the home but also by an insurer–is still on the IRS books.

 

Qualified mortgage insurance premiums that are tax-deductible—include mortgage insurance provided by:

 

• The Department of Veterans Affairs (commonly known as a “funding fee” or “VA funding fee”)

 

• The Federal Housing Administration (commonly known as “Mortgage Insurance Premium or MIP“)

 

  • The Rural Housing Service (or successor organizations); and

 

  • Private Mortgage Insurance (commonly known as PMI)

 

Except in the case of mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service, qualified mortgage insurance premiums may be prepaid by the taxpayer.

 

In such a case, premiums allocable to periods after the close of the tax year must be allocated over the shorter of:

 

  • The stated term of the mortgage; or

 

  •  84 months beginning with the month the insurance was obtained. Premiums are treated as paid in the year to which they are allocated. If the mortgage is satisfied before its term, no deduction is allowed for the unamortized prepaid mortgage insurance premiums.

 

Mortgage Cancellation Debt

The Consolidated Appropriations Act, 2021 also extended the exclusion from income of certain qualified principal residence indebtedness. Under the five-year tax extender, a taxpayer may exclude income arising from discharge of qualified principal residence indebtedness provided one of the following applies:

 

  • The debt was discharged before 2026; or

 

  • The debt was discharged after 2020, and the discharge is subject to an arrangement entered into and evidenced in writing before January 1, 2026. Properly reporting qualified principal residence indebtedness discharge requires preparation of IRS Form 982 and its attachment to the taxpayer’s federal income tax return.

 

Points paid in association with a home mortgage may also be eligible for deduction or amortization over the life of the mortgage loan.

 

Unreimbursed Employee Expenses

Unreimbursed Employee Expenses are no longer deductible as part of reforms under the Tax Cuts & Jobs Act of 2017.

 

Dependent Credit

If you have dependent care expenses, you may be eligible for a credit.  The amount of your credit is based on the type and age of the dependent and is based on the expenses you pay and your earned income for the year.

 

Depreciation

Unless the taxpayer elects to use ADS or is required by law to use ADS, a taxpayer must use GDS.

 

The straight-line method of depreciation is used for a taxpayer electing to use ADS, and such a taxpayer must make the election in the first-year residential rental property and nonresidential real property is placed in service; once made, the taxpayer cannot revoke the election.

 

If you have business and/or rental property, it is important that you know that you can use depreciation to help lower or reduce your tax burden.  In many cases it is important that you bifurcate your depreciation in order to maximize your deduction and tax savings.

 

Earned Income Credit or EIC

You may be eligible for the Earned Income Credit of varying amounts based on your earned income and number of dependents.

 

Education Deductions/Credits

529

ABLE

Coverdell

The education savings bond program

IRA when used for educational purposes may avoid the early withdrawal penalty

 

Education Credits

American Opportunity Credit or AOC–first 4 years of higher education—max $2,500

Lifetime Learning Credit or LLC–max $2,000

Tuition & Fees–Tuition and Fees Deduction Eliminated

 

Educational credits for those who qualify can help lower the amount of taxes that are owed or increase the amount of your refund.

 

Student loan interest that you pay may also be deductible on your tax return!

 

Energy & Other Credits

The Credit for Nonbusiness Energy Property was Extended

If you replaced windows and doors in 2021 or had energy improvements to your HVAC, water heater and possibly other energy related purchases you may be eligible for a tax credit, therefore be sure to inform your tax professional at tax time and organize your receipts of purchase at this time if you did repairs or improvements to your home. 

 

Estimated Tax Payments

Estimated tax payments are generally due in four installments.

 

Although an installment may be due on the following business day if the normal due date falls on a weekend or legal holiday, the estimated tax payment due dates are April 15, June 15, September 15 and January 15.

 

You would generally be required to pay estimated taxes if you had a qualified business, you were an employee and you did not have adequate withholding, you are an employee and you have a sideline business and you file as self-employed, and you expect or have income after all of your deductions from your business.

 

Estimated income taxes may be paid using any of the following methods:

 

  • Crediting an over-payment of tax on the previous year’s tax return to the current year’s estimated tax

 

  • Payment of the estimated tax by direct transfer from the taxpayer’s bank account using the Electronic Federal Tax Payment System (EFTPS), making payment by use of a credit or debit card, by using a pay-by-phone system, or via the Internet; or

 

  • Remitting a payment using a check or money order along with a payment voucher Form 1040-ES

 

Individuals wishing to take advantage of the cash payment option should visit the IRS.gov payments page, select the cash option in the “Other Ways You Can Pay” section of the web page and follow the instructions:

 

  • Taxpayers will receive an email from ACI Payments, Inc. (acipayonline.com) confirming their information

 

  • Once the IRS has verified the information, the Cash Processing Company sends the taxpayer an email with a link to the payment code and instructions

 

  • Individuals may print the payment code provided or send it to their smart phone

 

  • The retail store listed in the Cash Processing Company’s email provides a receipt after accepting the cash. The receipt is confirmation of the taxpayer’s payment and should be kept for the taxpayer’s records. The payment usually posts to the taxpayer’s account within two business days

 

  • Payment frequency and amount limits and fees apply

 

Taxpayers who are due a tax refund also have several choices with respect to its receipt!

 

The options available to a taxpayer owed a refund include that the refund:

 

  • Be applied to the taxpayer’s estimated tax for the following year

 

  • Be deposited to a prepaid debit card

 

  • Be deposited into two or three accounts at a bank or other financial institution (such as a mutual fund, brokerage firm, or credit union) in the United States; (See Limit on Direct Deposit Refunds below)

 

  • Be deposited directly to a traditional, Roth or SEP IRA; or

 

  • Be sent to him or her in a check. If the taxpayer is due an income tax refund but has not paid certain amounts owed, the refund may be used to pay any past-due amounts. Thus, a tax refund may be used to pay:

 

  • Past-due federal income taxes

 

  • Federal debts, such as student loans

 

  • State income taxes

 

  • Child and spousal support payments; and

 

  • State unemployment compensation debt

 

Taxpayer’s who are owed a refund can even have the refund credited to a TreasuryDirect® online account in order to buy U.S. Treasury marketable securities or savings bonds!

