Foundation & Wealth Building

Learn why a “strong financial foundation” lies at t he center of your future wealth building success…

 

It is important that you realize that a strong financial foundation is what you need at this time if you are to succeed and build wealth in a more appropriate manner throughout your lifetime.

 

It is important that you live for the future in a manner where worry, anxiety, fear, frustration, lack of effort and excuses play no meaningful role in your forward movement.

 

If you now lack a strong financial foundation it is important that you “at this time” make a real commitment to have a very strong foundation as you pursue your wealth building efforts as that foundation will set you apart from those who struggle daily in the management of their finances.

 

In a similar manner as a weak foundation in the building of the San Francisco  Millennium Tower made what appeared to be a beautiful creation on the inside and outside—but the foundation was faulty—so too must you be aware of the foundation that you lay as you build wealth.

 

If you do not possess what it takes on the inside to build a foundation that cannot be shaken you are selling yourself and your family short when it comes to building lasting wealth.

 

Even though it may appear to you at this time that you possess what is necessary and you are headed on an upward trajectory—you must take steps at this time to ensure that you will achieve at your highest level of excellence—and it all starts with a strong foundation.

 

In this discussion TheWealthIncreaser.com will show you in emphatic terms why a strong financial foundation is not only the key to your success, but will provide you the impetus to achieve at a level that allows you to pursue your financial goals in a manner where you will give it your absolute best!

 

Step 1

 

Determine your level of financial knowledge and financial preparation that you have at this time…

 

You must analyze where you now are with your financial level of understanding and you must use that knowledge as a guide to let you know that more work is required of you—if you truly desire to make your dreams come true.

 

You must know your areas of strength and know your money management personality so that you can take a more introspective (look deep inside your mind, heart and soul) approach as you move toward the goals that are most important to you—whether they be financial or otherwise!

 

Step 2

 

Determine if you have what it takes on the inside to achieve optimally…

 

You must realize that those who purchased at the San Francisco Millennium Tower thought that they had what it took on the inside and outside to achieve financially and enjoy a beautiful dwelling.

 

However, they did not properly analyze the foundation of the building and in some cases it cost them possibly  thousands of dollars (or even more) by being in an adverse position–when it really didn’t have to be that way.

 

When it comes to your financial foundation you must know what is the appropriate knowledge that you must know that will allow you to achieve results that will show!

 

If you fail to do a careful, critical, analytical and accurate assessment of where you truly stand at this time as far as your finances are concerned—you are demonstrating an unwillingness to confront your finances and the foundation that you desire to start or that you have already started as it relates to your wealth building will-possibly look good to you on the inside and outside (your heart and mind may feel that you are doing great) but the generational wealth building success that you need or want to achieve may be lacking.

 

Step 3

 

Know that a faulty foundation will send you backward or at best keep you where you are now at…

 

Even if you have what it takes on the inside (have fire and desire inside your heart and mind) to successfully achieve at what appears to be a high level—you can do far more on a daily basis if you start off with a strong credit and financial foundation.

 

You can get momentum rolling and turn your current position into one of lasting success if you acquire the right knowledge and you apply that knowledge in a manner that works with your mind and propels you toward the future goals that you desire.

 

You possess inside the “ability to choose” a new and more rewarding way to achieve wealth building success today.

 

Conclusion

 

The mere fact that everything looks good from the outside (or even the inside) does not mean that all is well!

 

You must approach your financial future with a “comprehensive perspective” and you must know that major success lies ahead if you properly turn the gravel and analyze the soil (know where you now stand and sincerely look for real ways to achieve more).

 

You don’t have to approach your future in a fearful or cautious manner if you make the decision at this time to build a foundation that cannot be shaken!

 

All the best toward your future success based on the decision that you are now making that will allow you to achieve at your absolute best…

 

 

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Mega Success & Wealth Building

Learn how you can achieve the type of financial and life success that you need or desire to achieve…

 

It is important that you realize that you have the ability within to achieve “mega-success” in the management of your finances so that you can achieve many of your dreams such as retiring early, vacationing when and where you want to, volunteering for your favorite causes, donating to your favorite causes, increasing your net worth to the level that you desire and achieving any other goal that you may have in mind!

 

In this discussion TheWealthIncreaser.com will show you in precise terms how you can achieve “mega-success” and build your wealth in a way where you can leave behind an inheritance for your future generations yet unborn.

 

If you have struggled in the past with your credit and finances or you are currently struggling—your future can be bright in spite of where you now stand.

 

If you are now on a successful path in the management of your credit and finances you too can learn other and possibly more effective ways to achieve the goals that you desire.

 

Over the years we have received many questions about how to achieve more in the credit and financial areas of the lives of many.

 

In this discussion TheWealthIncreaser.com will explain how you can achieve lasting financial success in a more efficient manner as you build wealth over time.

 

Know where you are in your “life stage” and use that knowledge to your advantage…

 

You must pursue stability in your financial life and pursue the “quality of life” that you desire in a way that gets you real results.

 

You must know your cash flow position, know how credit works and know all of the areas of your finances that you must address at the various stages in your life.

 

Know how to use “success qualities” to your advantage in your financial life…

 

You must know how to use the “qualities of success” to your and your family’s best advantage and you must have the determination and grit to give it your best at all times and in all endeavors in spite of what others may be doing.

 

You are responsible for pursuing your goals at a high level and gaining the preparation and knowledge that allows you to pursue success more efficiently and more effectively in all areas of your life.

 

You are responsible for responding to adverse situations that will occur throughout your lifetime in a winning manner.

 

Know how to “integrate your financial knowledge” so that you can achieve more…

 

You must look at and analyze your financial position as it relates to insurance,  investments, taxes, emergency fund, education planning, estate planning and retirement planning on a consistent basis.

 

To attain mega-success you must know whether you are investing for income, growth–or income and growth–and you must know what vehicles will take you to where you need or desire to be.

 

Will you use money market accounts, money market mutual funds, bonds, stocks, mutual funds, closed end funds, REIT’s, MLP’s or Master limited Partnerships or more exotic investments to get you the returns and growth that you desire?

 

By answering those and other questions you will be well on you way to success—and if you do it at your highest level you can attain “mega success” because you decided to give it your best.

 

Conclusion

 

If you do a critical analysis of where you now stand financially and you look within in a sincere manner and decide to improve in areas where you are weak both financially and personality wise you can attain much more on a daily basis.

 

You are now in position to make a real choice about the direction that you desire to go and it is you who can steer your investments and personality in the direction where success lives—or if you do it at your absolute best—where mega-success lives.

 

All the best toward giving your best and achieving mega-success…

 

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Tax Preparation Tips & Wealth Building

Learn how you can build wealth and use the tax code to assist in your efforts…

 

The proper preparation and filing of your tax return is an important step in the upward movement of your net worth and is a key aspect of your wealth building efforts.  Now is the time that you rise up and achieve more in your life and knowing a few tax tips can possibly lead to you flying higher.

 

With another successful tax season in the books TheWealthIncreaser.com thought that helping prepare you and others who desire more success in the coming tax seasons was in order.  In this discussion TheWealthIncreaser.com will discuss how “preparing in advance” is a key step in filing your taxes and building wealth.

 

It is important that you realize that record keeping is an important responsibility whether you decide to file your own tax return or you hire a professional to do them for you.

 

If your taxes are not complex and you are computer savvy you may be able to file your taxes yourself.

 

If you make under $66,000 the IRS offers free filing if you qualify.

 

Other online services also offer free tax preparation as well.  If you choose a free provider be sure to read the fine print and know all of your obligations going in—not after the return is prepared and filed.

 

You also have the option of purchasing tax software and doing your return yourself.  Live chats and explanations are normally included in the software purchase.

 

The average cost to file a tax return is over $200 in most areas of the United States.  In many cases it can be money well spent.

 

If you dread doing your taxes yourself consider a professional who knows how to complete the type of return that you will file.  If you have schedule A entries, capital gains or losses, investment properties, business income and the like you may want to choose a highly competent tax professional as there are nuances and certain understanding that is possessed by those who do taxes on a regular basis and take the profession seriously.

