Social Security Simplification & Wealth Building

Learn the importance of knowing all about social security prior to you actually deciding to get your benefits…                 


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Caution: 50-minute read, but well worth it in the opinion of for those who desire to take control of their understanding of Social Security


In the current economy the threat of Social Security and Medicare tampering happens on a regular basis.  But what exactly is Social Security and Medicare–and how can you make the Social Security and Medicare that you have contributed to work for your best advantage during your retirement years?


Deciding on the best approach to take to receive your Social Security benefits can be a confounding and confusing process for many, and this discussion is designed to clear up competing arguments on when and what is the best approach to receive retirement benefits and more specifically your Social Security benefits so that the average person can understand and possibly provide guidance so that they are better informed.


And just as your investments and how you approach them are determined by your unique goals that you have, your risk-tolerance level, your income and your personal situation–so too does your analysis of your Social Security that you will receive, to a lesser or greater degree, depend on those same factors.


In this timely discussion, will attempt to simplify the topic of Social Security so that you can make better use of Social Security during your retirement years–and possibly be of more benefit to your heirs after you transition.


Social Security & Your Finances


Learn how to determine the best time to receive the social security and other benefits that you are entitled to…


As you age and edge closer to retirement, Social Security and your other retirement income becomes a real concern.


In this discussion, will discuss the ins and outs of Social Security so that you can better time “the time” (pun intended) that you will elect to receive your benefits, and furthermore show you other things that you can do as you approach retirement that can enhance your Social Security and other benefits that you may be entitled to.


You can apply for Social Security disability income at any time if you are suffering from a disability that allows you to receive benefits.


Full Retirement Age, or FRA, is the age when you are entitled to 100 percent of your Social Security benefits, which are determined by your lifetime earnings.  It is gradually increasing, from 66 and 6 months for those born in 1957 to 66 and 8 months for those born in 1958 and, ultimately, 67 for people born in 1960 or later.  Be sure to “distinguish” that FRA when you are entitled to 100% of your Social Security benefit, is not the same as your Maximum Benefit Amount which could be 25% or more higher than the amount you receive at your FRA.


Those FRA dates apply to the retirement benefits you earned from working and to spousal benefits, which your husband or wife can collect on your work record.  They differ slightly for survivor benefits, which you can claim if your spouse dies.


Full retirement age for survivors is 66 and 4 months for people born in 1958 and gradually increases to age 67 for people born in 1960 or later.


  • Claiming benefits “before” full retirement age will lower your monthly payments that you receieve from the SSA; the earlier you file — you can start at age 62 — the greater the reduction in benefits.  Spousal and survivor benefits are also reduced if you claim them before reaching full retirement age.


  • You can increase your retirement benefits by waiting past your FRA to retire.  Each month you put off filing up to age 70 earns you delayed retirement credits that boost your eventual benefit.


How early should I decide to get my benefits?


Your window to elect to receive Social Security benefits begin at age 62 and end at age 70 (note: you can elect to receive Social Security after age 70, however there is no financial benefit of doing so).


That’s a difficult question and will depend on your goals, risk-tolerance level, income, tax position, personal situation and other factors that may be unique to your current and anticipated financial position.  You can claim Social Security as early as age 62, but it may be to your benefit to put off filing for benefits as long as possible (pun intended).


By delaying you can maximize your monthly payments.  But you may want to do further analysis.


Here are some key factors that you may want to consider:


  • Q: How’s your and your family’s health history?  A: If you have a reasonable expectation of living decades past retirement, postponing benefits to get a bigger payment could prove important to your long-term financial stability.  But if you turn 62 and you are in poor or debilitating health, or you have a genetic predisposition to certain illnesses, or otherwise have a pessimistic view of your future, you may decide it makes more sense for you and your family to get what you can, while you can.


  • Q: How long do you expect to be gainfully employed? A: Many older workers are being nudged into early retirement as companies downsize, and they wind up spending their last working years in the gig economy or other odd jobs.  If you are one who did not plan appropriately for you golden years and you find yourself struggling to pay your monthly expenses, filing for Social Security at age 62 or before your FRA and taking lower benefits may be what you need to make ends meet.  Just be sure to take into consideration inflation, rising property taxes, rising insurance rates and other factors that may be unique to you and the environment in which you live, into serious consideration.


Still, there are strong arguments for waiting as long as you can, and you want to use caution and do careful analysis of the choices available:


  • Filing earlier locks you into a lower benefit on a “permanent” basis.  You are not entitled to 100 percent of the benefit calculated from your earnings history unless you apply at full retirement age (66 and 6 months for people born in 1957, 66 and 8 months for people born in 1958 and rising two months annually to age 67 over the next few years).



  • From full retirement age until age 70, you can earn delayed retirement credits that can boost your eventual benefit by two-thirds of 1 percent for each month of delay — and increase survivor benefits for your spouse, if you die first.


Survivor, Spousal & Dependent Support


  • after you transition your spouse and/or dependents could receive–survivor benefits


  • after 10 years of marriage and you divorce–your “former spouse” could be entitled to benefits–divorced spouse benefits


  • dependents may be entitled to receive social security benefits based off of your work record–dependent benefits


Other family members may be entitled to benefits that you have earned through the Social Security program during your working years.


Social Security “survivor’s benefits” are paid to widows, widowers, and dependents of eligible workers and this benefit is particularly important for “young families with children” and the benefit amount would be based on your earnings, if you were to transition after accumulating a work history.


If you are divorced, your ex-spouse can receive benefits based on your record (even if you have remarried) if certain conditions are met.


Generally, you must be married for one year before you can get spouse’s benefits.  However, if you are the parent of your spouse’s child, the one-year rule does not apply.


The same is true if you were entitled (or potentially entitled) to certain benefits under Social Security or the Railroad Retirement Act in the month before the month you got married.  A divorced spouse must have been married 10 years to get spouse’s benefits.


You can apply for benefits by going online and completing the application for benefits.


Regardless of when you claim Social Security benefits, the sign-up age for Medicare is still 65. You can’t enroll earlier, except under very narrow circumstances, and you may incur hefty fees for signing up later.  There is a “time-period window” (roughly a 6-month period near the time of your 65th birthday) that must be met in order to sign up and receive Medicare!


How does a Reduction in Benefits work?


It depends on the year you were born and how long until you reach full retirement age, abbreviated as FRA.  That’s the age at which you would collect 100 percent of the monthly benefit payment that the Social Security agency calculates from your lifetime earnings history.


Retirement benefits are designed so that you get the full benefit if you wait until full retirement age, which is 66 and 6 months for those born in 1957, 66 and 8 months for those born in 1958 and gradually rising to 67 for those born in 1960 and afterward.  If you file early, Social Security reduces the monthly payment by 5/9 of 1 percent for each month before full retirement age, up to 36 months, and 5/12 of 1 percent for each additional month.


Suppose you were born in 1962 and will turn 62, the earliest age to claim retirement benefits, in 2023.


Filing at 62, 60 months early, permanently reduces your monthly benefit by 30 percent and if you would have been entitled to $2,000 a month at full retirement age, you will get $1,400 if you start benefits when you turn 62.


Here’s what the reduction would be in subsequent years.


  • Age 63: 25 percent


  • Age 64: 20 percent


  • Age 65: 13.3 percent


  • Age 66: 6.7 percent


In essence, by starting early you would forfeit roughly 5% to 7% or more in guaranteed returns a year, depending on the year you decided to start receiving your benefits.


  • The figures above represent the reduction if you start benefits as soon as possible upon reaching the designated age.  The benefit decrease is calculated based on months, not years, and each month that you wait beyond your 62nd birthday lessens the reduction.



  • All care in the accuracy in the data above was pursued, however the above data cannot be guaranteed as changes occur over time and the data obtained cannot be guaranteed.


What is the Maximum Benefit that I could receive?



You receive the highest benefit payable on your own record if you start collecting Social Security at age 70.


Once you reach your full retirement age, or FRA, you can claim 100 percent of the benefit calculated from your lifetime earnings.  Again, the full retirement age is 66 and 6 months for people born in 1957, 66 and 8 months for those born in 1958 and for those born in 1959, 66 and 10 months.


It will incrementally increase to 67 over the next few years, however if you were to hold off a few years, you could earn delayed retirement credits that increase your eventual benefit — by two-thirds of 1 percent for each month you wait.


For example, if you were born in 1958, your reach full retirement age between September 2024 and August 2025.  If you put off filing for Social Security until you turn 70, you’ll get 40 months of delayed requirement credits, good for a bump of nearly 27 percent over your full retirement benefit.


If the benefit you’re entitled to at FRA is $1,800 a month, at 70 your benefit would bump up to about $2,280 a month.


Here’s how that $1,800 full benefit could grow for you if you decided to wait:


  Year of birth     Full retirement age    Benefit at 70   


1954 66 $2,376 (132% of full retirement benefit)
1955 66 and 2 months $2,352 (130.67%)
1956 66 and 4 months $2,328 (129.33%)
1957 66 and 6 months $2,304 (128%)
1958 66 and 8 months $2,280 (126.67%)
1959 66 and 10 months $2,256 (125.33%)
1960 or later 67 $2,232 (124%)

At age 66 and 8 months you would receive a benefit of $1,800 a month, however if you waited to age 70, you could pocket $2,280 monthly–a difference of $480 a month, which could go a long way if you were in financial position and health condition to hold off a few years.


Keep Points


  • You can claim benefits later than 70, but there’s no financial reason to do so as delayed retirement credits stop, and your payment tops out once you attain age 70.


  • From age 67 to age 70 you can earn “delayed retirement credits” which can increase the benefit amount that you would receive.


What is the maximum amount that I can receive if I contribute a substantial amount to the system?


The most an individual who files a claim for Social Security retirement benefits in 2024 can receive per month is:


  • $2,710 for someone who files at 62


  • $3,822 for someone who files at full retirement age (66 and 6 months for people born in 1957, 66 and 8 months for people born in 1958).


  • $4,873 for someone who files at age 70 (Maximum Monthly Benefit Possible for anyone in 2024)


To add more clarity, the average Social Security retirement benefit in October 2023 was $1,796 a month, while the average disability benefit for 2023 was $1,489 a month.