 

Recovery rebate payments will not be reduced to pay past-due taxes under a payment agreement with the IRS or to pay other state or federal debts.  In general, creditors cannot get access to the money for reduction or offset and direct payment to themselves.

 

The CARES Act only allows offsets to cover past due child support payment!

 

Tax return preparers are prohibited from negotiating client refund checks or accepting such payments in an account owned or controlled by the preparer.

 

No direct deposits of tax refunds should be requested to an account not in the taxpayer’s name.

 

For taxpayers who use the calendar year, the due date for filing the federal income tax return is generally April 15th of the year following the end of the calendar year for which the tax return is being filed, although 2021 tax return due date is delayed until Monday, April 18, 2022, because of Good Friday falling on April 15th.

 

The federal income tax returns for taxpayers who use a fiscal year, i.e., a year ending on the last day of any month except December, are due by the 15th day of the fourth month after the close of the taxpayer’s fiscal year.

 

For example, the federal income tax return of a taxpayer whose fiscal year ends on June 30th is due on the following October 15th.  A taxpayer’s failure to file a timely income tax return may subject the taxpayer to a failure-to-file penalty and interest.

 

The federal income tax return of a decedent, i.e., a taxpayer who died during the year, must be filed by the decedent’s representative.  The return is due by the 15th day of the fourth month after the end of the decedent’s normal tax year.

 

Even if you obtain an extension of the time to file, any tax due must generally be paid by the regular due date.

 

Failure to pay any tax due by the regular date will result in the imposition of interest and possible penalties on the unpaid amount from the date due until the date actually paid.

 

A taxpayer who is unable to file a federal income tax return by the normal due date may be able to get an automatic six-month extension of the time to file. The automatic extension may be obtained by:

 

• Using IRS e-file; or

 

• Filing a paper form.

 

The AMTI exemption amount is reduced (but not below zero) by 25 percent of the amount by which the taxpayer’s alternative minimum taxable income exceeds:

 

• $1,047,200 for taxpayers whose filing status is “married filing jointly” or “qualifying widow(er)”

• $523,600 for taxpayers whose filing status is “single,” “head of household,” “married filing separately” and

• $85,650 for trusts and estates.

 

Health Savings Account

Health FSA’s enable workers to contribute before-tax amounts to an account that may then be accessed tax-free to pay various out-of-pocket health-related expenses. Although annual caps on the amount that can be contributed to a health FSA are generally imposed by employers—usually as a way to limit their risk of pre-funding—no limit was previously imposed by the federal government.

 

That changed for years 2013 and later and the limit for 2021 is $2,750.

 

Although the tax penalty for a taxpayer’s failure to maintain health coverage has been reduced to zero, individuals who meet specified income, coverage, and other criteria are eligible to receive a refundable tax credit to enable them to purchase a qualified health plan.

 

Since the tax credit is a refundable tax credit, the taxpayer may receive the credit even though he or she has no income tax liability.

 

ARPA, § 9661, significantly expands the subsidies provided under the ACA in two ways:

 

1. By increasing the level of subsidy to those taxpayers who currently qualify for a subsidy; and

 

2. By including taxpayers who, solely because their income, would not qualify for a subsidy under the law prior to passage of ARPA.

 

Under ARPA, for tax years 2021 and 2022:

 

  • A taxpayer can claim a tax deduction for contributions made to the HSA even if he or she does not itemize deductions.

 

  • Contributions made to the HSA by the taxpayer’s employer, including contributions made through a cafeteria plan, may be excluded from the taxpayer’s gross income.

 

  • The earnings on amounts contributed to the HSA are tax deferred.

 

  • Distributions from an HSA to pay qualified medical expenses are entirely tax free.

 

  • A taxpayer’s contributions and earnings, if any, remain in the HSA from year to year until the taxpayer uses them.

 

  • An HSA is non-forfeitable and portable, so that it remains with the account holder if he or she changes employers or leaves the work force; and

 

  • Distributions from an HSA for other than qualified medical expenses—if taken after the account holder reaches age 65, becomes disabled, or dies—are taxable but not subject to tax penalties. 1.1.9.2 HSA Eligibility

 

An individual eligible to establish an HSA is one who meets the following requirements.

 

The individual:

 

  • Is covered under a high deductible health plan (HDHP) on the first day of the month

 

  • Has no other health coverage except for certain specified coverages

 

  • Is not enrolled in Medicare; and

 

  • Cannot be claimed as a dependent on another person’s tax return for the year.

 

If a taxpayer meets these eligibility requirements, he or she is an HSA-eligible individual even if the taxpayer’s spouse has non-HDHP coverage, provided the spouse’s coverage does not cover the taxpayer.

 

High Deductible Health Plan Requirement

For 2021, the IRS defines a high deductible health plan as any plan with a “deductible” of at least $1,400 for an individual or $2,800 for a family.

 

An HDHP’s total yearly out-of-pocket expenses (including deductibles, co-payments, and co-insurance) can’t be more than $7,000 for an individual or $14,000 for a family.

 

A taxpayer who is an HSA account holder must file Form 8889, Health Savings Accounts (HSAs), and attach it to Form 1040 or Form 1040-NR if: 26

 

  • The taxpayer or employer made contributions to the taxpayer’s HSA during the year

 

  • The taxpayer files a joint return and his or her spouse or spouse’s employer made contributions to the spouse’s HSA during the year; or

 

  • The taxpayer (or spouse, if filing jointly) acquired an interest in an HSA because of the death of the account holder

 

When HSA contributions not exceeding the maximum permitted are made by an individual account holder, they are deducted by the individual from his or her income for purposes of determining the account holder’s adjusted gross income.

 

Hobby Income

A hobby, for tax purposes, is an activity not engaged in for profit or income.  Any income from a hobby is reported on Form 1040 as “Other income.”  However, because of the loss of the miscellaneous itemized deductions as a result of passage of the Tax Cuts and Jobs Act, hobby expenses not exceeding hobby income—at least through 2025—are no longer deductible.

 

Long Term Care

Qualified long term care premiums and benefits;

 

Long Term Care premiums may be tax deductible and the tax-deductibility of qualified long-term care insurance premiums can be itemized and deducted on schedule A.  For individuals deemed to be chronically-ill, there are tax-exemption of long-term care insurance benefits within certain limits.