 

Whether you decide to complete and file yourself or you decide to hire a pro, the following paragraphs will provide you with basic insight on how you can build wealth more efficiently by effectively using the tax code.

 

Maintain Good Financial Records Relating to Deductions

 

  • Document non-cash contributions and donations
  • Assign a value to each item you donate
  • Document all of your medical expenses and mileage to and from your medical provider(s)
  • Save all mail and correspondence that is marked “Important Tax Information”
  • Organize all of your financial data
  • Start an “IRA” if you or your loved one qualifies at the earliest time possible and keep a record of your annual contributions

 

It is important that you avoid common mistakes that many make whether they prepare their return themselves or use tax professionals.

 

You want to definitely maintain good mileage records as the mileage rate for 2018 is 54.5 cents per mile.

 

Don’t overlook any of your itemized deductions or potential itemized deductions as with the new law many have been eliminated–however you may still need to run the numbers to see if your federal and state refund amount or amount owed will be more or less beneficial to you–depending on the approach (itemized or standard deduction) that you take.

 

Be sure you know all entries that you can legally enter on schedule 1   and schedule A now–and in future tax years.

 

If you are a business owner and travel don’t overlook travel expenses and keep good records.  You also want to be aware of a potential home office deduction that you may be entitled to take.  Also document and keep records of all business related purchases whether they be office supplies or major assets such as machinery, computers, automobiles and the like.

 

Also, if you are not doing so contribute to your 401k or other retirement account as well as HSA, FSA and other tax advantaged accounts.

 

If you qualify consider a ROTH or Traditional IRA (income qualification and contribution limits apply).  Of course, whether and how much you contribute will depend on your current financial condition, therefore it is imperative that you know how to manage your finances at an optimal level.

 

Student Loan Interest

 

You can deduct up to $2,500 in student loan interest annually on your tax return if you qualify.  However if you are single and earn over $80,000, you would not be eligible for the deduction–which seems quite unfair–you borrow to pay your way through college and when you start earning decent money to pay the loan back you are penalized and not allowed a deduction on your tax return.

 

Outside of earning less (usually a bad option) or getting married (your income limit increases some) your options to qualify may be limited!  Are those real options for you–probably not and a change in the tax code would be more appropriate–however by knowing the income limitation at this time–you can at least plan proactively or plan to avoid student loans altogether if you find yourself in a precarious position at this time.

 

If you are currently seeking higher education or you have dependents who are now seeking higher education you may be eligible for credits and deductions that could help lower your taxes.

 

You can also save for higher education in a tax efficient manner by utilizing a 529 plan, a prepaid tuition plan or other tax advantaged educational savings plans–including IRAs.

 

Itemized Deductions

 

Medical deduction limit in 2018 is 7.5% of your AGI and 10% of your AGI in the 2019 tax year.

You can no longer deduct moving expenses unless you are in the military.

Casualty losses are non-deductible unless in a federally declared area.

Unreimbursed employee expenses, tax preparation fees and other 2% miscellaneous deductions are no longer allowed on schedule A.

If you need to make changes on your tax return remember the 3 year rule (three years from the filing deadline–including extensions) form 1040X allows you to amend your return.

If you have not filed your return in the past three years and you are due a refund–file now as after three years you will no longer be eligible for the refund.

 

Always consider your overall “effective” tax rate–that means looking at your taxes from a federal tax point of view as well as state and city (local)—where applicable.

 

 Investments

 

If you have investments be aware of the type you choose and the present and future tax consequences.  If you have children or grandchildren consider setting up a 529 plan, an IRA or other tax favored savings plan for their educational and/or retirement future.

 

It is important that you are aware of how your “investment choices” affect your future and your taxes–and it is you who must gain the “right knowledge” that you need–to succeed.

 

You can set up an IRA for your child or your grandchild if they have income and by saving consistently and gaining an average rate of return you can set your heirs up for a prosperous future in a relatively painless way.  However, it is important that you plan now and set up systems that allow you to do that and more.

 

In addition, you must insure that you are on track to meet or exceed the goals that you desire and you must also operate in a sound manner in all of the financial affairs in your life.

 

Conclusion

 

With many changes in the new tax law of 2017 many may feel uncomfortable tackling their own taxes.

 

However, in many cases your taxes may not be complicated and tax software can lead you toward an accurate and cost saving preparation of your taxes.

 

Under the Tax Cuts & Jobs Act the standard deduction has basically doubled for most taxpayers and personal exemptions are gone except in limited cases (now called a tax credit).

 

The tax rates were reduced for most taxpayers, the child tax credit doubled from $1,000 to $2,000 for children under 17.

 

If you own a business and had income you may qualify for the Qualified Business Income deduction.

 

In addition, you want to form the right type of business (sole proprietor, corporation, LLC, partnership etc.), pay your estimated taxes (January 15th–April 15th–June 15th–September 15th) in a timely and accurate manner, record your revenue and expenses accurately and stay in good standing with the IRS in a proactive way.

 

Be sure to keep a separate bank account for your business, separate credit card(s) for your business and avoid commingling your business and personal records including bank deposits and withdrawals.

 

Also, allocate your income and expenses in the appropriate categories so that you can see where your income is coming from—and how much you are paying out in expenses–and where!

 

Keep a mileage log in your car (vehicle) or use an automated system and log all business related miles as well as repair and maintenance expenses such  as gas, oil changes, parking/tolls and other expenses in case you decide to use actual expenses instead of mileage.

 

A monthly profit and loss statement will help your tax professional at tax time (or yourself if you plan on doing your own taxes) and also help in planning your business now and in the future as you can use the data for employee staffing, inventory, maintenance and other areas of concern that are particular to your type of business.

 

In short, by previewing your tax position now–you can plan better for your future.  It is the desire of TheWealthincreaser.com that this page has given you some added insight on how you can achieve more in your future and lighten your tax burden as well.

 

Now is the time that you use T P T & W B to achieve results that you can see!

 

All the best toward your tax saving and wealth building success…

 

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Investment Choices & Wealth Building

Learn why knowing how to choose your “Investments” in a wise manner is critical for your “Wealth Building” success…

 

In today’s economy there are a number of choices or investment options for you to choose from after you have determined your cash flow position, maximized your credit position and looked into the future of your finances in a comprehensive manner.

 

In this discussion TheWealthIncreaser.com will discuss several investment options—along with the tax angle that you can use to build wealth more efficiently in the economy that we are now in.

 

You can invest in stocks, mutual funds, bonds, MLP’s, real estate, futures, precious metals and many others—and it is important that you understand your potential tax position going in.

 

Although the creator of TheWealthIncreaser.com has been quite busy this tax season, the inspiration to create this page occurred as many of my clients over the past few weeks made investment choices and had capital gains and an increase in their net worth in the 2018 tax year.

 

STOCKS & MUTUAL FUNDS

 

First and foremost you must understand the difference between short-term and long-term gains and you must know the tax treatment of investments when they are “inside” or “outside” of your retirement account.

 

In addition you want to be aware of when and if you can carry losses forward and from what type of investment.

 

If your investments are outside of your retirement accounts your purchase price, sale price and how long you hold the investment is key! 

 

If your investments are inside of your retirement accounts you may avoid or defer taxation until a future date–normally retirement or at the time of withdrawal!

 

If your investment is held for less than a year outside of your retirement account(s)–you will have a short-term gain and you will be taxed at your ordinary income tax rate (if you have your 2018 tax return get it out and look at line 10 of form 1040 page 2 to see where you fall as far as taxation) that could range from 0% (lower end of spectrum) to 40.8% (higher end of spectrum).

 

If you hold your investment for one year and one day you will get the more favorable rate that is determined by your taxable income (long term capital gains rate that could range from 0% to a maximum of 23.8%).  If your brokerage or mutual fund company sell during the year and “they don’t specify a date” or if they state “various” on the 1099–your gain will be taxed as “ordinary income” unless you can prove that the stock or mutual fund was held for one year and one day.