You would be eligible for the maximum benefit if your earnings equaled or exceeded Social Security’s maximum taxable income — the amount of your earnings on which you pay Social Security taxes — for at least 35 years of your working life.


The maximum taxable income in 2024 is $168,600 and the figure is adjusted annually based on changes in national wage levels (wage adjustments), and thus the maximum benefit changes each year.


Also be aware that the maximum benefit is not the same as the maximum family benefit.  The most a family can collectively receive from Social Security (including retirement, spousal, children’s, disability or survivor benefits) on one family member’s earnings record differs from the maximum benefit amount for an individual mentioned above.  That amount is generally, about 150 to 180 percent of your full retirement benefit.


Can I stop and later restart receiving my Social Security benefits?


Yes, within limitations.  If you are in your first year of collecting retirement benefits, you could apply to Social Security for a “withdrawal of benefits” if you started early, say age 62.


If you later got an unexpected windfall such as an inheritance, lottery winnings, or a pay raise or higher-paying job, you could theoretically be in a position to wait until you are older and you can collect a larger benefit if you do so within 12 months of the date you first claimed your benefits.


You start the process by filling out Social Security form SSA-521. and sending the completed form to your local Social Security office, preferably by certified mail.


If you opt for a stop (withdrawal), Social Security will treat it as if you never applied for benefits in the first place, and you will have to repay every dollar you’ve received including the following:


  • Your monthly retirement payments.


  • Any family benefits collected by your spouse or children, who must consent in writing to the withdrawal.



If you’ve been getting retirement benefits for more than a year, the “window for withdrawal” has closed for you!


However, once you reach full retirement age (66 and 6 months for those born in 1957, 66 and 8 months for those born in 1958 and rising two months per year to 67 for those born in 1960 and later), there’s a second option:


You can request a suspension of benefits!


During a suspension, you accrue delayed retirement credits that were mentioned earlier, which will increase your monthly retirement benefit when you start collecting again.


You can ask Social Security to reinstate your benefits at any time prior to turning age 70, and if you don’t ask for reinstatement by age 70, the agency will do it for you!


Be aware that:


  • If you change your mind about a withdrawal of benefits, you have 60 days from the date Social Security approves your withdrawal to cancel the request.


  • The SSA-521 includes a question asking if you want to keep “Medicare” benefits.  You can if you want to, however if you don’t, there are numerous implications both for any health care benefits you’ve already received and for re-enrollment in Medicare at a later date.  You can review these implications in the Social Security publication “If You Change Your Mind.”


  • You don’t have to hand in your notice when you start getting retirement benefits, as there is “no requirement” that you stop working.


  • But continuing to draw income from work might reduce the amount of your benefit if you claim Social Security before you reach full retirement age (FRA), the age when you qualify to collect 100 percent of the maximum benefit allowed from your earnings history.


To reiterate, Full Retirement Age is 66 years and 6 months for people born in 1957 and will rise two months for each subsequent birth year, until it settles at 67 for those born in 1960 and later.  Prior to FRA, Social Security doesn’t consider you fully “retired” if you make more than a certain amount from work, and it will deduct a portion of your benefits if your earnings exceed that limit.


The earnings caps are adjusted annually for cost-of-living adjustments (COLA), and they differ depending on how close you are to full retirement age.


If you are receiving benefits and working in 2024 but not due to attain FRA until a later year, the earnings limit is $22,320.  You lose $1 in benefits for every $2 earned over the cap.  So, if you have a part-time job that pays $30,000 a year — $7,680 over the limit — Social Security will deduct $3,840 in benefits or roughly $125 a month, from your social security check.


Suppose you will reach full retirement age in 2024.  In that case, the earnings limit is $59,520, with $1 in benefits withheld for every $3 earned over the limit that applies until the date you hit FRA!  Once you attain age 70 and onward, there is no benefit reduction, no matter how much you earn–once you hit age 70, the sky is the limit as far as your earnings are concerned as it relates to your Social Security benefits.


In fact, Social Security increases your monthly benefit at that point so that over time you recoup benefits you lost to the prior withholding.


If you receive wages, earnings-limit calculations are based on your gross pay; if you’re self-employed, Social Security counts your “net income” only.  The Social Security pamphlet “How Work Affects Your Benefits” and its Retirement Earnings Test Calculator can provide you with more details.


Key points


  • The earnings cap applies only to income from work.  The cap does not count investments, pensions, annuities or capital gains.


  • If your Social Security payments are reduced because you earned income above the limit, spouses and children receiving benefits on your work record will have their payments reduced as well.


  • The earnings cap and rules also apply to the work income of people receiving spousal, children’s and survivor benefits.



  • It may be wise to consult your tax advisor prior to electing to receive your benefits, if possible, as all tax situations are unique and experienced tax professionals can see through blind spots and areas of taxation that are nuanced and you may not be aware of.


Will my benefits increase if I continue to work?


It very well could.  It will all depend on how much you’re making now and how much you’ve made working in years past.


Social Security uses your “lifetime average” for monthly income, as calculated from your 35 highest-earning years and adjusted to reflect historical wage trends, as the basis for your benefit calculation.


Even if you’ve already claimed your benefits, Social Security annually recalculates this average, factoring in any new income from work.


If your current earnings fall into your top 35 earning years, your monthly average will rise, and so could your benefit!


What is the recalculation time period?


The Social Security Administration recalculates your retirement benefit each year after getting your income information from tax documents.  If you have a job, employers submit your W-2s to Social Security; if you are self-employed, the earnings data comes from your personal tax return that you would file during the tax season.


Social Security will take any work income from that tax year and figure it into your benefit calculation.


That calculation is based on the average monthly income from the 35 best-paid years of your working life (as indexed for historical United States wage trends, a process similar to adjusting for inflation).  If your recent earnings make the top 35, it will increase the monthly average and your benefit payment will increase!


You can call Social Security at 800-772-1213 to ask about how your anticipated earnings might change your benefit.


What is the payment schedule?


Apart from any earnings-based calculations, Social Security makes an annual cost-of-living adjustment (COLA) to your benefit based on inflation, if any.  The COLA for 2024 will be 3.2 percent, boosting the average retirement benefit by $59 a month starting in January.  COLA review and adjustments are done annually by the Social Security Administration.


Social Security pays benefits in the month following the month for which they are due.  For example, the January benefit that you are entitled to would be paid in February.


For most beneficiaries, the payment date depends on your birth date since changes that were made in 1997 went into place.  If you are receiving payments on the record of a retired, disabled or deceased worker (for example, spousal or survivor benefits), that person’s birthday sets the schedule for the payments that you would receive.


Here’s how it works in a nutshell:


  • If the birthday is on the 1st through the 10th, you are paid on the second Wednesday of each month.


  • If the birthday is on the 11th through the 20th, you are paid on the third Wednesday of the month.


  • If the birthday is on the 21st through the 31st, you are paid on the fourth Wednesday of the month.


The Social Security Administration adopted this staggered schedule in June 1997.  Prior to that, all benefit payments went out on the third day of the month, but that became untenable as the number of beneficiaries grew to a level that made it impractical to pay out on a single day.


Most people who started receiving benefits before May 1, 1997, are still paid on the third of the month.


The third is also the monthly pay date for these groups of Social Security beneficiaries:



  • Those enrolled in Medicare Savings Programs, which provide state financial help for paying Medicare premiums continue to receive their payments on the 3rd day of the month.


  • Those who collect both Social Security and Supplemental Security Income (SSI) benefits.  If you were in this group, you would get your SSI on the first of the month and your Social Security on the third day of the month.


Social Security has an online calendar showing all the payment dates for 2024 and is updated annually.


Key points


  • Social Security no longer pays benefits by check. You can receive benefits by direct deposit or via a Direct Express debit card.


  • Those who receive Social Security Benefits receive payment based on the birth date of the retired, disabled or deceased person, or a set date determined by the Social Security administration which is generally the 3rd day of the month.


  • If a scheduled payment date falls on a weekend or federal holiday, payments are made on the first preceding day that isn’t a Saturday, Sunday or holiday.


Medicare payments

Medicare consists of:


Part A   Hospital

Part B   Utilizing Outpatient Coverage

Part C   Medicare Advantage

Part D   Prescription Drugs


An easy way to remember what each part of Medicare covers (which can be difficult for some) is to use the following system:


When you think of part A think of coverage that allows you to go to “A” Hospital

When you think of part B think that you will “Be” getting health coverage or utilizing outpatient coverage

When you think of part C think that you are buying “Coverage” for Medicare Advantage

When you think of part D think that you are going to get prescription “Drug” coverage


Medigap Insurance coverage fills in the gaps where you would possibly have out of pocket expenses and deductibles, and it can be purchase by you if you select Medicare–and decide not to buy into Medicare Advantage coverage.


Another way of looking at it is part A is Hospital Coverage and possibly free, Medicare is part B, Medicare Advantage is part C, and part D is coverage for Prescription Drugs, whether you have Medicare or Medicare Advantage!


Or yet another way to look at it is you must get over the HUMP with your Medicare–and you do so by realizing that part A is Hospital coverage, part B is Utilizing outpatient coverage, part C is Coverage for Medicare Advantage, and part D is Prescription Drug coverage.


Now that you have a system that you can use to distinguish all parts of Medicare and MA, let’s discuss Medicare in greater detail.


If you elect traditional Medicare, you will pay for parts B, D and Medigap, and you could be surprised by the premiums.  You have just learned and fully understand that part B covers outpatient care and has a monthly deductible ($174.70 in 2023), and there is also a deductible for every hospital visit on part A ($1,632 in 2023).


Part A: generally, you will qualify for hospital coverage if you have worked in the United States and have paid Medicare taxes (provides hospital coverage up to 60 days and a high deductible could be involved).


Part B: outpatient care is similar in scope to health insurance and in 2024 had a payment of $174.70 per month and the coverage will subject you to the benefits test if your modified adjusted gross income is over $103,000 single or $206,000 married filing joint.


Part D prescription drug coverage premiums averaged $50.50 in 2023, however drug and other coverage varies.  Often purchased through a private insurer.