 

Those limits generally change yearly.

 

In order for long term care benefits to receive favorable tax treatment, the individual on whose behalf they are paid must meet the “chronically-ill” definition included in HIPAA.

 

A chronically-ill individual is defined as an insured individual who has been certified by a licensed health care practitioner within the previous 12 months as an individual who:

 

  • Is unable, for at least 90 days, to perform at least two activities of daily living (ADLs) without substantial assistance from another individual, due to loss of functional capacity; or

 

  • Requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment.

 

Tax-qualified long term care insurance policy premiums are included in the definition of “medical care” and are, therefore, eligible for income tax deduction within certain limits!

 

In short, tax-qualified long term care insurance policy premiums are 100% tax-deductible for self-employed taxpayers to the extent they don’t exceed the dollar limits or the self-employed individual’s net earnings.

 

The amount of any long-term care insurance premium that may be included in medical care expenses is limited by certain dollar maximums that are indexed for inflation and which change as the insured’s attained age changes.

 

There are dollar limitations applicable to tax-qualified long term care premiums in 2020 and 2021!

 

So, if the benefit does not exceed the per diem limitation, all benefits are tax-free even though the benefits exceed the actual costs incurred.

 

Similarly, if the benefit does not exceed the actual costs incurred, all benefits are tax free even though the benefits exceed the per diem limit.

 

Luxury Tax

In 1991, Congress enacted a 10% federal luxury tax on the first sales price of a number of items that sold for more than a specific amount:

  • Furs and jewelry that sold for $10,000 or more
  • Vehicles that sold for $30,000 or more
  • Boats that cost more than $100,000
  • Aircraft with price tags of more than $250,000

The Omnibus Budget Reconciliation Act repealed this tax in 1993, and it was phased out by 2003.

 

The federal government doesn’t collect a sales tax, only states do, and they would normally impose a luxury tax at this time (tax year 2021), therefore if you plan on making a major purchase of a luxury nature–check with your state taxing authority in advance if you have concerns about paying additional taxes.

 

A luxury tax is a sales or transfer tax imposed only on specific goods.  The products taxed are considered non-essential or are affordable only to the wealthiest consumers. The mansion tax and sin taxes both fall into the category of luxury taxes.

 

The luxury tax may be charged as a percentage of the purchase price, or as a percentage of the amount above a specified level. For example, a luxury tax might be imposed on real estate transactions above $1 million, or car purchases over $70,000.

 

Luxury taxes generally fall into two categories:

 

  • So-called “sin taxes” are imposed on products like cigarettes and liquor and are paid by every buyer, regardless of income. Anyone who objects can just stop buying it. In imposing the tax, the government is both discouraging the use of these products and raising revenue from those who keep buying them.

 

  • Taxes on items that can be purchased only by the wealthiest consumers, who presumably can afford to pay the premium.

 

Luxury taxes generally do not apply to the entire price of the vehicle, rather the tax typically only applies to the difference between the total cost of the car and the tax threshold amount.

 

RECOVERY REBATE CREDIT

If you are one who received the recovery rebate credit, you probably want to know the tax implications of receiving the recovery rebates and advance credit payments that began in July of 2021 to eligible recipients.

 

Recovery rebates, authorized by the CARES Act and Taxpayer Relief Act of 2020 (TRA 2020), were issued in 2020.   And, in 2021, recovery rebates were authorized under the American Rescue Plan Act (ARPA).

 

As a tax credit, the recovery rebate is nontaxable and is not counted as income with respect to determining a taxpayer’s eligibility for income-based programs such as Medicaid or Health insurance Marketplace subsidies.

 

Recovery Rebates – The American Rescue Plan Act (ARPA) provides tax-free, refundable, recovery rebate tax credits in 2021 of up to $1,400 for each eligible individual ($2,800 for married taxpayers filing jointly), plus $1,400 for each dependent, as defined in IRC § 152, including qualifying relatives and college students.

 

Retirement Account Contributions

Retirement account contributions are a top tax-reduction tool, as they serve two major purposes.

 

Your contributions to traditional 401(k), 403b, Thrift Savings Plan and IRA accounts (among others) can be deducted from your taxable income and, as a result, reduce the amount of federal tax you owe.

 

These funds also grow tax-free until retirement.  If you start early, saving money in these accounts can help secure your retirement!

 

Even if you haven’t executed your plan by the end of the year, you may still have time as you can set up and contribute to your IRA up until April 18, 2022 and still deduct on your 2021 taxes if you are eligible..

 

The retirement savings contribution tax credit—typically referred to as the saver’s credit—is a nonrefundable credit that is limited to the “applicable percentage” of your eligible retirement savings contributions.

 

The credit is determined by your adjusted gross income and tax filing status.

 

The saver’s credit cannot exceed $1,000 per taxpayer!

 

The retirement savings contribution tax credit, if any, for for those who are eligible does not affect the tax treatment to which the contribution would normally be subject.

 

For example, if your contribution to a traditional individual retirement account made you eligible for the credit, you would still normally be able to take a tax deduction for the IRA contribution.

 

In other words, retirement savings contributions made by you would not offset other tax advantages for which you are eligible!  Yes, if you qualify–you can DOUBLE-DIP–so to speak!

 

Despite the number of plans to which the taxpayer makes contributions and the amount of those contributions, the total saver’s credit will not exceed $1,000 per taxpayer for the year.

 

Standard Mileage Rate versus Actual Expense rate for Automobiles

The standard mileage rates enable a taxpayer using a vehicle for specified purposes to deduct vehicle expenses on a per-mile basis rather than deducting actual car expenses that are incurred during the year.

 

The rates vary, depending on the purpose of the transportation.

 

Accordingly, the standard mileage rates differ from one another depending on whether the vehicle is used for:

 

  • Business purposes

 

  • Charitable purposes; or

 

  • Obtaining medical care or moving

 

Rather than using the optional standard mileage rates, however, you may choose to take a deduction based on the actual costs of using the vehicle.

 

The 2021 alternative standard mileage rate applicable to eligible business use of a vehicle is 56¢ per mile, down from 57.5¢ in 2020.