 

If you have a combination of short and long-term capital gains and capital losses you can offset the gains against the losses.

 

However, you must offset short term losses against your short term gains and long-term losses against your long-term gains —you then aggregate your losses and if they exceed your gains you can use the losses to offset your taxes.  If the losses exceed $3,000 you can carry them forward up to a maximum of $3,000 per tax year until it is used up.

 

Qualified stock dividends (stock held 60 days before or after the ex-dividend date) are also taxed at capital gain rates and if the stock dividend is unqualified it would be taxed at your “ordinary income” rate (which is usually a higher rate) and would be entered on your tax return as “ordinary dividends” on line 3b of your 2018 tax return.

 

If you invest in a mutual fund or your investments are handled by a brokerage they will normally spell out the differences on their 1099’s that you get around tax time.

 

They will also normally provide you your cost basis (the purchase price adjusted for tax purposes).

 

Always remember that it is important to adjust your cost basis for re-invested dividends.

 

You pay tax on re-invested dividends in the same manner as if you received cash.  The good news is you won’t be taxed twice because your cost basis will be adjusted upward as a result of the dividend re-investment and again most brokerage companies will do this for you.

 

When you decide to sell your stocks or mutual funds you have four options to choose from:

 

  • FIFO or first in-first out
  • LIFO or last in-first out
  • Use the average cost per share
  • Specify certain shares

 

Be aware that there are caveats and regulations that apply when categorizing for tax purpose so be sure you use competent tax professionals.

 

If you own stocks or mutual funds you may have to pay tax on the capital gains even if you don’t physically utilize the gain!

 

If you have a desire to avoid capital gains consider an index fund that only pays dividends or a tax efficient fund that avoids both capital gains and dividends.

 

Also if your fund has foreign holdings they will withhold taxes paid on dividends and if box 7 on 1099-DIV has an entry that means foreign taxes were paid.

 

You can use the foreign tax credit (U.S. residents) to reduce some or all of those taxes or you can choose the deduction (reduces your taxable income—use form 1116).

 

BONDS, MLP’S & REAL ESTATE

 

There are a number of bonds and the taxation depends on what type you own:

 

  • Corporate–taxed at ordinary income rates

 

  • Treasury–income is subject to federal but not state

 

  • Municipal–income is not subject to Federal and if issued and purchased in your home state may avoid state and local

 

  • Series I and EE bonds—taxation depends on how you use the proceeds at maturity or cashing in of bond

 

In most cases Master Limited Partnership‘s and Real Estate Investment Trust‘s are taxed at ordinary income tax rates.  Under the new tax law enacted in 2017 you may be able to deduct 20% of MLP or REIT income as qualified business income.

 

If you buy and sell real estate such as a personal residence and you meet the 2 out of 5 year rule—you have a tax free gain up to $250,000 if single and $500,000 if married filing joint.

 

If you sell rental property that property will be subject to recapture of depreciation (the depreciation that you took or had the option to take will be added back thus reducing your overall gain) and will be taxed at your ordinary income rate if held for less than one year and your “capital gains rate” if held for one year or more (see capital gain rates below).

 

1031 exchange may allow you to avoid or delay taxes and is an effective tool that is utilized by serious seasoned real estate investors and may be worth considering–depending on your goals.

 

Long-Term Capital Gains Rate:

 

0% if you are single and your taxable income is $38,599 or less or if you are married $77,199 or less

 

15% if you are single and your taxable income is between $77,200 and $425,800 or if you are married and your taxable income is between $77,200 and $479,000

 

20% if you are single and your taxable income is above $425,800 and married above $479,000

 

Note: If your modified adjusted gross income is above $200,000 if you are a single filer and $250,000 if you are married filing jointly you have to pay a 3.8% net investment income tax, potentially bumping your capital gains rate to 18.8% or 23.8% respectively.

 

If on your K-1 (if you have holdings in a trust, partnership or S-corporation) some portion is a return of capital—you may not owe taxes on that amount—your tax professional should be aware of whether you will owe taxes based on the data on your K-1.

 

FUTURES & PRECIOUS METALS

 

Profits from futures trading are generally taxed at 60% long-term capital gains and 40% short-term gains no matter how long you held the contract.

 

When you buy or sell option contracts on an exchange, the tax rules are the same as for stocks that was mentioned earlier in this discussion.

 

The taxation of options can be tricky and is beyond the scope of this discussion, however it is worth mentioning that you will need a tax professional who is familiar with option taxation.

 

Precious metals are often classified by the IRS as a collectible—rather than an investment and they would be taxed at 28% (long-term).

 

ETF’s or exchange traded funds that invest in precious metals are also taxed at the 28% rate.  Funds and ETF’s that invest in mining stocks of precious metals generally get the same capital gains rate as any stock fund!

 

OTHER

 

With the advent of  cryptocurrency such as bitcoin, block chains and other more complex investments, the taxation is not clear in some instances at this time as regulations are underway or the tax treatment is not clearly defined.

 

Most investments will normally be taxed in the U.S. if a gain is going in your pocket or it is traceable and it is important that you have a tax professional who has experience in handling the type of investments you now invest in—or you anticipate investing in during your lifetime.

 

CONCLUSION

 

You have a vast number of investment choices available and it is important that you have mastered your credit, you understand your life stage, you have an emergency fund that will add an additional layer of protection in case your investments don’t materialize as you planned, you are on track with your retirement income and you review your finances on a consistent basis.

 

Another key point worth mentioning is you “must know” how the taxation of your investment income will occur in the state that you now reside in–and/or anticipate moving to in your future!

 

By doing all of the above you will put yourself on a serious path toward wealth building and you will enjoy life along the way.

 

You can build wealth in a worry-free way and win throughout your financial life because you took the time (when others chose not to) to look at investments on the front end and knew ahead of time the tax ramifications that lied ahead in your future.

 

All the best toward your investment choices and future success…

 

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Fatigue & Wealth Building

Learn why you must give your absolute best even when operating on limited rest…

 

As you build wealth in the current economy it is important that you realize that you may feel tired and lack the inspiration to move forward or move forward at a faster pace.

 

Although that is often the norm with many—it is important that you operate outside of the norm and you must have the mindset that you will press on and make the dreams that you desire occur—in a timely manner.

 

Although we all are hit with moments where we don’t operate at an optimal level or a more prosperous pace—you don’t want to let that type of behavior direct your future.

 

It is important that you find a way that allows you to reach the goals that can make your life more meaningful and enjoyable.

 

In this discussion TheWealthIncreaser.com will show you how moving forward in a determined and consistent manner—even when you are fatigued can help you achieve more and reach the goals that you aspire to reach that may appear to be out of reach at this time.

 

1) Put a plan in place so that you have something to look forward to

You can make the goals that you seek occur in a more realistic manner by putting in place a plan that will move you toward success.

 

If you desire to build wealth more efficiently you must know your current financial condition and position, know your credit standing and put into place a plan that allows you to review and make improvements in all areas of your finances, thereby allowing you to pursue your goals at a higher level.

 

2) Make your best effort to reach or exceed the plan that you put in place

You must realize that it is your responsibility to make the dreams that you desire occur.  It is you who must expend the effort that is necessary to reach higher and pursue your goals at a level of excellence that is the best that is within you.

 

3) Realize that setbacks will occur, however setbacks must not deter you—or make you weary

You must pursue your dreams and dream big.  You must also expect adversity and have the mindset to continue moving forward in spite of the adversity that you will undoubtedly face.

 

You must see success clearly and you must use what you are now learning to move forward at a more efficient pace.

 

4) Move forward at a consistent pace even if you feel fatigued

You will at some time feel exhausted and feel that you can’t move on.  In life, we will all face difficult stretches where we feel we can’t move forward and inaction seems to be our calling card.

 

That is the time that you must dig in and find new ways that you can move forward!

 

You must have a determined spirit, put your frame of mind in position to move forward consistently by learning new and more encouraging ways of reaching your goals and building wealth–and always have the mindset that you will press on as best you can.

 

You must have a vision of your future that is inspiring and will direct you toward the results that you desire.  In short, you must make the decision at this time to reach higher.