Medigap coverage kicks in when there is a “gap in coverage” when you use part B and D, for example you could use the coverage to pay the part A and D deductibles mentioned above!


With Medicare, physicians and hospitals would have to submit claims to parts A, B, D and Medigap, where applicable individually, whereas with Medicare Advantage the claim would normally go to just one provider.


Medicare recipients could also possibly get financial assistance from Medicaid or other assistance programs if they qualified.


Medicare Advantage (part C) —the “competitor to Medicare” offers coverage for parts A, B and D, and coverage and costs varies by provider.  The coverage provided is similar to that of an HMO or PPO and provider costs and coverages that vary from provider to provider, so it is best to shop around.


In either plan, Medicare Advantage (MA) or Medicare “pre-existing conditions” will be covered!


Star Ratings by AARP could also be helpful when considering plans!


If you are signed up for both Social Security and Medicare Part B — the portion of Medicare that provides standard health insurance or outpatient care — the Social Security Administration will “automatically deduct” the premium from your monthly benefit.


The standard Part B premium for 2024 is $174.70 a month, an increase of $9.80 from the 2023 rate. Medicare Part A, which covers hospitalization, is free for anyone who is eligible for Social Security, “even if” they have not claimed Social Security benefits yet.


If you are getting Medicare Part C (additional health coverage through a private insurer, also known as Medicare Advantage) or Part D (prescription drugs), “you have the option” to have the premium deducted from your Social Security benefit or to pay the plan provider directly yourself.


Part D is also subject to a means test, similar to part B!


If you want the deduction from your Social Security income, you will have to contact your part C or D provider to arrange it!


Keep points 



  • People with low incomes and limited financial assets may qualify for Medicare Savings Programs that can help with Part B premiums.  These are federally funded but run by the states.  In 2023, income limits to qualify for the programs in most states ranged from $1,235 to $1,660 a month for individuals and $1,663 to $2,239 a month for married couples (the thresholds are higher in Alaska and Hawaii).  The 2024 limits will be posted on the Medicare website once they are announced.


  • If you are receiving benefits” from SSA, the Social Security Administration will “automatically sign you up at age 65” for parts A hospitalization and B outpatient care of Medicare.


  • Medicare is operated by the federal Centers for Medicare & Medicaid Services, but Social Security handles enrollment.  Social Security will send you sign-up instructions at the beginning of your initial enrollment period, three months before the month of your 65th birthday, however mistakes and delays can occur, therefore you want to act within the 6-month window of your 65th birthday if you have a need for Medicare as you are now aware of the enrollment process.


  • Medicare Part A covers basic hospital visits and services and some home health care, hospice and skilled-nursing services.  If you are receiving or are eligible to receive Social Security retirement benefits, you do not pay “premiums” for Part A.


  • Medicare Part B is similar to standard health insurance and carries a premium.  The base rate in 2024 is $174.70 a month.  Higher-income individuals pay more depending on the amount of their modified adjusted gross income.


  • You can “opt out” of Part B — for example, if you already have what Medicare calls “primary coverage” through an employer, spouse or veterans’ benefits and you want to keep the primary care that you already have.


  • Check with your current insurance provider to make sure your coverage meets the standard. Opting out will not affect your Social Security status, but you might pay a penalty in the form of permanently higher premiums if you decide to enroll in Part B later.


  • If you want to enroll in Medicare Part C (also known as Medicare Advantage, an “alternative to Part B” that is provided by private insurers, you must sign up on your own. The same goes for Medicare Part D, prescription drug coverage.  You can find more information in Social Security’s “Medicare” publication and AARP’s Medicare Made Easy guide, or you can call Medicare at 800-633-4227.


Key points


  • If you are living abroad or are outside the United States when you become eligible for Medicare, contact the nearest U.S. embassy or consulate to request an enrollment form.


You can only enroll in Medicare at age 62 if you meet one of these criteria:



  • You are on SSDI because you suffer from amyotrophic lateral sclerosis, also known as ALS or Lou Gehrig’s disease (The two-year requirement is waived in this case).


  • You suffer from end-stage renal disease.


Otherwise, your initial enrollment period for Medicare begins three months before the month of your 65th birthday.  For example, if you turn 65 on July 14th, 2024, the enrollment window opens on April 1st and closes on November 1st, 2024.


If you “are receiving” Social Security benefits, the Social Security Administration, which handles Medicare enrollment, will send you an information package and your Medicare card at the start of the sign-up period.  You’ll be automatically enrolled in Medicare Part A (hospitalization) and Part B (standard health insurance) in the month you turn 65.


In the meantime, consider looking into other options for health insurance to bridge the gap until you are Medicare-eligible if you lack insurance and have not reached the age to receive Medicare.  Depending on your financial and marital situation, these might include Medicaid, private insurance through the Affordable Care Act marketplace or coverage through your spouse’s workplace plan or your own employer’s work plan.


Key point



How to enroll


You can enroll online, by phone at 800-772-1213, or by visiting your local Social Security office.  Local offices fully reopened in 2022 after being closed to walk-in traffic for more than two years due to the COVID-19 pandemic, but Social Security recommends calling in advance and scheduling an appointment to avoid long waits.


You should proactively be aware of the enrollment deadlines, as Social Security will not sign you up automatically at 65 for “traditional Medicare” — Part A (hospitalization) and Part B (health insurance) — as it typically does for people already collecting Social Security benefits!


In this situation, you’ll have to enroll yourself, either online or by contacting Social Security.


Always remember that Medicare and Social Security are “two separate programs” however the Social Security Administration runs enrollment for traditional Medicare!


You can enroll in Medicare parts A, B and D (prescription-drug coverage) as early as three months before the month you turn 65 or as late as three months after your birthday month which is called your initial enrollment period.  For example, if your 65th birthday is May 15th, 2024, the initial enrollment window is open from February 1st until August 31st, 2024.


Here’s why you need to be on top of your deadline:


If you don’t sign up during those seven months, you may be subject to a permanent surcharge once you do enroll.  You’ll find more information on sign-up periods in Medicare publications about enrolling in Part B and Part D.


Part A is free if you qualify for Social Security, even if you have not claimed benefits yet, however Part B carries a premium and in 2024, the standard Part B premium is $174.70 a month; it goes up for beneficiaries with MAGI (income) above $103,000 for those who file an individual tax return, and MAGI of $206,000 for a married couple filing jointly.


If you are not yet receiving Social Security benefits, you will have to pay Medicare directly for Part B coverage.  Once you are collecting Social Security, the premiums will be deducted from your monthly benefit payment.


If you “decide to purchase” a Part D prescription-drug plan, it’s best to do so during your initial enrollment period; and as mentioned previously, you may pay a higher premium, permanently if you fail to sign up in a timely manner.


Your Part D provider cannot deny coverage even if you are in poor health or have a preexisting condition.  You can choose between paying Medicare directly or having Part D costs deducted from your Social Security payment.


Key points


  • The Medicare eligibility age of 65 no longer coincides with Social Security’s full retirement age (FRA) — the age when you qualify for 100 percent of the Social Security benefit calculated from your lifetime earnings.  FRA was long set at 65 but it is gradually going up: It’s 66 years and 6 months for people born in 1957, 66 and 8 months for those born in 1958, 66 and 10 months for those born in 1959 and will settle at 67 for those born in 1960 or later.


  • Always remember that even if you don’t elect for Social Security at the earliest time possible, you can still sign up for Medicare at 65 as long you are a U.S. citizen or lawful permanent resident.  You will have to pay Medicare directly for all coverage, including Part A (unless you or your spouse are among the small number of state and local government employees who paid Medicare taxes but not Social Security taxes; in this case, you may be able to get Part A for free).


Managing Medicare enrollment


For most people, Medicare eligibility starts at age 65 and “if you’re receiving Social Security retirement benefits” at that time, SSA will send you a Medicare enrollment package at the start of your initial enrollment period, which begins three months before the month you turn 65.   This point cannot be over-emphasized and is repeated here yet again due to the importance of you understanding this deadline.  If you are not on Social Security, you want to still know that you must sign up by age 65 if you desire the coverage!


For example, if your 65th birthday is July 15, 2024, this period begins April 1.


On your 65th birthday, you’ll automatically be enrolled in parts A and B.  You have the right to opt out of Part B, but you might incur a penalty, in the form of permanently higher premiums, if you sign up for it later.


If you have not yet filed for Social Security benefits, you will need to apply for Medicare yourself!


You can do so any time during the initial enrollment period, which lasts seven months (so, for that July 15 birthday, the sign-up window runs from April 1 through Oct. 31). If you do not enroll during that period, you could face late fees if you do so later.


You’ll find comprehensive enrollment information in SSA’s “Medicare” publication and links to application forms on the Social Security website.


Paying Medicare premiums


If you are drawing Social Security benefits, your Medicare Part B premiums are deducted from your monthly payments.  If you’re not getting benefits, you’ll receive bills from CMS (almost all Medicare beneficiaries pay no premiums for Part A because they worked, and paid Medicare taxes, long enough to qualify for the program).


The standard Part B premium paid by most Medicare enrollees is $174.70 a month in 2024. The rate rises with the beneficiary’s income, going up in steps for individuals with incomes greater than $103,000 in 2024 and married couples who file taxes jointly and have a combined income of more than $206,000 in 2024.


Social Security determines whether you will pay a higher premium based on income information it receives from the IRS!


If your income is high enough, Social Security will impose what is called an Income Related Monthly Adjustment Amount (IRMAA) or means test on Part B outpatient care and Part D prescription drugs.


Although this surcharge is unknown to many prior to signing up for Medicare, it can add up and can be hundreds of dollars on a monthly basis for some recipients.  If your income tier (MAGI) is from $103,000 to $129,000 in 2024, everyone in that tier would pay the same annual surcharge.  For MFJ the tiers start at MAGI of $206,000.


Therefore, if you are a high-income household and your spouse were to transition, you could fall into the single tax bracket (and the tier of $103,000 to $129,000) and a monthly surcharge could be added to your monthly payment, even though your household actually had a reduction in income.