 

In order for such expenses to be deductible, they must have been: 

 

  • Paid or incurred during the tax year

 

  • Use for the purpose of carrying on the taxpayer’s trade or business; and

 

  • Ordinary and necessary

 

  • Traveling between workplaces

 

  • To meet with a business customer

 

  • To attend a business meeting located away from the taxpayer’s regular workplace; or

 

  • From the taxpayer’s home to a temporary place of work

 

In addition to using the standard mileage rate, you may also deduct any business-related parking fees and tolls paid while engaging in deductible business travel.

 

However, parking fees paid by you to park your vehicle at the usual place of business are considered commuting expenses and are not deductible.

 

The standard mileage rate applicable to your use of a personal vehicle for charitable purposes is based on statute and is 14¢ per mile. You may also deduct parking fees and tolls regardless of whether the actual expenses or standard mileage rate is used.

 

In addition, you may also deduct medical and dental expenses to the extent they exceed the applicable percentage of your adjusted gross income (AGI).

 

The vehicle expenses may be included as medical and dental expenses are the amounts paid for transportation by you to obtain medical care for yourself, your spouse, or a dependent.  You may also include as medical and dental expenses those transportation costs incurred!

 

If you use a personal vehicle for such medical reasons you are permitted to include the out-of-pocket vehicle expenses incurred—the expenses for gas and oil, for example—or deduct medical travel expenses at the standard medical mileage rate.

 

For 2021, the standard medical mileage rate is 16¢ per mile, down 1¢ from 2020.

 

You may also deduct any parking fees or tolls, regardless of whether actual expense or the standard mileage rate is used!

 

Synopsis 2021 Mileage Rates:

 

Business–56¢ per mile

Charitable–14¢ per mile

Medical & Moving–16¢ per mile

 

Taxable Compensation

In addition to wages and salaries, there are other types of compensation received by a taxpayer that may or may not be taxable and they include the following:

 

  • Advance commissions and other earnings

 

  • Allowances and reimbursements

 

  • Back pay awards

 

  • Bonuses and awards

 

  • Differential wage payments

 

  • Government cost-of-living allowances

 

  • Non-qualified deferred compensation plans

 

  • Notes received for services

 

  • Severance pay

 

  • Sick pay

 

  • Social Security and Medicare taxes paid by the taxpayer’s employer; and

 

  • Stock appreciation rights

 

Retirement income includes income derived from a range of sources, both private and public.

 

Although some retirement income is excludable, in whole or part, from income, most retirement income is taxable as ordinary income in the year received.

 

It is important that you realize that distributions received from the following are often taxable in whole or part at the federal and state level, however there may be credits or exclusions that are available:

 

  • Social Security

 

  • Pensions

 

  • Annuities; and

 

  • 401(k) plans

 

The U.S. tax code provides for a substantial number of tax credits, generally designed to meet various societal objectives.

 

Tax Credits are categorized as:

 

  • Refundable tax credits that are treated as having been withheld from the taxpayer’s income and payable to the taxpayer regardless of income tax liability; and

 

  • Nonrefundable tax credits that are payable to the taxpayer only to the extent of any income tax liability.

 

Among the most frequently claimed tax credits are:

 

  • 1. Child tax credit
  • 2. Credit for other dependents
  • 3. Child and dependent care tax credit
  • 4. Education tax credit
  • 5. Earned income tax credit.

 

Lifetime Learning Credit–unlimited number of years—max $2,000

Virtual Currency–is now taxed

If you have financial interests abroad with financial accounts–those interests must be disclosed.  Virtual currency must  also be reported as it too is now fair game for taxation by the IRS.

 

AMT–The Alternative Minimum Tax is still in effect!

 

Keep in mind that a number of other Affordable Care Act provisions, including the refundable tax credits to assist taxpayers in purchasing qualified health plans, small business health insurance premium tax credit, and large employer shared responsibility requirement went into effect in 2021.

 

An in-depth discussion of these topics are beyond the scope of this discussion, however it is important that you realize that they exist.

 

W-4 Adjustment

Information previously provided by the taxpayer to his or her employer on Form W-4 may change during the year.

 

Although you can submit a new W-4 at any time, you are required to provide the employer with a new Form W-4 within 10 days following any change that would affect withholding.

 

If events during the current year will “decrease” the number of withholding allowances for the following year, you must provide the employer with a new Form W-4 by December 1 of the current year.  If the event affecting the number of allowances occurs in December of the current year, a new Form W-4 must be submitted within 10 days following the event.

 

W-2–Issued by your employer and used to file your federal and state and possibly local taxes in the U.S.

W-9–Form that requests taxpayer information for tax reporting purposes–normally social security number or Tax ID number

1099 series–number of uses but most common is for non-employee compensation and retirement income reporting

1096–For those who issue 1099-MISC non-employee compensation the total amount paid on 1099’s that are issued to all non-employees are grouped on this form

 

Mandatory withholding when you win the lottery, take early retirement withdrawals and penalties for early withdrawal must be a part of your consciousness.  Borrowing against your 401k could also have tax and financial consequences as well.

 

There may also be mandatory withdrawals on certain retirement accounts once you reach age 72.

As a taxpayer you can use the free estimator, found at www.irs.gov/W4App, if you:

 

  • Expect to work only part of the year

 

  • Have dividend or capital gain income, or are subject to additional taxes, such as Additional Medicare Tax

 

  • Have self-employment income; or

 

  • Prefer the most accurate withholding for multiple job situations

 

You may claim an “exemption from income tax withholding” if both the following situations apply:

 

1. You had a right to a refund of all federal income tax withheld because of having no tax liability in the current year; and

 

2. You expect a refund of all federal income tax withheld in the next year because of having no income tax liability.

 

The IRS can impose interest and penalties against you for being under withheld, and you could also be subject to a penalty of $500 if both the following apply:

 

  • You made statements or claimed withholding allowances on Form W-4 that reduced the amount of tax withheld; and

 

  • You had no reasonable basis for those statements or allowances at the time Form W-4 was prepared.

 

If you don’t pay enough tax, either through withholding or by paying estimated tax (or a combination of both), he or she may be subject to a penalty.

 

A criminal penalty may also apply for willfully supplying false or fraudulent information on the form or for willfully failing to supply information that would increase the amount withheld.

 

The penalty upon conviction can be a fine of up to $1,000 or imprisonment for up to one year, or both.