 

Conclusion

 

As you formulate goals and move toward building wealth you must determine at this time if you are truly sincere—or whether you are just “testing the waters.”

 

Your level of commitment and your willingness at this time to put in place a plan that will take you toward your dreams in a real way is what will move you forward and separate you from the rest—even when you are not feeling your best or you are operating on limited rest.

 

Always realize that if you lack a solid financial foundation you will often approach your finances with a sense of fear or you will timidly approach your finances because you don’t know if you have missed an area of your finances that should have (or needed to be) addressed and therefore in most cases you will not be operating at your highest level of mental efficiency as it relates to your finances.

 

Hopefully, if you are one who lacks a solid financial foundation–this discussion has at least provided you a  “meaningful blueprint” so that you can at a minimum get started on the right path toward major success.  By applying what you have learned in this discussion at your highest level of mental energy–you can start on a serious journey that can lead you toward building the solid financial foundation that you need and deserve in this economy–or any economy.

 

By seeing your success and knowing that you can accomplish what you see if you stick to your plan you will be motivated at a much higher level and when fatigue or that tired feeling kicks in—you will overcome and continue to move forward because you will be operating at a level of focus that allows you to reach your goals more efficiently.

 

In addition, your internal motor (mind, heart and spirit) will be inspired at such a high level that the success that you see will be the only outcome that could be–because you will make a serious commitment to plant a new tree (overcome all obstacles) so that you can truly be all that you were meant to be.

 

Even though doing all of the above is not the master key–it will help “you” achieve results that you can see.

 

All the best toward getting your needed rest and achieving at your absolute best…

 

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Bond Frequently Asked Questions

 

Bond Frequently Asked Questions

 Learn more about bonds and bond funds by reviewing common questions that many have asked about bonds…

 

Q: What can I do to position myself for successful bond investing?

A: It is important that you “have all your bases covered” prior to starting on your bond investing or any investing as it is important that you have reduced or eliminated your debt to an acceptable level, you have a properly funded emergency fund (or you are working toward that goal), you understand credit—and you have looked at your finances in a comprehensive way.

By doing the above you put yourself in position for lasting success and you make your bond investing (or any investing) more likely to succeed—and even if you are unsuccessful your living conditions won’t be adversely affected.

 

Q: What is a bond?

A: a bond is a debt instrument used by corporations (and government entities) to help fund their growth.  Bonds are issued in increments of $1,000 and are sold at either a discount (below $1,000) or at a premium (above $1,000) and yield and yield to maturity is used to determine rates of return.

Interest rate movement will play a large factor in determining the actual yield or yield to maturity.  Bonds come in all durations with short, intermediate, and long-term available on the markets.

Governments also issue bonds (i.e. series EE and Series I) directly to individuals as well and they also issue municipal bonds  and treasuries among others.

 

Q: What is a bond fund?

A: a bond fund is a collection of bonds and can be mixed in any number of ways such as corporate and government, long-term only, short, intermediate and long-term, national and international and many other ways that a bond fund manager sees fit to create.

 

Q: What is the difference among corporate, municipal, government, international, series EE, series I and junk bonds?

 

  • Corporate bonds are a debt security issued by a corporation and sold to investors. The backing for the bond is usually the payment ability of the company, which is typically money to be earned from future operations. In some cases, the company’s physical assets may be used as collateral for bonds.

 

  • Municipal bonds (or “munis” for short) are debt securities issued by states, cities, counties and other governmental entities to fund day-to-day obligations and to finance capital projects such as building schools, highways or sewer systems etcetera. Generally, the interest on municipal bonds is exempt from federal income tax, however some municipalities issue both taxable and non-taxable munis.   Pension funds and foreign investors normally don’t get the tax break.

 

  • Government bonds are a debt security issued by a government to support government spending. Before investing in government bonds, investors need to assess several risks associated with the country, such as country risk, political risk, inflation risk and interest rate risk, although the government usually has low credit risk. Federal government bonds in the United States include savings bonds, Treasury bonds and Treasury inflation-protected securities (TIPS).

 

  • International bonds are a debt investment that is issued in a country by a non-domestic entity.  International bonds are issued in your country but are purchased outside of the country in which you reside and are purchased in your  country’s currency.  They pay interest at specific intervals, and pay the principal amount back to the bond’s buyer (you) at maturity in the same manner as domestic bonds.

 

  • Series EE bonds are a “non-marketable”, interest-bearing U.S. government savings bond that is guaranteed to at least double in value over the initial term of the bond, typically 20 years. Most Series EE bonds have a total interest-paying life that extends beyond the original maturity date, up to 30 years from issuance.

 

  • Series I bonds are a non-marketable, interest-bearing U.S. government savings bond that earns a combined: 1) fixed interest rate; and. 2) variable inflation rate (adjusted semiannually).  Series I bonds are meant to give investors a return plus protection on their purchasing power.  Series EE and I bonds are considered “non-marketable” savings bonds meaning they can’t be bought and sold in the marketplace.  The can be redeemed at many banks and financial institutions.

 

  • Junk bonds are a fixed-income instrument that refers to a high-yield or non-investment grade bond. Junk bonds carry a credit rating of BB or lower by Standard & Poor’s (S&P), or Ba or below by Moody’s Investors Service. Junk bonds are so called because of their higher default risk in relation to investment-grade bonds.

 

They do well when the economy is growing rapidly and stocks are rising.

 

Q: What are bond rating agencies and how do they operate?

A: There are a number of bond rating agencies and they include Weiss, S & P’s, Moody’s, Fitch and several others and they rate corporations, cities, counties, states and national government’s based on their ability or perceived ability to repay their debt.

In a sense it is based on the financial strength that they bring forward based on their past, present and projected ability to repay their debt obligations.

  

Q: What is the bond rating of the United States?

A: With the United States being the strongest economy in the world in the minds of many it is a big surprise for many when they learn that the United States does not have the highest bond rating.

The United States was recently downgraded from AAA to AA by Moody’s and Standard & Poors (several credit rating agencies around the world have downgraded their credit ratings of the U.S. federal government, including Standard & Poor’s (S&P) which reduced the country’s rating from AAA (outstanding) to AA+ (excellent) on August 5, 2011.

 

Q: If the interest rate rises what will happen to bond prices?

A: The bond price “will fall” as there is an inverse relationship (opposite relationship) to bond prices–meaning if interest rates fall bond prices will rise.

 

Q: What is YTM or Yield to Maturity and how do I determine what my YTM is prior to purchasing a bond?

A: Yield to Maturity takes into consideration the interest (coupon payments) during the period of bond ownership up until the bond is sold at its maturity date—thus YTM.

Yield on the other hand only includes the coupon payments that you will receive on an annual basis.

You can possibly get the YTM or projected YTM from your broker or other published financial publications.

 

Q: What is duration as it relates to bonds?

A: Duration is a measure of a bonds interest rate sensitivity.  You can use a bonds duration to make a better decision as to whether the bond will rise or fall based on interest rate movement.

 

Q: How are bonds taxed?

A: Many are taxed depending on whether they are inside or outside of a retirement account and the taxation is based on the interest received during the year.

If they are inside of your retirement account they may avoid taxation until withdrawals or retirement distributions begin to occur.  Some bonds (depends on the type) are taxed on an annual basis and some are taxed at maturity and those that are used for certain purposes may avoid taxation altogether.

 

Q: What is the biggest risk that I will normally face if I invest in bonds?

A: Market activity is the real key especially as it relates to rising inflation.  If inflation is stable or not moving upward much, interest rate movement will normally be stable as well and bond investments will remain a good play.

When a large number of bondholders move over to stocks for varying reasons that too can be a cause for concern.

However, rising inflation is something you must be aware of and if you are a bond owner you want to be aware of that movement so that you can countermove and limit your losses or protect your gains—in a timelier manner.

 

Q: What is bond laddering and how can I ladder my portfolio to increase my returns?

A: You can ladder your portfolio by purchasing bonds at different times and purchasing bonds with differing durations.