The determination as to whether you will face this surcharge is based on your AGI (line 11 amount on form 1040 that does not go into the calculation of your MAGI or modified adjusted gross income) so charitable contributions or donations, mortgage deduction, taxes and medical deductions would not be of benefit with the exception of a QCD (Qualified Charitable Deduction) in which you can donate up to $100,000 annually and count it toward your RMD (distributions that must begin at age 73 according to the SECURE  Act 2.0.


Unlike cash, a QCD will keep the donation out of your gross income (it is an above the line deduction in tax jargon–goes on schedule 1 adjustments) and thus “lower your MAGI” so you could possibly avoid (the IRMAA adjustment) the surcharge.


Strategies that you can use to avoid or minimize the surcharge imposed by the Income Related Monthly Income Adjustment Amount:


*Consider a ROTH conversion

News flash–withdrawals from a ROTH IRA don’t count toward IRMAA


*Contribute more to your Retirement plans

You can lower your above the line income (IRS form 1040 line 11 and above) by contributing the maximum amount or at the very least an increased amount to your retirement plan or IRA account(s) and thus fall below the $103,000 threshold for singles, or $206,000 threshold, if you file as married filing jointly.


*Use tax-gain harvesting

By harvesting you sell your stock, mutual fund, etf etcetera, that is outside of your retirement account and buy it back immediately to “reset” your basis.  You would pay taxes on the gain in the year you harvested.   And by doing so the higher cost basis will reduce your taxes once you sign up for Medicare.


*Set up a Qualified Charitable Donation

As mentioned above, by setting up a QCD you can take an above the line deduction and reduce the amount of you MAGI, so your income won’t reach the threshold set by IRMAA (Income Related Monthly Adjustment Amount).


*Defer taking Social Security

You have up to age 70 until Social Security benefits make the most sense to take for many, and by delaying Social Security won’t count toward IRMAA.


*Compare your premiums between Medicare and Medicare Advantage

Medicare Advantage may give you the coverage that you need and might be cheaper than Medicare.  With Medicare you must pay separately for Parts A, B, D and Medigap and that along with the coverage that you desire could tilt the scales as to which one to choose.


*Appeal the surcharge

You can appeal if your income is significantly lower than it was 2 years ago.  SSA uses a 2-year lookback to determine current year surcharges.  If you were to start receiving Medicare in 2024, they would look at your 2022 MAGI to determine if IRMAA was applicable for 2024.  Other grounds to appeal include life changing events such as retirement, death of a spouse, divorce, loss of pension and other life changing events that the agency could possibly accept if it appeared reasonable in their eyes.


*Use your imagination to find other ways to avoid the surcharge

The surcharge is not necessarily permanent and if you can find ways to reduce your income some in future years, you may be able to avoid this surcharge altogether.  You may want to take the surcharge early because you know you can avoid it later.  Likewise, you may want to find ways to avoid the surcharge early and pay it later.  The surcharge is a year-to- year charge and you want to use the creativity that you have to find ways to eliminate this charge–when possible.


Key points


  • People with disabilities may qualify for Medicare before age 65 in many instances.  If you are receiving Social Security Disability Insurance (SSDI), Social Security will enroll you automatically in Parts A and B after you have been drawing benefits for two years.


  • If you have Medicare Part D (prescription drug plan) or a Medicare Advantage plan, also known as Medicare Part C, you can elect to have the premiums deducted from your monthly Social Security payment.




Social Security, Railroad Retirement Benefits and Pension income and other retirement income are areas that you want to give proactive analysis to, as the decisions and choices that you make will be critical for a successful retirement where you can do what “you” desire during your retirement years and not be restrained due to inadequate income or poor planning.


Although pension income for many is a thing of the past, those who now or will soon receive it can use the proceeds in conjunction with their social security income and sound investment and retirement planning to live out their life with more joy and enthusiasm.


Railroad Retirement Benefits are similar in scope to the benefits that the Social Security Administration provides, however those benefits are designed to assist railroad workers and their family in retirement and in the unfortunate transition of the income earner.  It is a system that is generally more generous than that of the SSA (pun intended) toward recipients and beneficiaries.  If you receive, or anticipate receiving those benefits, you too want to plan appropriately and build your retirement nest egg in the best way possible, based on your ability to do so.


Now is the time that you contemplate your Social Security payment amount that you will receive and combine the monthly benefit with your other retirement benefits to determine if the number that you are now at or will soon be at, is sufficient or whether you will need to earn more income, work a few more years until ultimately retiring or taking your benefits at the earliest time possible due to financial and health concerns.


Your total monthly income must be determined upfront, that means you must combine your 401k or other pre-tax retirement income, pension income, IRA income and income that is outside of your retirement accounts to determine if you have the monthly cash flow that allows you to pay your monthly expenses, do what you desire and have funds that can last for your remaining life expectancy and beyond.


The basic questions of choosing whether Medicare or Medicare Advantage is your best choice, whether you should you start your SSB, RRB or other retirement distributions earlier, at a reduced amount, or start later at a higher level may all coincide at this time or at the time you plan to retire!


If you delay, your eventual Social Security and/or RRB payment that you could receive will keep rising, until you hit age 70.


If you elect to start your benefits today or before reaching your FRA, you can enjoy the benefits earlier, because you are concerned about whether life and the future will go your way!  If you decide to wait, you may find an additional amount monthly, and for you that could be great.  Your unique financial and health condition will play a large role in the approach toward your retirement funds that you choose.


The choice as to whether to choose Medicare or Medicare Advantage can be a difficult one and should be given careful analysis, possibly with the assistance of family members and other professionals.


But many other factors come into play when determining the best age for you to claim benefits, including your physical well-being, marital status, financial needs, tax position and job satisfaction, other sources of income and your life savings.


The election of when and how you will elect SSB, RRB or choosing between Medicare and Medicare Advantage must all be analyzed in a thoughtful manner from all angles.


When you combine your SSB, RRB, investment income inside and outside of retirement, retirement income whether from your 401k’s, IRA’s, 403b’s, Thrift and other retirement plans, you want to be in position where you can put yourself, your loved ones and causes that you value most that bring you the most joy at the center.  And if you planned appropriately and obtained the necessary knowledge in a timely manner all of your retirement goals can come into clear focus and be attained in real time.


By simplifying the process and the way that you approach investments and retirement, you can make what you desire to happen most during your retirement years become a reality.


Other Key Points:


You receive the highest “maximum benefit payable” on your own record if you start collecting Social Security at age 70.  Full retirement age is 66 years and 6 months for people born in 1957 and will rise two months for each subsequent birth year until it settles at 67 for those born in 1960 and later.


You receive the “highest benefit payable” on your own record at FRA if you start collecting SSB or RRB at age 67.  Full Retirement Age extends from age 65 for beneficiaries born before 1938, to age 67 for those born in 1960 and later.  You can receive your full railroad retirement benefit starting at age 60 if you have 30 years of qualifying service.  Normal full retirement age for railroad benefits is 65 or 67, depending on the year you were born.


Medicare and Medicare Advantage are often in a “state of flux” and you can expect changes (hopefully for your benefit) to occur in the future.


All the best to your SSB, RRB, Other Retirement Income & Medicare success, as it is our hope that this discussion has allowed you to valiantly perch from your retirement nest…                                                                                                                               



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Retirement Simplification & Wealth Building

Learn how you can manage your retirement in a more stress-free manner as you build your wealth…


Caution:  20-minute read, however it is “well worth your time” in The Wealth’s opinion


In the most recent post investment simplification was discussed and investment approaches were presented in a way that allows you to build wealth almost effortlessly.  Based on that post, if you determined that you had the needed discretionary income and you were to apply the principles learned in that discussion on a consistent basis, you would now be on a real path toward investment and possibly retirement success.


You must know what you need to do after you have accumulated a large nest egg and this discussion is designed to show you a number of ways that you can receive your retirement income and minimize your taxes so that you can stretch your income over your life expectancy so that you can do more and live more abundantly!


Your retirement plan may need to last you decades and you want to know how you can stretch your nest egg at the earliest time possible so that you can live a more comfortable retirement.  Even if your retirement is decades away, you want to proactively familiarize yourself with the information in this timely discussion, so that you can achieve more throughout your lifetime.


Once you approach your retirement years you can choose to roll over your 401k, 403b, Thrift or other retirement plan, you can decide to leave your retirement funds in the 401k or other retirement account, or you also have other options, and they will all be discussed below:


Do the rollover yourself

Once you retire you can choose to roll over your funds from your retirement plan into an IRA, and you have 60 days to do so if you want to avoid the pain of being taxed on the entire amount.  Even if you roll over your funds within the 60-day window your employer (or former employer) or plan administrator will withhold 20% of the rollover amount for income taxes.


If you don’t have the 20% amount laying around in your emergency fund or other accounts, you will only be able to roll over 80%.


By coming up with the 20% you can “recoup” the 20% that was withheld at tax time when you file your tax return!


If you are unable to come up with the 20%, be sure that you realize that the 20% will be considered taxable income, and if you are under age 55 you will be penalized another 10%!


Say you receive $200,000 to rollover, $40,000 would be withheld and sent to the IRS and $160,000 would be rolled over into your IRA that you designated.  You would receive a 1099R at tax time showing $40,000 as taxable income.  By rolling over 100% it would not be considered taxable income and you could file your taxes and get the 20% withholding back.


Arrange for a trustee-to-trustee rollover

A trustee to trustee, also known as a direct rollover could be more beneficial than a rollover that you do yourself as it will be done by your retirement plan administrator, and is generally the best course of action as there would not be a 20% withholding.


Once the money is in the IRA, you are not “required” to take anything out until April 1st of the year after you turn 73.  If your contribution includes “after-tax” contributions, you can only roll over for the full amount if the IRA sponsor will account for the after-tax money separately.


If you have after-tax contributions, a “portion” of every IRA withdrawal will be tax free.  Or you can receive all of the “after-tax money” before the rollover and pocket it tax free!


Leave the money in the account

If you like your plan administration and the returns that you are getting, you can choose to leave the money in the account and cash out or roll it over later if you desire.  If the retirement plan is providing good returns and you are comfortable with the investments, why shake up the pot?