 

Conclusion

 

It is important that you use your best judgment and the use of professionals where appropriate to make the best possible moves as it relates to reducing or eliminating the various taxes that have been discussed above.

 

Successfully navigating the tax maize and building wealth is not as difficult as you think if you have the right view, and you are willing to do what you need to do–and you work alongside your tax professional in a helpful manner.

 

The time to learn about taxes and how they affect you and your family is at the earliest time possible in your “life stage” so that you can make the right or best decisions in a proactive manner!

 

Key Takeaways on Taxes

 

Below you will find a number of topics that you can run through your mind at this time to find areas of taxation that you can address at this time or in your future to help reduce or eliminate your tax liability.  They have all been presented above, however they are presented again so that you can have a quick reference point on what you can do to reduce your taxes.

 

By reviewing the following topics in a careful, critical and accurate manner, you may be able to improve your tax and wealth building position immediately–or at a later date!

 

Open a Health Savings Account

If you have an eligible high-deductible medical plan, contribute to a health savings account.

 

Contributions to these accounts offer an immediate tax deduction, grow tax-deferred and can be withdrawn tax-free for qualified medical expenses.  Any balance left at the end of the year can roll over indefinitely, similar to the assets in a retirement account.

 

Use Your Side Job to Claim Business Deductions

Self-employed individuals (full time or part time) are eligible for scores of tax deductions. That means your freelance projects or side gig as a ride-share driver, starving artist and other areas of interest to you–could land you considerable tax savings if you approach the activity from a business perspective.

 

A few of the business deductions available include business-related vehicle mileage, shipping, advertising, website fees, percentage of home internet charges used for business, professional publications, dues, memberships, business-related travel, office supplies, phone, computer and basically any reasonable expenses incurred to run your business.

 

If you pay for your own health, dental or long-term care insurance, those premiums may be deductible too.

Just be sure to maintain proper records, as many people lose their deductions due to their lack of preparedness by not keeping proper records.

 

Tax deductions are often disallowed because taxpayers don’t keep the right documentation, so it is important that you keep receipts, mileage logs or other records that you can produce in the event of an audit.

Claim a Home Office Deduction

If you work for yourself or have a side business, don’t be afraid to take the home office deduction.

 

To qualify for the deduction, the space must be used regularly and exclusively for business purposes.

 

For instance, if an extra bedroom is used exclusively as a home office and it constitutes one-fifth of your home or apartment’s living space, you can deduct one-fifth of mortgage/rent payment and utility fees.  Keep in mind there may be recapture provisions that could cause you to owe taxes at the time you sell your home in the future.

Write Off Business Travel Expenses, Even if You are on Vacation

Did you know that you can possibly combine a vacation with a business trip, and you could reduce vacation costs by deducting the percent of the expenses spent for business purposes?

 

This could include airfare and part of your hotel bill, proportionate to the time spent on business activities. Talk to your tax professional about how you can make this calculation according to IRS guidelines.

Don’t Forget to Deduct Half of Your Self-Employment Taxes

The IRS assesses a 15.3% Federal Insurance Contributions Act tax (FICA) on all earnings to pay for the Social Security and Medicare programs.

 

While employers split the cost with their workers, self-employed individuals are responsible for paying the entire amount themselves. To compensate for the extra expense, the government will let you deduct 50% of the amount paid from your income taxes.  This is an above the line deduction, therefore you don’t have to itemize to claim this tax deduction.

 

 

Get a Credit for Higher Education

The government offers valuable tax credits to offset the cost of higher education. The American Opportunity Tax Credit (AOTC) can be claimed for the first four years of college and provides a maximum credit of $2,500 per student per year.

 

Since it’s a credit, that amount is deducted from whatever tax you might owe the government.  If it exceeds the amount of taxes you owe, up to $1,000 may be refundable to you.

Meanwhile, the Lifetime Learning Credit is great for adults boosting their education and training and those pursuing post graduate study.  This credit is worth up to $2,000 per year and helps pay for college and educational expenses that improve your job skills.

 

Utilize Rental Property for Tax Benefit

You can use rental property to shelter your taxes and help to possibly reduce your taxes if done properly.  By properly deducting the various expenses related to the rental you can in many cases reduce your tax bill on an annual basis for years.

 

Keep in mind there may be recapture provisions that could cause you to owe taxes at the time you sell your rental property in the future.

 

See if You Qualify for an Earned Income Tax Credit or Saver’s Credit

Even if you aren’t required to pay federal income taxes, you could get a refund from the government.

 

The earned income tax credit (EITC) is a refundable tax credit of up to $6,660 for tax year 2020 and is usually adjusted annually.

 

The EITC is calculated with a formula that takes into consideration income and family size and the income limits for the credit range from $15,820 for single taxpayers with no children to $56,844 for married couples filing jointly who have three or more children.

 

If you contribute toward your retirement savings and meet income eligibility you may qualify for a “savers credit” that is based on your income threshold and the amount you contribute toward your retirement savings.

Itemize State Sales Tax

Taxpayers who itemize their deductions can include either their state income tax or state sales tax on their Schedule A form.

 

The state sales tax break is a great option if you live in a state without income taxes!

 

You can use a table provided by the IRS to easily claim the sales tax deduction, however if you had a major purchase during the year such as a car, boat or Recreational Vehicle–be sure to add that sales tax.

 

The federal tax deduction for state and local taxes is capped at $10,000 from all sources as a result of the Tax Cuts & Jobs Act of 2017.

 

Deduct Private Mortgage Insurance Premiums

If you have less than 20% equity in your home, chances are you pay private mortgage insurance  or MIP if you have an FHA loan. This coverage is required by lenders as a way to protect them in the event you stop making payments.

 

Until 2017, taxpayers could deduct the cost of private mortgage insurance on their itemized deductions.

 

While the Tax Cuts and Jobs Act eliminated the deduction, it was reinstated at the end of 2019 and is available for the 2020 and 2021 tax years.  It was made retroactive for 2018 as well. Therefore, you could amend your 2018 tax return to claim PMI–if it made good financial sense to do so.

 

Whenever you amend an older return, you generally put yourself at greater IRS scrutiny of the filed return–so use caution.

 

Make Charitable Donations

Charitable contributions made with payroll deductions, checks, cash and donations of goods and clothing are all deductible.