For example you can purchase short, intermediate and long-term bonds at differing intervals such as every 6 months, every year or every other year for a specified period of time—and that will help protect your gains or limit your losses.

 

Q: What is my number 1 concern if I decide to invest in bonds?

A: Depending on the type of bond you invest in inflation is normally the major concern as it will devalue the real worth of future interest payments and usually results in higher interest rates that will bring down the bond’s current market value.

 

Q: What is an inverted yield curve and how will it affect my bond investments?

A: It usually means the economy is slowing and moving into a recession.  Investors may forecast lower interest rates and pull money out of bonds and put into cash, stocks or mutual funds.

 

Q: How are bonds typically sold?

A: Usually in multiples of $1,000 if you purchase from a broker. Bond funds and mutual funds may offer investment of a lower amount.  Series EE and I bonds can be purchased for as little as $50.

 

Q: If a company liquidates where do I as a bondholder fall in claiming whatever cash becomes available as a result of the liquidation (bankruptcy)?

 

A: The good news is that bondholders are first in line to be paid during bankruptcy proceedings.  You would be considered a general creditor, along with employees, contractors and suppliers–stockholders would be the last in line.

 

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Qualified Business Income & Taxation

Learn how you can use QBI (Qualified Business Income) to lower your taxes…

 

After the tax cuts and jobs act of 2017, a popular buzzword or acronym that has crept up in the American lexicon is QBI or Qualified Business Income as it has the potential to lower the taxes for those who qualify.

 

In this discussion TheWealthIncreaser.com will try to explain what QBI is and show you ways that you can use this new tax change that occurred as a result of the tax cuts and jobs act of 2017 to reach your future goals more efficiently.

 

What exactly is QBI and why should I be concerned about QBI?

 

QBI stands for Qualified Business Income!

QBI is the net amount of qualified items of income, gain, deduction and loss from any qualified trade or business as the result of the 2017 tax cuts and jobs act that occurred in the United States.

In  laymen terms if you have income from a sole proprietor, partnership or other pass through entity you could potentially deduct 20% of the income and lower the taxes that you pay on your tax return.

The pass-through deduction is a personal deduction that you may take on your Form 1040 whether or not you itemize and the deduction is taken on line 9 (second page) of your Form 1040.

It is not an “above the line” deduction on the first page of Form 1040 that reduces your adjusted gross income (AGI).

Furthermore, the deduction only reduces income taxes, not Social Security or Medicare taxes so keep that in mind.

 

Can QBI be used for rental property?

 

The new Section 199A regulations make it clear that merely owning rental real estate that generates rental income is not a trade or business of being a real estate investor, and as such, wouldn’t qualify for the QBI deduction.

However, if you actively manage your rental real estate—there is the potential for some or all to be classified as QBI.

 

Who qualifiies for the QBI deduction?

 

If you are self-employed or your business qualifies as a pass-through entity, the Tax Cuts and Jobs Act says you may deduct up to 20% of your QBI on your federal income tax return if you meet the qualifications.

The QBI deduction is known as the pass-through entity deduction that you may have heard about!

 

The following would have to be subtracted out of your business income when calculating the QBI deduction:

 

* capital gains and losses

* dividends or interest

* annuity payments

* foreign currency gains or losses

* reasonable compensation for owner/employees of S-Corps

* guaranteed payments to partnerships and LLCs

 

Are there Income Thresholds?

 

The QBI Thresholds for the 2018 tax year are:

  • $157,500 for single filers, and

 

  • $315,000 for people filing joint returns

 

The numbers will be adjusted for inflation after the 2018 tax filing season.

 

Also, keep in mind that  for certain businesses that provide services such as law firms, accounting firms, and doctors’ offices, the limitations are steeper and the deduction is phased out altogether when taxable income reaches $207,500 ($415,000 for joint filers).

 

Example 1:

You formed a new company in 2018 and operated as a sole proprietor.

During 2018, your w-2 wages total $82,183, you itemize, make IRA contributions and pay tuition and fees (both of which would be non-deductible due to your combined income exceeding the threshholds) and your businesses generates a loss of ($11,763) from business 1 and a gain of $196,987 from business 2.

Your QBI deduction would be $34,956 calculated as follows:

$196,987 gain from business 2 minus ($11,763) loss from business 1 equals net gain of $185,224 less 1/2 of self employment tax paid of $10,442 equals QBI deduction of $34,956.

You file jointly with your spouse for 2018, and the combined “taxable income” for the year for both you and your spouse, after subtracting out your itemized deductions of $24,765 and the QBI deduction or qualified business income deduction, is $198,084.

You have two dependents that allow you to claim the “credit for other dependents” of $1,000, and your other taxes total $20,912 which consist of self-employment tax of 20,883 and an additional medicare tax of $29 since AGI exceeded the $250,000 threshold for married filing jointly.

Your total tax would be $56,031 and with federal withholding of only $3,198 you would owe taxes in the amount of $52,833 for the 2018 tax year.

 

Deduction for Income Above $315,000 ($157,500 for Singles)

 

If your taxable income exceeds $315,000 if married, or $157,500 if single, calculating your deduction is much more complicated and depends on your total income and the type of work you do.

 

Your first step would be to determine whether your business falls within one of the following service provider categories:

 

  • health (doctors, dentists, and other health fields)
  • law
  • accounting
  • actuarial science
  • performing arts
  • consulting
  • athletics
  • financial services
  • brokerage services
  • investing and investment management, or
  • trading and dealing in securities or commodities.

 

There is a final catchall category that includes any business where the principal asset is the reputation or skill of one or more of its owners or employees such as that of TheWealthIncreaser.com’s.

 

This likely includes many individuals who provide services not listed above.

 

Architecture and engineering services are expressly not included in the list of personal services.

 

Pass-through owners who provide personal services are not favored under the pass-through deduction.

 

They lose the deduction entirely at certain income levels.

 

There are no such limitations on pass-through owners who do not provide personal services and that discussion follows.

 

Deduction for Non-Service Providers (Income Over $315,000/$157,500)

 

If your business is not included in the list of service providers, and your taxable income is over the $315,000/$157,500 thresholds, how you figure your deduction depends on your taxable income.

 

Non-service Provider Taxable Income Above $415,000 ($207,500 for Singles)

 

If you’re a non-service provider and your taxable income is over $415,000 if married filing jointly, or $207,500 if single, your maximum possible pass-through deduction is 20% of your QBI, just like at the lower income levels.

 

However, when your income is this high a W2 wage/business property limitation takes effect.

 

Your deduction is limited to the greater of:

 

  • 50% of your share of W-2 employee wages paid by the business, or
  • 25% of W-2 wages PLUS 2.5% of the acquisition cost of your depreciable business property.

 

Therefore, if you have no employees or depreciable property, you get no deduction.

 

This is intended to encourage pass-through owners to hire employees and/or buy property for their business in order to stimulate the economy.

 

The business property must be depreciable long-term property used in the production of income—for example, the real property or equipment used in the business (not inventory).

 

The cost is its unadjusted basis—the original acquisition cost, minus the cost of the land, if any.

 

The 2.5% deduction can be taken during the entire deprecation period for the property; however, it can be no shorter than 10 years.

 

Example 2:

Example: David and Monica are married and file jointly. Their taxable income this year is $1,000,000, including $800,000 in QBI they earned from their nightclub business they own through an LLC or limited liability company.

 

They employed eight employees during the year to whom they paid $300,000 in W2 wages. They own their nightclub building outright and are not leasing.

 

They bought the nightclub building  two years ago for $1.2 million and the land is worth $200,000, so its unadjusted acquisition basis is $1 million.

 

Their maximum possible pass-through deduction is 20% of their $800,000 QBI, which equals $160,000.

 

However, since their taxable income was over $415,000, their pass-through deduction is limited to the greater of:

 

(1) 50% of the W2 wages they paid their employees $150,000, or,

 

(2) 25% of W2 wages (75,000) plus 2.5% of their nightclub building’s $1 million basis (25,000) equals $100,000.