You would normally need at least $5,000 or more in the account to make this option worthwhile and distributions would be required by age 73, even if you did not need the money.  If your account was invested in a ROTH, you could leave the money in the account until you transitioned.


Roll over to a ROTH IRA

You can roll your assets from your company plans to a ROTH IRA, and because your contributions to your company plan was done on a “pre-tax” basis and have never been taxed, the rollover would now be taxable, however no 20% withholding would be required.  You do not have to take Required Minimum Distributions (RMDs) at age 73 with a ROTH.  The assets in your ROTH IRA could then grow tax-free indefinitely.


If you use this strategy, you want to be able to find the money “outside of your retirement account” to pay the taxes, otherwise you will limit the tax-free growth of the ROTH account.  Also, if you transition, the funds in the ROTH IRA could go to your beneficiaries and RMD’s and taxes would come into play.


Take out company stock

If you work for a fortune 500 company or a company that has publicly traded stock and your company put those stocks within your retirement plan, you could have yet another option that could help you save on your taxes.


You can use a tax concept called NET UNREALIZED APPRECIATION” (NUA) and pull the company stock out and put only the non-company stock balance in the IRA!


Rolling highly appreciated stock into an IRA, locks in a high tax rate for that appreciation.  You will owe taxes on the full value of the stock at ordinary income tax rates (up to 37%) “as you sell it” and take distributions from the IRA.


However, there is a better way to transfer the stock!


Lets say you have $2.2 million (the part not held in company stock) and roll it into an IRA, and you transfer the stock to a separate taxable account.


You will owe income taxes on the company stock, but the tax is based on its “cost-basis” — the value of the stock when your employer put them into your account.  In this case, let’s say it was $20,000 and is now valued at $200,000.


When you sell the stock from your taxable account, you will report a long-term capital gain, and if the sales price is $300,000, the gain ($300,000 minus $20,000) of $280,000 would be taxed at the more favorable capital gains rate of 0%, 15% or 20 percent–which would for most be lower than the “ordinary income tax rate” mentioned above that could be as high as 37%.


Assuming a retirement “long-term capital gains” tax rate of 15%, ($280,000 * .15) your taxes would be $42,000.


Had you rolled the entire $2.2 million into the IRA and “then” withdrawn the $300,000, you would owe income tax on the entire distribution in your highest tax bracket–and if it was the 37% tax bracket you would owe $111,000–a difference of $69,000, an amount that can go a long way during your retirement years.


Another way of looking at it is if you were able to use the above strategy you would pay $69,000 less in taxes or you would have an additional $69,000 that you could be utilizing for the continued growth of your retirement fund.


It is important that you realize that there are things in life that you don’t know–that you don’t know, and you want to know this important “lifelong fact of life” at this time or the earliest time possible in your life (no pun intended)!  This tidbit of knowledge that you have just learned as it relates to company stock can go a long way in protecting your nest egg during your retirement years, if it is a strategy that you can use with your retirement portfolio.


If you own the stock when you transition, not having it in an IRA creates a windfall for your heirs as the stock will receive “favorable stepped up basis” (stock will be stepped up to the stock price at your transition date and that means lower taxation for your heirs) treatment and once your beneficiaries sold the stock the tax would be at the capital gains rate and would be based on the price of your company stock at the time of your transition–not when your employer put them in your account.


Or another way of looking at it is if the stock is “outside the IRA, appreciation after the distribution becomes tax free” and the gain not taxed at the time of the distribution would be taxed at the 0%, 15% or 20% long-term capital gains rate, depending on where your beneficiaries would fall based on taxable income and filing status.


If the stock was in the IRA, the full value would be taxed as income in your beneficiary’s top tax bracket (as high as 37% as of 2024) as it is withdrawn.


Taxes & Retirement

Once you retire and start taking distributions from your retirement accounts, pensions, social security or railroad retirement benefits, you want to plan for the payment of your taxes in a proactive manner where possible.  You social security income could be taxable depending on the amount of your retirement income and whether you work part or full time after retirement.  Also keep in mind that taxation at the state level must be taken into consideration as many states exempt some or all income of retirees–and some states have no income tax at all.


In addition, consider the estate tax system in your state proactively, as even though you may not have estate taxes at the federal level–you may very well be required to pay them at the state level.


During your retirement years you will receive 1099Rs, Social Security Benefit statements, W-2s or 1099NEC if you decide to work, other 1099 statements for interest, dividends, capital gains etcetera, and you want to proactively plan with your tax professional so that you won’t have large surprises at tax time.


The IRS also receives copies of all of these documents so you want to do a “double take” to ensure that you have all of your documents at tax time.  Failure to do so and your inability to provide them to your tax pro for any reason could result in your return being audited.


Also realize that if you file your personal or business taxes by paper, the return will receive extra scrutiny from the IRS.  Even though many think paper is more secure, filing electronically has proven to be more secure and accurate.  You can also enroll in the IP PIN program (Identity Protection Personal Identification Number program) to further secure your filing, as even if they (scammers) have your social security number or ITIN (Individual Taxpayer Identification Number) they would still need your PIN to pretend they were you.


Your payment of taxes (ordinary income rates) will be based on your taxable income and filing status (10%, 12%, 22%, 24%, 32%, 35% or 37%) and you will pay taxes on your investment income at a rate of 0%, 15%, or 20% and that rate would be based on your taxable income and family situation (filing status).  If you are single with adjustable gross income over $200,000, ($250,000 married filing joint), you will have an additional 3.8% net investment income tax on your investment returns that were not offset by losses.


You also want to commit age 59.5 (age that you can begin withdrawals), age 73 (age at which you must take RMDs) and the age in which you will eventually transition (your assets will or will not receive “stepped up basis” treatment) to memory as those ages are important to know for planning purposes and particularly for tax and estate planning.  In addition, you want to know that short-term (less than 12 months) gains will be taxed at your ordinary income rates.


The above figures are based on the 2023 tax year and the numbers are adjusted annually.


Required Minimum Distributions & Retirement

Required Minimum Distributions or RMDs are the least amount of money you “must” withdraw from your traditional IRAs or pretax 401k and other pre-tax retirement accounts based on United States tax law.


Always remember that whatever your retirement (or pre-retirement) age, it is never too early to strategize your RMDs for 2024 and beyond.


The year that you turn 73 is the year that RMDs will be required to be taken by you.  If you are not turning 73 this year, you may still want to take withdrawals to reduce the amount of your future RMDs.  It will all depend on your goals, risk-tolerance level, income, personal situation–and tax bracket, the impact on the raising of your Medicare premiums and the impact of increasing the taxes on your Social Security income.


If you are now 70.5 or older, you can make a QCD (Qualified Charitable Distribution) directly from your IRA to a charity.  If you are 73 or older the QCD will count toward your RMD.  Though you can’t generally claim the deduction for the donation, you won’t be taxed either.


If you fail to take your RMDs in a timely manner, you want to notify the IRS of this “before they notify you” when possible (use form 5329) and explain with a letter why you didn’t take the RMDs by the December 31st deadline.


By doing so you can possibly avoid a 25% penalty on the amount you were required to withdraw–however you may still be subject to a 10% penalty!


Bond Management

Unless you have time to monitor and respond to the bond market, you may want to hire a pro as the pricing of bonds are normally out of the public view when compared to stocks.


Bonds have what is called a “bid price” and an “ask price” and shopping around for bonds can save you hundreds on commissions and markups.  If you are a buy and hold investor, you normally want to have at least $50,000 to spend and you want to assemble a portfolio of high quality corporate, treasury and possibly municipal bonds.  Mutual funds offer one stop bond diversification, but a portfolio of them typically costs “more to maintain” than a portfolio of individual bonds.


You want to have “at least two brokers” and check with each before placing your order.  You can also search online to compare prices and yields by going to:







All of the above sites would be a good starting point. allows you the opportunity to purchase directly without fees and you can manage savings bonds, T-bills, notes, bonds and TIPs (Treasury Inflation Protected securities) in a free online account.


You also want to ask the right questions whether online or with your broker.  You would want to know the following:


*What is the spread between the bid and ask price?

The closer you buy to the bid price the smaller the markup!


*Is the bond callable?

Bonds may be redeemed by the issuer, and if so you want to request the yield-to-worse call (which is the lowest potential yield)!


*Which yield are you quoting me?

The coupon, yield to call (YTC) or yield to maturity (YTM)!  Be ready to haggle as brokers expect it.  If you don’t like to haggle, consider treasuries.


Since you are retired or are now anxiously anticipating the day that you will be, you now or will one day have the time to learn about bonds and other investments that can possibly help grow your nest-egg with relatively low risk.  You want to put yourself in position to learn what you need to learn in a relaxed and as stress-free a manner as possible while you are improving your finances.


You may also want to set up a bond ladder system during your retirement years to “smooth out the ups and downs” of interest rates.  Treasuries are as close to a risk-free investment that you can buy and when purchased in a 5-year laddering system, it can provide you income that guards against inflation during your retirement years.


If you need more income, consider CDs, municipal and corporate bonds in a laddering system or even dividend paying stocks such as those offered by utility stocks and REITs (companies that own and manage office buildings, shopping centers, apartments and other large developments).


On occasion, annually at least–you may need to re-balance your asset allocation, as over time based on gains and losses–your asset allocation will go out of balance from what you initially selected.


If your stocks or bonds exceed your previously set allocations by more than 5% you may want to re-balance once that occurs.


You generally want to re-balance first inside of tax deferred IRAs or tax-free ROTH accounts to get their allocation back on track as no taxes would be due and you want your risk level to return to what you selected initially.


You can also invest RMDs that you receive from your retirement accounts that are out of balance back into those tax-deferred accounts–so they go back into the market (they will be taxed) and increase your returns further.



You will have to allocate your assets based on your goals, risk-tolerance, income and personal situation.


You want to buy and sell bonds appropriately and know how to set up a bond ladder if that is of appeal to you and something that you feel can be of benefit during your retirement years.  It is important that you choose the best option possible based on what you desire to achieve during your retirement years and after you transition.