 

These deductions add up and are often overlooked by many taxpayers.

 

You generally need to itemize to claim a deduction, and since the 2017 tax reform nearly doubled the standard deduction, many people choose not to itemize.

 

However, if you do, it could be more beneficial to you and your family.

 

As a result of the CARES Act (the Coronavirus Aid, Relief, and Economic Security Act), those who don’t itemize can deduct cash donations of up to $300 ($600 if MFJ) made before Dec. 31, 2020–and 2021.

 

Adjust Your Basis for Capital Gains Tax

When calculating the cost basis after selling a financial asset, make sure to add in all of the reinvested dividends.

 

That increases the cost basis and reduces your capital gain when you sell the investment.

 

If you sell your house, you may end up paying capital gains tax as well, particularly if your property’s value has risen significantly–over $250,000 if single and $500,000 if married filing jointly and you meet the criteria for exclusion from taxation.

 

You can reduce or eliminate the amount you owe if you’ve made home renovations or improvements, therefore keep adequate records.

Avoid Capital Gains Tax by Donating Stock

Another way to avoid capital gains is by using stocks to make charitable gifts.  You can also offset your capital gains against your losses up to a limit.

 

Utilize the Social Security Taxable Earnings Limit to Your Advantage  

The Social Security taxable earnings limit;

Social Security taxes are comprised of two components:

 

1) OASDI (Old Age, Survivors and Disability Income) and

 

2) HI (Health Insurance) taxes. OASDI is a tax imposed on a worker’s wages up to the applicable Social Security taxable earnings limit

 

That limit is $142,800 in 2021 and generally increases annually. The employee tax rate for the OASDI part of Social Security is 6.2%. HI, the second component of Social Security taxes, is a tax of 1.45% imposed on all taxpayer wages— no earnings limit applies, in other words—to fund Medicare Part A.

 

The taxability of Social Security benefits received by a taxpayer depends on the recipient’s total income. Social Security benefits may be entirely tax-free or partially taxable depending upon whether the total of:

 

  • Half the net Social Security benefits received during the year by the taxpayer (total benefits received during the year less any Social Security benefits repaid during the year); plus

 

  • All other income received by the taxpayer (including tax-exempt interest)

 

Set Up an IRA or Contribute to Your Retirement Plan

Individual retirement arrangements (IRAs), qualified plans and annuity contracts enjoy certain tax benefits, including tax deferral, while funds are being accumulated within the plans.

 

Although there are some exceptions, distributions from these tax-favored plans are generally taxable as ordinary income.

 

An individual retirement account (IRA) is a personal retirement savings plan, funded by an annuity or a trust, provides for tax-deferral of earnings and may permit either tax-deductible contributions or tax-free qualified distributions!

 

Individual Retirement Accounts are fundamentally of two types:

 

  • Traditional IRAs that may permit tax-deductible contributions and generally taxable distributions, and

 

  • Roth IRAs whose contributions are not deductible but whose qualified distributions are entirely tax-free.

 

Yearly contribution limits for 2021 are $6,000 plus $1,000 catch up provision if you are age 50 or more.

 

A taxpayer who is “not an active participant” in an employer-sponsored qualified plan may deduct a traditional IRA contribution he or she is eligible to make–regardless of income.

 

Traditional IRA distributions of after-tax contributions are received tax-free as a return of basis on a pro-rata basis, and the remainder of the distribution is taxable.

 

Although, tax penalties generally apply to IRA distributions before age 59½, there are certain premature distributions to which the 10 percent penalty tax doesn’t apply.

 

Those distributions include distributions:

 

  • Made at the taxpayer’s death

 

  • Attributable to the taxpayer’s disability

 

  • Made for medical care to the extent allowable as a medical expense deduction

 

  • Made for the payment of health insurance premiums by unemployed taxpayers

 

  • Made to pay qualified higher education expenses for the taxpayer, his or her spouse, child or grandchild

 

  • Considered “first-time home buyer distributions” up to a lifetime maximum of $10,000

 

  • That are part of a series of substantially equal periodic payments made for the life of the taxpayer or the joint lives of the taxpayer and his or her beneficiary; or

 

  • That are qualified birth or adoption distributions not exceeding $5,000.

 

The Internal Revenue Code requires that minimum distributions from a traditional IRA begin no later than the owner’s age 72. The law permits the individual to delay taking these first required minimum distributions (RMD) until April 1st of the year following the year in which he or she turns age 72.

 

The date on which RMDs must commence is known as the “required beginning date.”

 

Lifetime distributions never need to be taken from a Roth IRA.

 

A “qualified” distribution from a Roth IRA is one that is made no earlier than the fifth year following the year for which the owner made his or her first Roth IRA contribution and:

 

  • The taxpayer is age 59½ or older

 

The distribution is a qualified first-time home buyer distribution

 

  • The taxpayer is disabled; or

 

  • The distribution is made to a beneficiary on or after the taxpayer’s death

 

There is an additional tax advantage on distributions that Roth IRA owners enjoy, even when the distribution isn’t a qualified distribution: a non-qualified distribution—one that fails to meet the requirements to be a qualified distribution—from a Roth IRA receives FIFO tax treatment under which all contributions are deemed to be distributed tax free before any earnings are distributed.

 

It was noted earlier that a premature distribution—one made prior to the owner’s age 59½—from a traditional IRA would result in a 10 percent tax penalty. The 10 percent premature distribution tax penalty is based on the amount that must be reported as a taxable distribution.

 

The same is true of a Roth IRA and just as in the case of a Traditional IRA, the penalty for a distribution of earnings before age 59½ from a Roth IRA is waived if the distribution is:

 

  • Attributable to the IRA owner’s death or disability

 

  • Made for medical care to the extent allowable as a medical expense deduction

 

  • Made by unemployed taxpayers for the payment of health insurance premiums

 

  • Used to pay qualified educational expenses

 

  • A qualified first-time home buyer distribution

 

ROTH required minimum distributions must be made following the owner’s death!

 

Trustee-to-trustee transfers from one IRA to another IRA are not subject to the one per-year limit and, thus, may be made at any time, however you may have termination and other fees–depending on the trustee.