 

Since (1) is greater, their pass-through deduction for tax year 2018 is limited to $150,000–not $160,000 that was initially calculated above prior to the limitations being applied.

 

Many owners of pass-through businesses, especially landlords, have no employees, thus the 25% plus 2.5% deduction is of most benefit to them.

 

Conclusion:

 

We will conclude this discussion by defining what a pass through entity is and then reiterate how you can make the QBI deduction work better for you and your family.

 

Definitions:

Pass-through entity:

 

A pass-through entity is a business entity that passes through its income to the owners of the business. The owners then report the business income on their personal returns.

 

Generally, pass-through entities include partnerships and S corporations, but the qualified business income deduction also applies to other unincorporated entities such as sole proprietorships and single-member LLCs.

 

Partnership

S-Corporation

Sole Proprietorship

Single-Member LLC

 

Common Questions:

 

How can I make the Qualified Business Income Deduction work for me?

By becoming a business owner or continuing as a business owner with the right form of ownership (discussed above) you can deduct up to 20% of your qualified business income or, if lower, 20% of your taxable income net of any capital gain.

 

This deduction would be claimed on your individual tax return.

 

Generally, qualified business income refers to the business’s profits (income minus expenses).

 

Qualified business income does not include salary or wages paid to you–either as W-2 wages from an S corporation or guaranteed payments from a partnership.

 

This basic formula applies if the taxable income that business owners report on their individual returns does not exceed certain thresholds that were mentioned earlier–and will be presented again to further your understanding.

 

The thresholds for taxable income are:

 

$157,500 for single filers and $315,000 for people filing joint returns.

 

The numbers will be adjusted for inflation after 2018.

 

If taxable income does exceed these thresholds, the deduction factors in limitations relating to the wages the business pays to its employees and depreciable assets the business owns–also discussed above.

 

A key point to keep in mind – the latest pass-through business tax reform reduces “federal income tax” but does not reduce self-employment taxes for income from partnerships and sole proprietorships, or income for purposes of the alternative minimum tax.

 

How can I benefit throughout the year?

If you have the right form of business ownership and your income passes through on your federal 1040 return you can adjust your estimated taxes to account for this reduction in taxable income.

 

But, be sure to use caution because if you “underestimate” how much income you’ll earn in a year, the penalty for underpayment of estimated taxes can hurt you during filing time as you will be penalized.

 

In the examples presented above in this discussion “estimated taxes” were not taken into consideration and in both examples “a penalty” would more than likely apply for underpayment of estimated taxes!

 

If the new tax reform for pass-through entities sounds complex—you can increase your understanding by comprehending this article and site, gaining a real handle on your personal finances and hiring competent professionals if you now have a pass through entity or you anticipate having one in your future.

 

What is QBI?

The new qualified business income deduction provision in the Tax Cuts and Jobs Act (TCJA) gives a 20% deduction for qualified business income.

QBI is also called the section 199A deduction.

The goal of the legislation is to improve the benefits for flow-through entities and sole proprietors, who did not receive the major tax cuts that were given to C corporations (regular corporations) where their tax rate was reduced to 21%.

Whether the rule meets the goal remains to be seen. Any strategies you consider should be approached with  caution as the new law has some grey areas.

However, you can review the basic rules and strategies and see how they may apply to you, and what questions you may want to explore further as you expand and grow your business.

 

What exactly is a qualified business?

A qualified business is any business except those “specified service businesses” and the income earned by an employee, from guaranteed payments or personal interest, dividends or capital gains.

The specified service businesses can be in health, law, accounting, consulting, brokerage services, financial services, and others, but exclude architects and engineers.

 

What forms of ownership qualify?

QBI is available to sole proprietors and owners of pass-through entities such as S-Corps, LLCs, and partnerships.

 

Are there any limitations?

QBI is subject to limitations based on the taxpayer’s income and the type of business they operate.

Service businesses face additional limitations, however non-service businesses face limitations based on:

 

(1) 50% of the W2 wages they paid their employees or,

(2) 25% of W2 wages plus 2.5% of their capital expenditures

 

W- 2 and depreciation limits apply to non-service businesses but they are always allowed a deduction of some amount if they qualify (contrast that with a service business where elimination of the deduction will occur at some income level).

 

Exactly how does a Qualified Business Deduction work?

The QBI deduction reduces your taxable income, but not your adjusted gross income and can be taken regardless of whether you itemize deductions on your tax return.

To get the full benefit of the deduction, and not be subject to further wage and capital limitations, taxable income must be no greater than:

$315,000 for married filing jointly (phases-out through $415,000);

and $157,500 for single or married filing separately (phases out through $207,500).

 

  • If the pass-through entity owner is over the dollar threshold and a specified service business, it does not get the deduction; but if it’s a qualified trade or business it does, although it is subject to wage and capital limitation.

 

What is the amount of the deduction?

The deduction is the lesser of: 20% of the taxpayer’s qualified income, and a wage and capital limitation.

The wage and capital limitation is the greater of: 50% of the W-2 wages; or 25% of the W-2 wages plus 2.5% of the unadjusted basis of all qualified property–whichever is greater.

In addition, there is 20% deduction of REIT dividends and distributions from publicly traded partnerships.

 

What is the W-2 wage limit all about?

The W-2 wage limit minimizes the deduction if the business does not employ a substantial number of people relative to its size, or invest in a substantial amount of property under the “wage-and-property limit.”

Specified service businesses that rely primarily on the efforts of their owners or those with limited employee or capital investments will be affected the most and they may not be able to fully utilize the new qualified business income deduction.

In addition, there is an overall limitation on the deduction!

The limitation is the lesser of: the combined qualified business income, and 20% of any excess taxable income minus the sum of any net capital gain plus any qualified cooperative dividends.

The total amount cannot exceed the taxpayer’s taxable income (minus the taxpayer’s net capital gain) for the tax year.

 

How can I better qualify for the deduction?

If some portion of your qualifying business income comes from a “specified service business” you could:

  • Redefine your business if done so legally

 

  • You could consider spinning off portions of your business (separating the specified service business portion from the other qualified trade or business portion)

 

  • You could consider operating as a real estate investment trust (REIT), which do especially well. There is only one level of tax, and shareholders are entitled to a 20% qualified business income deduction for ordinary distributions with no W-2 basis limitation. On the flip side, REIT compliance and maintenance rules are complicated.

 

  • You could consider operating as a publicly traded partnership (PTP), which are not subject to the W-2 wage limit and qualified property cap.

 

  • If you are participating in an S corporation, it may be beneficial to take advantage of reasonable compensation so that you could meet the 50% of wages limitation by paying out more in compensation.

 

  • You could possibly rearrange your employer-employee relationship to one in which there is a partnership under an agreement in which the individual’s income from the partnership would be higher and their salary would be lower, thus making them (or you) eligible for the deduction.

 

  • You could use a gifting strategy (give up a percentage of business ownership) to bring in more people that qualify under the  “$157,500 per person threshold.”

 

  • If you are in a partnership, consider switching from guaranteed payments, which don’t qualify, to preferred returns, which do.

 

  • You could possibly increase the W-2 limit by switching from 1099 independent contractors to W-2 employees–think this process through carefully as there may be other negative effects as well.

 

  • You could manage your total income and taxable income so it is below the phase-out thresholds in order to qualify for the deduction.

 

  • You could manage your pension contributions to reduce taxable income as no part of the pension contributions would be included in income, so the QBI deduction could apply.

 

  • You could make tax-deductible qualified retirement plan contributions to reduce  your or your employee’s  taxable income in order to qualify for the deduction.

 

  • You can use your imagination to come up with other scenarios that might allow you to legally qualify for the QBI deduction–be sure to run it by your tax professional to ensure that it falls under the QBI guidelines.

 

In summary, The Tax Cuts and Jobs Act (HR 1, “TCJA”) established a brand new tax deduction for owners of pass-through businesses that can provide a tangible advantage for those who put themselves in position to qualify.

 

Pass-through owners who qualify can deduct up to 20% of their net business income from their income taxes, reducing their effective income tax rate by 20%.