As you can see from this discussion the “choices that you make” can lead to lasting, cost-effective or cost-ineffective results during your retirement and pre-retirement years–and even after you transition!


The factors that should influence your decision should include your age, income tax bracket, insurance needs, income needs, estate plans, and whether you own individual stocks and/or mutual funds.  If you have adequate pension and social security income, you can supplement resources by spending income “generated in taxable accounts” and letting the “investments in your IRA grow tax deferred” until withdrawals are required.


Some people re-invest even after RMDs start, rather than spending their money.  You want to ensure that your allocation of stocks, bonds and cash are at the right mix to balance your need for both income and continued growth.  If you have Treasuries and Money Market accounts, corporate bonds and REITs that generate taxes, you may want to put them in your IRA.


You can put municipal bonds, index funds and stocks held for the long-term into a taxable account(s).


With the cap rate on most stock dividends capped at 20%, your IRA may not be the best place for dividend paying stocks.  And even though your stocks in a taxable account may generate capital gains taxes when you sell, the top long-term rate is 20% in 2024.  Keep in mind non-qualified dividends could be taxed at your ordinary income rate.


It is critical that you create a portfolio (or have your advisor do it) that is diversified among asset classes–from small company domestic companies to international equities, from bonds to commodities to help lessen the effects of an economic downturn during your retirement years as the funds in your accounts along with your social security (and possibly pension income) at a minimum must last through your remaining life expectancy.


Keep in mind that an all-stock portfolio will normally “fall more” during a downturn and also “rebound more” during an upturn in the economy.  As you get older during retirement, you may want to shift your allocation to a more conservative position such as 35% to 40% in the market, 10 to 15%% in cash and 45% to 50% in bonds.


By taking to heart and giving real consideration to how you will build up and  divvy up your retirement fund(s) during your lifetime, you can make your retirement stage or phase one that you can truly enjoy with your loved ones.  You can also “position your life” where volunteering your time and resources toward causes that are important to you while you are yet alive here on planet earth–can happen for you in a more realistic way–as you awake each and every day!


All the best as you make the best choices that will lead to continuous retirement success…



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Retirement Success & Wealth Building

Learn the importance of successfully planning for your retirement years…


In the current market many soon-to-be retirees are feeling short-changed to a degree, as 2022 was not a good year for many in the financial markets.  As a person who anticipates retiring and enjoying life abundantly in the future, it is imperative that you plan in advance to make a successful retirement a reality.


It is important that you realize that investment returns will go up and down from year to year but has historically averaged from 6% to 9%–which is more than you can get in most other places–relatively speaking.


In this discussion will focus on the importance of you choosing a portfolio that can lead you toward the goals that you desire–as you put a plan in place that will take you higher and higher–and lead to you reaching the retirement number that will not leave you in a quagmire.


Do the basics early so that you know where you stand

You must put yourself in position for a successful retirement by doing the basics or what you need to do on the front end.  That includes creating a budget or cash flow statement, an income statement, a balance sheet and a net worth statement at the earliest time possible during your working years.


By doing so, you give yourself a helpful guide that can provide more direction as you formulate goals that are more precise and forward moving toward the lasting wealth building success that you need to achieve–and particularly your retirement planning success.


You want to at the earliest time possible contemplate the amount that it would take for you to feel confident about retiring and doing what brings you joy and happiness–consistently.  There are a number of factors that you must consider (such as what your expenses will be) and unknowns (such as how long you’ll live) along with what you desire to do most during your retirement years.


You want to know the minimum number or baseline that you need to reach to pay your monthly expenses and live out the remainder of your life based on the life expectancy that you (or your financial planner) anticipate–based on sound analysis.


By using the 25x rule or other highly effective retirement planning formulas or techniques, you can get to your retirement funding in a manner that you can feel more comfortable as you approach your retirement.


The 25x rule, simply means that to stop earning new income (retire), you will want to have saved 25 times the amount you expect to need every year in retirement–as that should sufficiently fund your retirement for 25 years after you retire–and is generally a well planned life span for those who plan on retiring after age 60.


You can figure out what you’ll need for retirement using the 25x guideline by doing the following:


Your retirement calculation:


1. Start with your 25x number (25 times the amount you expect to need every year in retirement).

2. Subtract the savings you have today to get the savings you’ll need.

3. Estimate what your current savings may grow to by the time you reach, say, 62, by plugging that number into a compound interest calculator assuming a conservative 6%, 7%, 8% or 9% rate of growth.

4. Subtract that amount from your 25x number.

5. Divide the result by the amount you think you can save each year and you will have calculated the number of years you’ll need to get there.




1.  Say your 25x number is $2,000,000. ($80,000 a year times 25)

2.  Assume you’ve already saved $200,000.  $2,000,000 – $200,000 = $1,800,000 (your target!)

3.  If you’re 32 years old, by age 62 your $200,000 will be worth $1,522,451. (assuming 7% return compounded annually over 30 years)

4.  $2,000,000 – $1,522,451 = $477,549 (subtract the amount from line 3 from your 25x number)

5.  Say you can save $1,000 per month or $12,000 per year.   (divide result from number 4 above by what you think you can save each year) $477,549 / $12,000 = 39.8 years


If you’re 32 now and have already saved $200,000, you could retire at 71 with 2 million in your account by saving $1,000 per month for roughly 40 years.


If you’re 32 now and have already saved $200,000 and you desire to retire at age 62 with 2 million, you would have to bump your monthly savings up to $1,333 per month or $16,000 annually ($477,549 / $16,000 = 29.8 years) for roughly 30 years.


Always remember that this is just an estimate, and there are more caveats (in addition to the ones above) as you must consider inflation and other factors that could eat into your savings–but your savings and investments may help offset that along the way if you attain the right return over time.


Always remember that investing always involves risk!


Although the stock market has traditionally averaged from 6% to 9% return on investments over a number of intervals–that does not mean your portfolio will meet that average as it could be higher or lower over your retirement savings interval.


Therefore, your assumed rate of return is not what may occur in actuality, and your rate of return over the years will depend on how you invest, save and allocate your money, including the level of risk in your portfolio and other political, regulatory, economic, societal, technological and legal happenings in your country!


The 6% to 9% return is a reasonable expectation based on the history of the S&P 500 Index–but their are periods where that average has been lower–and higher.  You may want to consult a competent financial advisor if you want to be more precise in your calculations–and remember that financial markets don’t always act as they did in the past.


How Much Savings Will I Have When I Retire?


What will your portfolio numbers look like when you retire?


Here’s another way to figure it out!


The retirement calculation:

1. Think about how many years you plan to work.

2. Using an interest calculator, figure out what your current investments will be worth when you retire, assuming 6%, 7%, 8% or 9% annual growth.

3. Estimate your yearly savings.

4. Over ________ years, that regular contribution will get you to $________. (For comparison, if you just saved that money without investing it, you’d only have $__________).

5. Current Investment when you retire = $_________ +  your yearly savings estimate over x number of years $___________ = $____________ or the amount you would have when you retired!

Note: You can also use a financial calculator if you are proficient in the use of one


Make adjustments as needed

You must not only have the commitment to do what you need to do–you must also continuously review, if you are sincere in making your dreams come true.  That includes having a flexible mindset to make adjustments as adversity and life happenings that you did not or could not plan for–will occur.


Know what your retirement budget or monthly cash flow will look like

Retirement is a new era, but just like the rest of your life, it will all fall in place if you plan appropriately.  In each stage of your life, your concerns, goals and budgets (cash flow) will vary–therefore effective planning is essential.


You may want to break down your retirement in intervals to help simplify your retirement.


●    First 10 years of retirement. As you adjust to your new lifestyle, you’ll likely be in good health and excited by the transition into retirement and as long as you stick to your plan you can take vacations and enjoy life in a more bountiful manner.  It is important that you don’t overdo it on spending, as you must withdraw your retirement savings accounts appropriately because those funds still have to last you a while!


●    Second ten years of retirement. Hopefully you’ve had some fun during the first ten years, and now you might be settling down a bit—as spending usually drops some for most who are over age 70.  If you have downsized or paid off a mortgage and your housing costs are down you should be in great shape.  Be alert for home improvement or accessibility costs going up if you need them as you age, as well as healthcare costs.  If your investments have done better than expected and you need some extra cash you can utilize that cash if you have saved appropriately.


Third ten years of retirement. At this point, you may have a need to move into an assisted living facility or even needing long-term care.  You will likely spend less on everyday necessities, but be prepared for increased healthcare costs, especially if you need assistance.  As you slow down, you can increase your percentage of withdrawals further, though keep in mind how much you want to leave behind in your estate for your heirs.


Put a plan into action that will lead you to reach your “retirement number” that will position you to do what you desire during your retirement years

You must put effective forward moving plans in place if you are to reach your retirement goals.  That consists of knowing what you need to save annually to reach your desired goals and live out your life in a more joyful manner.


The 25x formula mentioned above or another retirement savings formula that provides you a way of reaching the number that you need to reach, can lead to you reaching the number that allows you to pay your monthly utilities, entertainment, taxes, charitable giving–along with traveling at the level that you desire during your retirement years.


It is important that you know the age that you want to retire along with the age that you can retire!  Their is no secret to your retirement success, you must save and manage your money consistently until you reach your retirement number!


While you can’t tell you how many grey hairs will be on your head by the time you are able to retire, you can help reduce stress in your life and estimate roughly when you’ll be financially ready to enter the “retirement zone” that you always aspired to reach by planning proactively and expecting success!


You have already assessed how much you’ve been able to set aside so far by doing the analysis above–and you now know what you can save moving forward (again based on the analysis that you did above)–therefore you must now do and review–as you already have the planto make your dreams come true–or you will soon have one!



Additionally, you want to know how much social security and other income that you and/or your household will receive, know when your required minimum distributions are required for your various retirement accounts and know the taxes that you will have to pay during your retirement years at the federal, state and local level (particularly your income taxes at the state and federal level, property and sales taxes in your area–along with any other taxes in your area that could be of a burdensome nature).


It is important that you get out in front of your retirement planning so that you can achieve greater success! 