 

Know the Standard Mileage rates for the 2021 Tax Year

Business 56 cents per mile

Charitable 14 cents per mile

Medical 16 cents per mile

 

Use Stepped-Up Basis when Applicable

Upon death many assets may receive favorable stepped-up basis in valuation–thus lowering your or your heir’s taxes.

 

Understand your state, local, sales and other taxes, state Income taxes, state business taxes etcetera

If you live in the United States, you will normally have a variety of taxes (or a variation of taxes that go by other names) at the state and local level.

 

State ad valorem taxes, state transfer taxes and stamps, property taxes at the local and state level, hotel and special use tax, rental car taxes and the like are not uncommon as states try to ensure a steady flow of income to provide and pay for various state and local functions.

 

Whether state income taxes, sales tax, property taxes, transfer taxes and other fees that are in effect taxation, it is important that you are aware of those taxes, and you do your best to avoid or reduce them.

 

There could be “income exclusions” on your state taxes if you qualify, homestead and other exemptions may be available to help you reduce your property taxes, you may be able to avoid sales tax by making your major purchases during “tax holidays” if your state offers them.

 

Use your imagination and the tax codes to find ways to reduce taxes wherever they may exist at the state, local and federal level.

 

Below you will find a number of taxes in the state of Georgia.

 

They are provided so that you can get a feel of state and possibly local taxes–however always keep in mind each state and country will have their own unique set of taxing authorities and collection practices.

 

GA TAVT https://eservices.drives.ga.gov/_/

https://dor.georgia.gov/title-ad-valorem-tax-tavt-faq

 

How is fair market value determined for a USED motor vehicle?

 

A used motor vehicle is any motor vehicle, which has been the subject of a sale at retail to the general public.

 

For a used motor vehicle, the fair market value is the value identified in the state motor vehicle assessment manual. This value is calculated by averaging the current wholesale and retail values of the motor vehicle pursuant to O.C.G.A. § 48-5-442. Accordingly, the fair market value for a used motor vehicle for purposes of TAVT will generally be the same as the value that was used in the old annual ad valorem tax system.

 

A reduction is made for the trade-in when the sale was made by a dealer, but not when the sale was made by a private individual.

 

Where do I apply for my title and pay TAVT?

 

  • The application for title and TAVT payment must be submitted to the county in which the buyer resides. The TAVT must be paid at the time of initial title application.

 

  • If you purchase your vehicle at a dealership, the dealer must accept the application for title and TAVT payment on your behalf and deliver the title application and TAVT payment to the County Tag Office where the buyer resides.

 

What sales are subject to sales tax in Georgia?

 

In general, Georgia imposes tax on the retail sales price of tangible personal property and certain services. While most services are exempt from tax, Georgia does tax the sale of accommodations, in-state transportation of individuals (e.g., taxis, limos), sales of admissions, and charges for participation in games and amusement activities. O.C.G.A. §§ 48-8-2(31), 48-8-30(f)(1).

 

In addition, Georgia imposes tax on charges by the seller that are necessary to complete the sale of taxable property.  O.C.G.A. § 48-8-2(34)(A). For example, if a seller charges $20 for a shirt and $5 to deliver the shirt, sales tax is imposed on $25 ($20 for the shirt plus $5 for delivery).

 

If a provider of a nontaxable service makes sales of tangible personal property, the service provider must collect and remit sales tax as appropriate. Service providers are, in most instances, end users and liable for sales or use tax on all tangible personal property used by them to provide their service. O.C.G.A. § 48-8-63.

 

What is use tax?

 

Use tax is tax imposed on non-exempt items brought into Georgia. “Use tax” is also a term commonly used to refer to the tax imposed on taxable goods and services that were not taxed at the point of sale.

 

Tax imposed on non-exempt items brought into Georgia

 

Use tax is imposed upon the first instance of use, consumption, distribution, or storage in Georgia of non-exempt tangible personal property purchased at retail outside of Georgia. (Note that property brought into Georgia as a result of a change of domicile is generally exempt as long as the property is not brought into Georgia for use in a trade, business, or profession. O.C.G.A. § 48-8-3(19).)

 

Property used longer than six months outside of Georgia prior to its first use inside Georgia is taxed at the state and local sales tax rate on the lesser of the purchase price or the fair market value of the property. O.C.G.A. §§ 48-8-30(c)(2), 48-8-82(a), 48-8-102(b)(1), 48-8-109.3(b), 48-8-110.1(c), 48-8-201(b), 48-8-241(d), 48-8-269(a).

 

Generally, the applicable local sales tax rate is the rate imposed in the county where the buyer receives the goods. O.C.G.A. § 48-8-77. A taxpayer’s use tax liability will be reduced by like taxes previously paid in another state. O.C.G.A. §§ 48-8-30(c)(3), 48-8-30(e), 48-8-42(a).

 

Example: A contractor buys a bulldozer in another state and pays state sales tax but no local sales tax. The following week the contractor transports the bulldozer into Georgia and performs a job in Hall County.

 

The contractor now owes Georgia state use tax on the purchase price of the bulldozer at a rate of 4%. His Georgia state use tax liability will be reduced by the sales tax previously paid in the other state. In addition, he owes Hall County use tax on the purchase price of the bulldozer at the Hall County sales tax rate.

 

Tax imposed on non-exempt items and taxable services that were not taxed at the point of sale

 

If a taxpayer purchases taxable goods or services in Georgia without the payment of tax, the taxpayer must accrue and remit the tax. O.C.G.A. § 48-8-30(g).

 

Example: A retailer buys light bulbs tax free under terms of resale to sell in her store. She takes the light bulbs out of inventory to light up the store. She now owes sales tax on the price for which she purchased the bulbs. The sales tax in this case is commonly referred to as “use tax” because it is not paid at the point of sale, but accrued at the time of use.

 

Example: Joe purchases a bicycle online. The seller does not charge sales tax. The bicycle is delivered to Joe in Georgia. Joe now owes “use tax” on the bicycle’s sales price.

 

$1.00 per tire disposal fee

 

Charges made for delivery, transportation, freight, or shipping and handling are part of the sales price and subject to sales tax in the same manner as the underlying sale. Thus, if a taxable item is sold, and the seller makes a separate charge for delivery, transportation, freight, or shipping and handling, the separate charge is taxable. O.C.G.A. §§ 48-8-2(34). Charges for delivery that are not associated with the sale of taxable property are not taxable.