 

This deduction begins for 2018 and is scheduled to last through 2025—that is, it will end on January 1, 2026 unless extended by Congress–as it was not made permanent in the manner that the 21% tax rate for corporations were.

 

If you are a small business owner–or desire to be one–you need to understand this somewhat complex, but highly beneficial deduction.

 

Always remember that:

 

You Must Have a Pass-Through Business

 

  • a sole proprietorship
 (a one-owner business in which the owner personally owns all the business assets)
  • a partnership
  • an S corporation
  • a limited liability company (LLC), or
  • a limited liability partnership (LLP).

 

As an owner you would pay tax on the money on your individual tax return (as opposed to corporate tax return) at your individual tax rates.

 

The majority of small businesses are pass-through entities.

 

Regular “C” corporations do not qualify for this deduction; however, starting in 2018 they do qualify for a low 21% corporate tax rate–that was made permanent and could be more beneficial–depending on your type of business, revenue generation and your intended goals for the business.

 

Therefore, if you are structuring a new business or have an existing business you must determine the best form of ownership from both a tax and liability position among other considerations that you may have to determine the best type based on your future goals and the direction that you desire to take your future.

 

Other Key Points:

QBI is determined separately for each separate business you own.

If one or more of your businesses lose money, you deduct the loss from the QBI from your profitable businesses.

If you have a qualified business loss—that is, your net QBI is zero or less–you get no pass-through deduction for the year.

Any loss is carried forward to the next year and is deducted against your QBI for that year.

This serves as a penalty for having a money-losing business.

 

Example: During 2018, you earned $20,000 in QBI from a lawn care business and had a $40,000 loss from your office store business.

You have a $20,000 qualified business loss, so you get no pass-through deduction for 2018. The $20,000 loss must be carried forward and deducted from your QBI for 2019.

 

You Must Have Taxable Income!

To determine your pass-through deduction, you must first figure your total taxable income for the year (not counting the pass-through deduction). This is your total taxable income from all sources (business, investment, and job income) minus deductions, including the standard deduction ($12,000 for singles, $18,000 for head of household and $24,000 for married filing jointly in 2018).

 

You must have positive taxable income to take the pass-through deduction!

Moreover, the deduction can never exceed 20% of your taxable income.

Example: You are a single taxpayer who run a consulting business which earned $80,000 in profit this year.  You had no other income and you take the standard deduction ($12,000).

Your taxable income is $68,000 ($80,000 income – $12,000 standard deduction = $68,000).

Your pass-through deduction cannot exceed $13,600 (20% x $68,000 = $13,600).  Even though  you had $80,000 in QBI, your deduction is limited to $13,600, not 20% of $80,000 = $16,000 because you had no other income such as w-2 income.

If you have other income that allows you to take advantage of the full 20% deduction you can do so as long as your taxable income is below $315,000 ($157,500 for Singles).

 

If you exceed the above limits that is a good problem to have–just realize your QBI deduction may be limited or eliminated if you are a “service business owner” and you exceed the threshold limits.

 

Deduction for “Service Business Owners” (Income Over $315,000/$157,500)

 

If your business involves providing personal services, and your taxable income is over the $315,000/$157,500 thresholds, your pass-through deduction is gradually phased out up to $415,000/$207,500 of QBI.

 

And remember that if you fall at the top of the income range you get no deduction at all.

 

That is, if your total income is $415,000 if you’re married, or $207,500 if you’re single, you get no deduction. This was intended to prevent highly compensated employees who provide personal services—lawyers, for example–from having their employers reclassify them as independent contractors so they could benefit from the pass-through deduction.

 

There is no such phase-out of the entire deduction for non-service providers.

 

All the best toward your effective use of QBI and your future  success…

 

 

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Hot Tax Topics & Wealth Building

As we enter the latter part of January many consumers in the U.S. and other parts of the world are gearing up for the filing of their 2018 income tax returns…

Learn about the latest tax news so that you can avoid the financial blues…

 

In this discussion TheWealthIncreaser.com will look at and discuss a number of critical areas of taxes that could help you maximize your tax position in 2019 and beyond.

 

In order to achieve more and maximize your personal income tax return it is important that you have knowledge of—and a practical understanding of how you can do the following more effectively:

 

Use the New Tax Rates to Your Advantage

 

If you are an individual and do not have majority ownership in a C corporation or S Corporation–your maximum tax rate is 35% versus the maximum for a corporation of 21% due to the job and tax act of 2017.

 

That means if you have high income that puts you in the upper income tax brackets you could possibly reduce the taxation of your income by establishing a corporation or keeping your income in the corporation as opposed to receiving a salary if you now have a corporation.

 

There are a number of ways that you can strategize to lower your taxes by using the new tax rates to your advantage and it is up to you and your professional team to find ways to do just that.

 

If You are a Business Owner or Desire to be One You Must Understand the Forms of Ownership

 

Sole Proprietorship

Limited Liability Company (LLC)

Limited Liability Partnership (LLP)

S Corporation

C Corporation

 

You must know and understand fully that certain types of ownership allows you to shield your personal assets against the liabilities of your business.

 

If you are operating as a sole proprietor where you are using your social security number as your Federal ID you are putting yourself and your family in position to be personally liable for actions that may arise out of liabilities of your business.

 

Whether a pass through entity or a corporation will be of greatest benefit to you will depend on your unique tax and financial position, the type of business you operate, the state that you are in, your liability (risk) exposure and the path that you desire to take to reach your goals once you lay out all of your intentions–whether you decide yourself or you decide to use financial professionals.

 

IRA’s

 

IRA’s and other tax favored retirement plans retain those tax advantages in spite of the tax cut and jobs act of 2017.  That means the “saver’s credit” and deductibility for a traditional IRA are still available.

 

In addition ROTH conversions can be done regardless of your income level and ROTH IRA’s still enjoy the tax free benefit upon withdrawal if done so according to IRS guidelines.  Contributions remain tax free upon withdrawal.

 

With both IRA’s the first time homebuyer withdrawal provision remains as well as several other “exceptions” that can help you avoid the tax bite.

 

HSA’s

 

A Health Savings Account may allow you to save more and meet your health care expenses in a tax efficient manner by allowing you to deduct the amount you contribute,  allow your contributions to grow tax free and allow you to withdraw your earnings tax free when used for medical related expenses.

 

Be sure to give the “triple tax benefit” of HSA’s real consideration.  In addition, be aware of the expenses that you will pay as that can eat away at your earnings.  Be sure to shop for the best plan available based on your financial position and health saving goals.

 

Know at the earliest time possible if you are going to utilize the standard deduction or itemize your deductions

 

Standard Deduction

 

The standard deduction has been increased for the 2018 tax year and many of those who once itemized will find that it is no longer to their advantage to do so.

 

Single is now at $12,000

Head of Household is now at $18,000

Married Filing Jointly is now at $24,000

 

Personal exemption eliminated for most—some dependents on your tax return may allow you to claim a $500 personal exemption.

 

Be sure to consider the effect on your state tax refund in determining whether to itemize or claim the standard deduction–as you may be surprised to find that a reduced itemized deduction at the federal level could still be to your benefit if you would get a higher overall refund or pay less in taxes when the federal and state amounts have been combined!

 

Itemized Deductions

 

Medical

Long-Term Care (LTC) insurance that you pay, Medical Insurance that you pay, Health Care Insurance Premiums that you pay, Eye Care that you received during the year, Out of Pocket medical expenses that you pay for the year, Dental Expenses that you pay for the year, Prescription drugs that you purchase for the year, Mileage to and from your medical care destination and many other medical related expenses may all be deductible in 2018 if they exceed 7.5% of your AGI (Adjusted Gross Income–line 7 on page 2 of form 1040) and you itemize your deductions. 

 

The AGI limit increases to 10% in 2019 and beyond unless Congress acts.

 

Taxes

 

State income taxes and sales taxes, ad valorem taxes, property taxes and possibly other taxes may be deductible by you if you itemize and otherwise qualify.