With many now living well into their 80s and 90s–it is important that you plan for the years after you stop working with the expectation that you too will live well into your 80s or 90s (or beyond) so that you can enjoy life in a more bountiful manner.


You also want to be on the lookout for financial fraud as scammers are highly adept at creating accounts using your identity and getting your retirement benefits–particularly utilizing phishing scams and setting up fraudulent social security accounts.


Whether you anticipate receiving traditional IRA income, ROTH IRA income, pension income, 401k income, 403b income, railroad retirement benefits, government thrift savings plan payments, social security or any other source, you want to proactively plan for what those payments will be (in total) at the earliest time possible–if possible (no pun intended).


The monthly retirement payments that you will receive must be clear in your mind and not vague or cloudy–or even worse not even in the ballpark of what you need to carry on with your life in the manner that you intended–as no one cares more about you–than you–and that is as it should be.


By making a “real effort” to reach your “retirement number” you can put yourself in position to have a more rewarding and enjoyable retirement.


By applying what you sincerely feel can help you achieve your retirement goals more efficiently you will be putting yourself and your family in a better position as you age–and it is the desire of–that you will do just that as a result of visiting this page.


May all of your retirement dreams come true, as you now know what you must do–therefore the retirement success that you desire is now up to you!


You want to know at the earliest time possible what you value as far as saving for a more rewarding retirement and you want to put plans in place for what will happen after you transition because there is a good chance that you will have assets when you transition–and “you” can decide where they go if you plan now.


It is important that you utilize the values that you have acquired over your lifetime that are positive and uplifting so that you can reach your “retirement number” and improve humanity while you are here on planet earth–and even after you transition?


Do you have the endurance that you need to lead or are you at this time “not ready” to succeed–as you more effectively plant your retirement seed?


All the best as you operate daily at a level that will lead to your retirement success…



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10 Questions you must ask prior to your retirement…

What will I receive from Social Security on a monthly basis…

Retirement Cautions

5 Common Mistakes to Avoid

20-30-40–plan for success–for those who are age 30 or less


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Adjustments, Benefits, Credits, Deductions & Your Taxes

Learn more about taxes and how you can save on your income taxes at this time…


It is important that you realize that there are ways that you can benefit from the tax code if you are a taxpayer in the United States and possibly its territories (and you file income taxes) that could mean more money in your pocket.


Even though you may be unable to use the large array of loopholes in the tax code that many millionaires and billionaires take advantage of, there are ways that you can benefit even if you have modest income.


In this discussion will discuss ways that you can possibly use adjustments, credits and deductions so that you can benefit yourself and your family so that you can build wealth more efficiently and achieve meaningful goals.


In the following paragraphs you will learn about adjustments that could possibly benefit you–along with credits and deductions that you can use to help make your desire to pay lower taxes actually come true!



If you contribute to an IRA (and you qualify) and/or you are a teacher and you have teacher expenses that you pay out of pocket, you can adjust your earned income by claiming an “adjustment to your income” which would have the effect of lowering your taxes and possibly increasing your refund amount or reducing the amount of taxes that you would pay if you were in the unfortunate position of “owing” on your taxes.


As a taxpayer you can possibly subtract certain expenses, payments, contributions, fees, etcetera from your total income.  The adjustments (Schedule 1 Part II) would be subtracted from total income on Form 1040 and would help you establish your adjusted gross income (AGI) that goes on your 1040 tax return.


Common “adjustments to income” include such items as educator expenses, student loan interest, alimony payments or contributions to a retirement account–among others, and you can possibly take these adjustments even if you don’t “itemize” on your tax return.


Other Benefits You Must Know About

You must be able to tell if you can benefit more by claiming the standard deduction or the itemized deduction and you must know whether it is best to use the standard mileage rate or the actual expenses (in order to switch from standard mileage to actual expenses–you must use standard mileage rate in year 1) when claiming the use of your vehicle for your business or farm–at a minimum.


Because all tax situations are unique–your tax professional may be able to clue you in on “other areas of your tax position that you are unaware of” to see where and if there are other areas in the tax code that you could possibly benefit from.


You may be able to contribute to your company retirement plan and get a pre-tax benefit as well as an employer match–and you definitely want to know about that so that you could contribute at a level that is best for not only your current tax position but also at a level that allows you to meet or exceed your future goals so that you can do what you desire most during your retirement years.


If your income is at the right level, you may be able to qualify for a Retirement Savings Contributions Credit (a federal income tax credit designed to encourage low- and modest-income individuals to save more aggressively for retirement).  The credit equals 10% to 50% of your contributions for the year, up to certain limits and is based on your income qualification.



There are many tax credits that are available, and it is important that you (or your tax professional) know of the “tax credits that may apply to your situation” and how they could possibly be of benefit to you and your family at tax time or possibly benefit you and your family in future tax years.


To name a few, energy credits, earned income credit, child tax credit, other dependent credit, childcare credit, clean vehicle credit for electric car purchases, savers credit and the home improvement credit, along with many others may be able to help you lower your taxes (technicalities must be met to qualify for many credits).


If you or your spouse are elderly and disabled you may be eligible for a credit–or if you anticipate future educational expenses, there are ways that you can use educational savings accounts such as 529 plans among others, that provide tax advantages at the federal, state and possibly local level, if utilized appropriately.  In future years (when you utilize funds to pay for qualified educational expenses for yourself or your children) you may be able to take advantage of the American Opportunity Credit or Lifetime Learning Credit so that you can reduce the amount of taxes you owe–or increase the amount of your refund.


In addition, you (or your tax professional) want to be aware of what is possibly available at the state level as well, as in many cases “you will have to apply for the credit(s)” that are offered in a particular state.


Tax credits are more valuable than a tax deduction as you would have a dollar-for-dollar reduction (your tax credit would be $1,000 if you were eligible for a credit of $1,000 unless your taxes owed was below $1,000 and the credit was non-refundable, or you owed no taxes, and the credit was non-refundable) as opposed to the deduction being tied to your tax bracket.


If you are in the 22% tax bracket and you have a “$1,000 deduction” you would save $220–NOT $1,000 (.22 multiplied by $1,000) on your taxes–when computing your tax deduction.



You can choose between a standard deduction (2022 amounts provided by the IRS) or an itemized deduction (includes medical expenses, state income or sales taxes, property taxes, mortgage interest, charitable contributions etcetera that you paid or contributed in 2022), depending on which one is most valuable to you from an overall perspective when you combine your federal and state taxes.


Deductions are not as valuable as a tax credit as a deduction will be based on your tax bracket–and “is not” dollar for dollar!


To reiterate to further enhance your understanding, if you are in the 22% tax bracket and you have a $1,000 deduction you would save $220 (.22 multiplied by $1,000) on your taxes.  On the other hand, if you had a $1,000 credit you would save $1,000 on your taxes generally speaking–get the picture?



It is important that you realize that “effective tax planning” is a “year-round process” and you need to know the importance of why you must be able to distinguish between a tax credit and a tax deduction as by having the ability to distinguish between the two–you can make better tax and wealth building decisions.


In addition, be aware of how you can use tax shelters such as starting a business, utilizing rental property or investing in a tax efficient manner to possibly lower your taxes.  You want to assess and identify what you potentially can (or need to do) do to plan your tax moves in a proactive manner in order to better predict your future outcomes–thereby reducing your risk of owing on your taxes or having other surprises at tax time.


Always be aware that some tax credits are refundable, and some are not!


On the other hand, a tax deduction or an adjustment to your income can still be of value as it helps lower your taxable income, which means you’re paying less in taxes overall.  It can also increase your refund, but this depends on how big the deduction or adjustment is, what kind it is, your tax bracket, your income and your filing status.


A tax deduction (and/or adjustment) can only lower your taxable income and the tax rate (puts you in a lower tax bracket thus saving you additional dollars that you would be paying if you remained in the higher tax bracket) that is used to calculate your tax!


This can result in a larger refund of your “tax withholding” on your W-2, 1099-R, estimated tax payment(s) or other documents in which taxes were withheld.


A tax credit reduces your tax dollar-for-dollar–giving you a larger refund of your withholding, but certain tax credits can give you a refund even if you have no withholding (it is a refundable credit)!


Whether they go by adjustments, credits, deductions or any other name, the key point to remember is that if they can be of benefit to you at tax time–you want to know about them!  Even though you don’t have to be a tax expert, you want to at least be aware of credits, deductions and other ways of sheltering income that are outlined in the tax code that can benefit you and your family when you decide to file your taxes.


All the best as you are now aware of the ABCD test, that you can use right now to analyze your taxes and make adjustments to benefit yourself and your family.  You are now fully aware of why you need to know about how you can use credits and deductions so that you can avoid financial destruction and build a foundation of wealth building that cannot be shaken–because the knowledge that you now possess–cannot be taken!


You are now in a better position to achieve at a level that is your absolute best, thereby ensuring that your finances won’t be a mess–as you achieve unlimited success–because you have decided to master the ABCD test–and put “the procrastination of your past” to rest.


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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 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.



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.



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.



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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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 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



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.



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.



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.



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




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 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. ( 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. 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.



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, 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.




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.




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


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: 800-525-6285 888-397-3742 and, 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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Copyright 2014–2022––All Rights Reserved



Business Expenses & Wealth Building

Learn how you can enhance your business revenue by using business expenses more effectively…

More on Taxes…

If you are currently a business owner, or desire to be one—it is important that you earn income and you know “the deductions that you can claim” now and in your future.


In this discussion will discuss a number of deductions or business expenses that you can take to help lessen your tax burden.


With this being the creation of the last page of this decade for the creator of and the 100th blog page on this site thought that an appropriate topic of discussion for those who desire to build wealth in the next decade and beyond was to show in clear terms how to use “business expenses” to build your business more efficiently–and effectively.


Although this discussion is longer than most, it is important that you “lock-in” on this discussion and utilize your mind at a high level so that you can see clearly where you can use business expenses to achieve more in the coming years.


Record Keeping


It is important that you realize the importance of record keeping whether it be for travel, meals, entertainment, office in the home, building, warehouse, office out of the home, automobile usage for business, advertising and any other expense related to your business.