 

Is property tax on leased personal property subject to sales tax?

 

The question of whether a tax should be included in the sales price (and therefore subject to sales tax) depends on whether the legal incidence of the tax falls on the seller or the purchaser. If the legal incidence of the tax falls on the seller, the tax is included in the sales price, like any other portion of the price designed to recoup the seller’s expenses. O.C.G.A. § 48-8-2(34).

 

Therefore, if a tax on personal property that is held for lease is imposed on the seller/lessor and the seller/lessor requires the customer/lessee to pay this amount, such amount must be included in the sales price and is subject to sales and use tax.

 

Itemized charges made for repair labor or installation labor are not subject to sales tax. O.C.G.A. §§ 48-8-2(34)(B)(iv), 48-8-3(23).

 

Mandatory gratuities associated with a taxable sale are subject to sales tax. Voluntary gratuities are not taxable. O.C.G.A. § 48-8-2(34)(A), Ga. Comp. R. & Regs. r. 560-12-2-.115.

 

Are restocking fees subject to sales tax?

 

At times, when a customer returns an item, the seller requires the customer to pay a restocking fee, thus resulting in only part of the original sale price being refunded to the customer.

 

Because sales tax can only be refunded to the extent the original sales price was refunded, when a restocking fee is charged, tax can only be refunded on the amount of the sales price refunded to the customer. Therefore, amounts designated as “restocking fees” are subject to sales tax because such amounts are refund reductions.

 

Retail sales of newspapers, magazines, periodicals, etc. are subject to Georgia sales and use tax. O.C.G.A. § 48-8-30(b). Publications sold by subscription are subject to sales tax based on the subscription price. Ga. Comp. R. & Regs. r. 560-12-2-.77.

 

Newspapers are often sold for a single amount, with sales tax included in this amount (i.e., the stated price of the newspaper includes the taxable sales price of the paper and the sales tax).

 

Aircraft and watercraft sales are taxable in the same manner as the sale of any other tangible personal property. Tax is due at the rate of the jurisdiction where the buyer takes delivery. O.C.G.A. §§ 48-8-30, 48-8-77.

 

Does Georgia have an exemption for aircraft or watercraft purchased in this state when the aircraft or watercraft will be immediately removed from this state?

 

The sale of aircraft and watercraft in Georgia is subject to the tax even when the aircraft or watercraft sold will be immediately removed from this state.

 

However, there is a specific exemption for aircraft, watercraft, motor vehicles, and other transportation equipment manufactured or assembled in this state when

 

1. sold by the manufacturer or assembler for use exclusively outside this state and

 

2. possession is taken from the manufacturer or assembler by the purchaser within this state for the sole purpose of removing the property from this state under its own power when the equipment does not lend itself more reasonably to removal by other means. O.C.G.A. § 48-8-3.

 

Can the sale of an aircraft or watercraft be excluded from the tax when the transaction meets the requirements of a casual sale?

 

Yes. The sale of aircraft or watercraft is not subject to sales tax when the sales transaction meets the requirements of a casual sale. Ga. Comp. R. & Regs. r. 560-12-1-.07.

 

Are sales and use tax due on motor vehicles?

 

If the vehicle is subject to Title Ad Valorem Tax (TAVT), no sales and use tax is due on the vehicle. When applying for a Georgia title and license plate for a vehicle that was not subject to TAVT and purchased from an out-of-state or country dealer or an out-of-state business or a Georgia business, Georgia sales tax must be paid at the time of registration or proof submitted that the sales tax has already been paid.

 

If the selling dealer used an incorrect sales tax rate to calculate the amount of Georgia sales tax due, then any additional sales tax due must be paid at the time of registration or proof of payment submitted.

 

A Georgia title and license plate will not be issued until any Georgia sales tax due is paid. The amount of sales tax due is based on the vehicle’s purchase price or the vehicle’s fair market value if a sales invoice is not submitted.

 

See the sales tax rate in your county as the published sales tax rates for counties include the State of Georgia’s sales tax rate.

 

Please visit the webpage When & Where to Register Your Vehicle for more information about the vehicle registration process. For additional information regarding sales tax, please contact the Department of Revenue’s Regional office serving your county.

 

Use Caution when Choosing your Tax Professional

Tax return preparers are held to a high standard of conduct in their preparation of clients’ income tax returns.

 

To prevent filing returns with stolen identities, tax preparers should ask taxpayers not known to them to provide two forms of identification—preferably forms of identification containing the individual’s picture–that include the taxpayer’s name and current address.  In addition, tax return preparers must confirm the identities and Social Security numbers of taxpayers, spouses and dependents.

 

The Federal Trade Commission (FTC) is the lead federal agency for identity theft, and the agency recommends the following steps for an identity theft victim:

 

1. Report the identity theft to the FTC at www.identitytheft.gov.

 

2. Contact one of the major credit bureaus to place a fraud alert on the victim’s records.

 

The contact information for the credit bureaus is as follows:

www.Equifax.com 800-525-6285

www.Experian.com 888-397-3742 and,

www.TransUnion.com 800-680-7289.

 

3. Be sure to close any financial or credit accounts that were opened fraudulently.

 

Additional suggested steps may be found on the FTC Website.

 

Be sure your tax professional understands the importance of meeting their obligations with respect to safeguarding your data and be sure that you too do all you can to safeguard your own data!

 

Be aware of how your tax professional handles the following:

 

  • Administrative activities

 

  • Facilities security

 

  • Personnel security

 

  • Information systems security

 

  • Computer systems security

 

  • Media security

 

  • Certifying information systems for use; and

 

  • Reporting incidents

 

Due diligence is the care and attention to detail appropriate to the subject to which it refers.

 

Thus, due diligence with respect to the preparation and safeguarding of your taxes is the care and attention to detail required of each tax professional in their preparation of your tax return.

 

In the end when it comes to reducing your taxes, remember that the tax laws “are what they are” however there are actions that you can take to reduce or lessen the tax burden that you and your family now face or could potentially face by getting “out in front” of your taxes and tax planning so that you can achieve more throughout your lifetime.

 

Doing a comprehensive review of your tax position or potential tax position is not a walk in the park–but it is worth it for those who desire true wealth building success.

 

All the best….

 

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