 

Keep in mind that there are limitations on taxes in some instances—so keep that in mind—particularly if you are in a high tax state such as California, New York, New Jersey, Connecticut and several others.

 

Mortgage Interest

 

Mortgage interest deduction is now limited to $750,000 down from 1 million.

Mortgage Insurance Premiums (MIP) and Private Mortgage Insurance (PMI) are not deductible for the 2018 tax year and beyond unless congress acts.

 

Charitable Contributions

 

New rules apply to deducting charitable contributions that are non-cash as you must provide additional documentation for donations valued over $250.

 

As for church donations and others that are in the form of cash the maximum percentage that you can deduct has changed,  however the required documentation is basically the same.

 

2% AGI Deductions Eliminated

 

Tax related fees, investment fees, unreimbursed employee expenses (including automobile expenses) and other 2% of AGI deductions have been eliminated for the 2018 through 2025 tax years.

 

Social Security Income Threshold Increases

 

In tax year 2018 the maximum social security wage base is $128,500—however for the 2019 tax year that wage base will increase to $132,900 which means if you earned over $128,500 in 2018 you may see a tax increase in the amount of social security tax that you will pay (6.2% of the amount that is between $128,500 and $132,900 will now be taxed) when you file your 2019 taxes.

 

The Medicare portion limit did not change as a result of the tax cut and jobs act of 2017.

 

Conclusion

 

It is important that you realize that many changes have occurred over the past few years as it relates to your taxes and the filing of your tax return. 

 

The form 1040 has a new look and now includes “Schedules” that allow you to include in income or deduct many of the items that were on page 1 of the 1040. 

 

You will now sign on page one as opposed to page two.  1040EZ and 1040A no longer exist and you must use form 1040 to file your 2018 through 2026 tax returns. 

 

In most instances you won’t claim exemptions, however the child tax credit has gone up to $2,000 per child with up to $1,400 of the credit refundable.  Student loan interest deduction and other educational credits remain.

 

Whether it is the “Affordable Health Care Act” (penalty will be eliminated after the 2018 tax filing year) the “Tax Cut and Jobs Act of 2017” or any other incidental changes in the tax code—it is important that you put yourself and your family in position to take advantage of the changes and not let the changes take advantage of you.

 

Be sure to choose highly competent professionals and be sure to gain the knowledge that you need so that you can succeed. 

 

Be sure to engage with professionals who have a track record of success, someone who encourages you to ask questions and are willing to spend the time that is necessary so that you can fully understand the questions you ask–and someone who adds value to your financial and overall life from this day forward!

 

You want to put yourself in an informed position where you know what is going on “tax wise” so that you can position yourself in a way where you can’t easily be taken advantage of.

 

By landing on this page alone—you are showing a real commitment toward success in you future and you are on a path to maximizing your tax knowledge in a way that will put you and your family in position to achieve more throughout your lifetime.

 

By landing on this page and navigating this site you will put yourself in position to not be taken advantage of like many were during the financial crisis from 2007 to 2009.

 

You will put yourself in position to know how the recent tax changes over the past few years will affect you and your family—thus giving you the opportunity to plan proactively and improve the likelihood that you will achieve your goals.

 

You no longer have to let your ignorance of the tax laws, immaturity in approaching your finances, insecurity in approaching your finances or the inability to approach your finances due to fear–lead to idleness and not moving forward in the financial realm of your life!

 

Today is the day that the Five “I’s” die—and you more than just try!

 

Today is the day that you pursue a new road to success that has fewer turns and less stress—and allows you to give it your best!

 

Today is the day that you become aware, mature, believe in yourself, operate daily with character and move to action in a manner where the success that you see has already been achieved.

 

All the best to your new tax knowledge and new road to success…

 

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New Beginnings & Wealth Building

Learn how you can approach your future from a new vantage point and achieve more…

 

As 2018 ends and 2019 begins—many are approaching various areas of their life with a new purpose or focus.

 

Whether you have a new vision of how you want to pursue your finances, health, fitness or any other goal–you must have a system that will bring into reality that vision.

 

In this discussion TheWealthIncreaser.com will look at and discuss a number of ways that you can achieve more and build wealth more efficiently in 2019 and beyond.

 

In order to pursue something new you in many cases must build from something old!

 

Your past failures and successes can be used to guide or direct your future!  By using your past as a guide you know what to avoid and what to continue doing.

 

As you build on your past financial successes it is important that you have a mental system that you can carry within your mind that allows you to see your credit and finances in clear terms—and act as a “more focused guide” that allows you to attain or achieve your goals more effectively and more efficiently.

 

You can use the following 3 approaches to get on a serious path to a “new beginning” in your life that allows you the freedom of thought to see your future in a manner where worry, anxiety, fear, frustration, lack of effort and excuses can be reduced or eliminated in your life.

 

1)   Utilize Personal Financial Statements Appropriately

It is important that you realize that many people who journey through life have more of a money management issue as opposed to not having enough income that allows them to reach their goals.

 

If only they had a money management system that made sense to them and that they created and believed in—they could achieve far more.

 

The use of personal finance statements in the right manner could allow those who fail to manage (or inappropriately manage) their finances just what is missing in their life to turn the tide in their favor and make the goals that they desire or need to attain a real possibility.

 

Be sure to use a personal cash flow statement (budget) at a minimum to help determine where you now are so that you can start on a new beginning and achieve more.

 

A monthly cash flow statement could be what is needed to get you to manage your finances more effectively and achieve more in the current economy.

 

For those of you who would like to achieve even more, be sure to consider creating (or have your financial planner do so on your behalf) a personal income statement to see how your finances look over a period of time—say one year or on an annual basis.

 

In addition be sure to create a personal balance sheet so that you can have a clear picture of what you own and what you owe—thus providing you a clear picture of your net worth.

 

By doing some or all of the above you will be on a serious journey or new beginning as it relates to your finances.

 

2)   Have a Thorough Understanding of Credit & How You Utilize It

Now that you have a clear picture of your monthly income, your monthly liabilities and you now know your net worth—you must put together a debt payoff or debt pay down plan–if you need to address those areas.

 

Whether you do or don’t have credit liabilities—you must have a practical understanding of credit that allows you to navigate through life in a manner where you are in control—and not creditors.

 

If you currently have credit card debt or other liabilities that are making your finances difficult to manage—be sure to get a thorough understanding of credit so that you can achieve more throughout your life.

 

3)   Know All Areas of the Financial Affairs in Your Life that You Must Address

Now that you know your current financial condition and you know how to effectively manage credit—you must now complete the picture by knowing all areas of your finances that you must address.

 

Insurance

Investments

Taxes

Emergency Fund

Education Planning

Estate Planning/Wills

Retirement

 

You must have a system that allows you to know and address the above critical areas of your finances throughout your life.

 

However,  just knowing is not appropriate–you must devise a plan to review and make improvements in all areas on a consistent basis!

 

Conclusion

By addressing the above areas on a consistent basis you will develop the habit of consistency and achieve more throughout your lifetime.

 

However, wanting to achieve more must be balanced with your willingness and determination to put in the required effort at this time if you are to achieve more by utilizing the steps in this discussion.

 

There is no hard and fast rule as to the timeline that you should do the above.  However it is important that you develop an action mindset so that you won’t procrastinate from this day forward.

 

You must realize that there are many paths to financial success.  Most people fail or fall short of reaching their financial goals because they lack a plan—or lack a plan that they can readily comprehend that gives them practical steps that they can take that will get them to their destination.

 

It is the desire of TheWealthIncreaser.com that this brief discussion has provided you the opportunity to see your “new beginning” in clearer terms and act as a springboard for you to achieve success by providing you a “clearer blueprint” that you can use throughout your lifetime so that you can enjoy life on your terms.

 

All the best toward your “new beginning”  and long-term success…

 

Learn what money management personality  you most closely resemble…

 

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Education Funding Vehicles & Wealth Building

Learn how you can fund your and your loved ones education so that you can build wealth efficiently and achieve more during your lifetime…   As the year ends and families gather around the table, the topic of education funding for a planned child, a newborn, a child whether toddler or teen will be on … Continue reading