It is important that you realize that most expenses—and in some cases all expenses that are directly related to your business—can or have the potential to be deductible on your individual or business tax return—and it is you who must keep records in an acceptable way to meet the scrutiny of the IRS.


All of the business expenses that follow have one thing in common—they all require that you keep effective records so that you can protect your interest if you face IRS scrutiny.


In the following paragraphs we will detail a number of critical expenses and show you ways that they can help you lower your taxable income.


Whether you now have (or are contemplating) forming a business as a sole proprietor, partnership, LLC or corporation–the discussion that follows can help you strategically plan your business and achieve more throughout your lifetime.


Automobile Expenses


You can use actual expenses or mileage to deduct automobile expenses and that topic will be discussed in greater detail later in this discussion.


For now, be aware that the standard mileage rate increased to 58 cents per mile for the 2019 tax year—up from 54.5 cents per mile in 2018.


Always remember that “depreciation” which will be discussed later, is already factored into the 58 cent mileage rate mentioned above.


For 2019, the first-year limit on depreciation, special depreciation allowance, and section 179 deduction for vehicles acquired before September 28, 2017, and placed in service during 2019 is $14,900.


The first-year limit on depreciation, special depreciation allowance, and section 179 deduction for vehicles acquired after September 27, 2017, and placed in service during 2019 is $18,100.


If you elect not to claim a special depreciation allowance for a vehicle placed in service in 2019, the amount is $10,100.


Meals & Entertainment


In general, entertainment expenses are no longer deductible.


The cost of business meals generally remains deductible, subject to the 50% limitation.


The maximum amount you can elect to deduct for most section 179 property (including cars, trucks, and vans) you placed in service in tax years beginning in 2018 and forward is $1,000,000.


This limit is reduced by the amount by which the cost of section 179 property placed in service during the tax year exceeds $2,500,000.


For 2018 and 2019, the special (“bonus”) depreciation allowance on qualified property (including cars, trucks, and vans) is 100% for qualified property acquired and placed in service after September 27, 2017 and placed in service before January 2023, and is reduced 20% each year after for property placed in service before January 2027.


For tax purposes, travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job.


An ordinary expense is one that is common and accepted in your trade or business.


A necessary expense is one that is helpful and appropriate for your business.


An expense does not have to be required to be considered necessary!


If you are in the military and you are transferred from one permanent duty station to another, you may have deductible moving expenses—for most, moving expenses are no longer deductible.


Generally, your tax home is your regular place of business or post of duty, regardless of where you maintain your family home.


It includes the entire city or general area in which your business or work is located.


If you have more than one regular place of business, your tax home is your main place of business.


If you move around a lot you are considered an itinerant (a transient) and your tax home is wherever you work.


As an itinerant, you cannot claim a travel expense deduction because you are never considered to be traveling away from home.


If you have more than one place of work, consider the following when determining which one is your main place of business or work:


  • The total time you ordinarily spend in each place.


  • The level of your business activity in each place.


  • Whether your income from each place is significant or insignificant.


If you (and your family) do not live at your tax home (defined earlier), you cannot deduct the cost of traveling between your tax home and your family home.


You also cannot deduct the cost of meals and lodging while at your tax home.


If you are on a temporary assignments or job there are nuances to your tax treatment that may require additional analysis by your tax professional.


Note: there are exceptions for federal crime investigators or prosecutors


When you travel away from home on business, you should keep records of all the expenses you have and any advances that you receive from your employer.


You can use a log, diary, notebook, or any other written record to keep track of your expenses.


The types of expenses you need to record, along with supporting documentation include meals:


There is a 50% limit on meals.


You can figure your meals expense using either of the following two methods:


1) Actual cost

2) The standard meal allowance


Both of these methods are explained below.


But, regardless of the method you use, you generally can deduct only 50% of the unreimbursed cost of your meals.


The actual cost method is quite simple and it only requires that you keep records of your meal costs and divide the cost by 50 percent.  You now have your meal deduction using the actual cost method.


If you use the standard meal allowance, you still must keep records to prove the time, place, and business purpose of your travel.  You deduct a per-diem amount based on IRS guidelines.


For travel between October 1, 2018 and September 30, 2019, the rate for most localities in the United States is $60 a day.


Note: The rates for the remainder of 2019 had not been published as of the date of this article


You can find this information (organized by state) at


Enter a zip code or select a city and state for the per diem rates for the current fiscal year.


Per diem rates for prior fiscal years are available by using the drop-down menu.


Incidental-expenses-only method


You can use an optional method (instead of actual cost) for deducting incidental expenses only.


The amount of the deduction is $5 a day.


You can use this method only if you did not pay or incur any meal expenses.


You cannot use this method on any day that you use the standard meal allowance.


This method is subject to the proration rules for partial days.


Building Mortgage or Lease Payments


If you are purchasing or renting a building for business use you can deduct the mortgage or lease payments.


Insurance, taxes and other fees related to the use and upkeep of the property such as maintenance, lawn care, grounds and other fees are also deductible.


Business Gifts


Always realize that there is a $25 limit on gifts as far as deductibility is concerned.


You can deduct no more than $25 for business gifts that you give directly or indirectly to any one person during your tax year.


Transportation Expenses


These expenses include the cost of transportation by air, rail, bus, taxi, etc., and the cost of driving and maintaining your car.


Also, daily transportation expenses can be deducted if:


(1) you have one or more regular work locations away from your residence, or


(2) your residence is your principal place of business and you incur expenses going between the residence and another work location in the same trade or business, regardless of whether the work is temporary or permanent and regardless of the distance.


If you want to use the “standard mileage rate” for a car you own, you must choose to use it in the first year the car is available for use in your business.


“Then in later years, you can choose to use either the standard mileage rate or actual expenses.”


If you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period.


If you purchase a car and change to the actual expenses method in a later year, but before your car is fully depreciated, you have to estimate the remaining useful life of the car and use straight line depreciation.


Standard mileage rate not allowed


You cannot use the standard mileage rate if you:


1) use five or more cars at the same time (such as in fleet operations)

2)  claimed a depreciation deduction for the car using any method other than straight line, for example, MACRS (as discussed later under Methods of depreciation under Depreciation Deduction)

3) claimed a section 179 deduction (discussed later) on the car

4) claimed the special depreciation allowance on the car, or

5) claimed actual car expenses after 1997 for a car you leased.


If you are self-employed and use your car in your business, you can deduct the business part of state and local personal property taxes on motor vehicles on Schedule C, Schedule C-EZ, or Schedule F (Form 1040).


If you itemize your deductions, you can include the remainder of your state and local personal property taxes on the car on Schedule A (Form 1040).


In addition to using the standard mileage rate, you can deduct any business related parking fees and tolls.


Parking fees that you pay to park your car at your place of work are nondeductible commuting expenses!


NOTE: If you qualify to use both methods, you may want to figure your deduction both ways to see which gives you a larger deduction.


Actual car expenses include:



Tolls/Parking fees


Lease payments

Registration fees





Garage rent



If you have “fully depreciated” a car that you still use in your business, you can continue to claim your other actual car expenses.


Be sure you continue to keep records!


If you use your car for both business and personal purposes, you must divide your expenses between business and personal use.


You can divide your expense based on the miles driven for each purpose—that is why effective record keeping is so important.


If you use a vehicle provided by your employer for business purposes, you can deduct your actual unreimbursed car expenses.


Casualty and theft losses


If your car is damaged, destroyed, or stolen—you may be able to deduct part of the loss that is not covered by insurance.


Note: For tax years 2018 through 2025, if you are an individual, casualty and theft losses of personal-use property are deductible only if the losses are attributable to a federally declared disaster,  however business casualty and theft losses are still deductible.


You can elect to recover all or part of the cost of a car that is qualifying section 179 property, up to a limit, by deducting it in the year you place the property in service.


What is the section 179 deduction?


A section 179 write off allows you to write off part or the entire purchase price of an asset in one year as opposed to depreciating and writing it off over a number of years based on its asset class and depreciation schedule.


Therefore if your goal is to reduce your taxable income you may want to write it off in one year.  Likewise if you desire to spread out the deduction over a number of years you have that option as well.


You must normally make the 179 election in a timely manner in order for it to be allowed by the IRS.


If you elect the section 179 deduction, you must reduce your depreciable basis in the car by the amount of the section 179 deduction.


“You can claim the section 179 deduction only in the year you place the car in service.”


For this purpose, a car is placed in service when it is ready and available for a specifically assigned use in a trade or business.


Even if you are not using the property, it is in service when it is ready and available for its specifically assigned use.


A car first used for personal purposes cannot qualify for the 179 deduction in a later year when its use changes to business.


Let’s say in 2018 you bought a new porsche and placed it in service for personal purposes.


In 2019, you began to use it for business.


Changing its use to business use does not qualify the cost of your car for a section 179 deduction in 2019.


“However, you can claim a depreciation deduction for the business use of the car starting in 2019.”


Requirements for 179 deduction


More than 50% business use is a requirement.


You must use the property more than 50% for business to claim any section 179 deduction.


If you used the property more than 50% for business, multiply the cost of the property by the percentage of business use.


The result is the cost of the property that can qualify for the section 179 deduction.


If the cost of your qualifying section 179 property placed in service in 2019 is over $2,500,000, you must reduce the $1,000,000 dollar limit (but not below zero) by the amount of cost over $2,500,000.


Let’s say the cost of your section 179 property placed in service during 2019 is $3,500,000 or more, you cannot take a section 179 deduction.


The total amount you can deduct under section 179 each year after you apply the limits listed above cannot be more than the taxable income from the active conduct of any trade or business during the year.


If you are married and file a joint return, you and your spouse are treated as one taxpayer in determining any reduction to the dollar limit, regardless of which of you purchased the property or placed it in service.


If you or your spouse file separate returns, you are treated as one taxpayer for the dollar limit. You must allocate the dollar limit (after any reduction) between you and your spouse.


Employees use Form 2106 to make the election and report the section 179 deduction.


All others use Form 4562 to make an election.


You must keep records that show the specific identification of each piece of qualifying section 179 property.


These records must show how you acquired the property, the person or business you acquired the property from, and when you placed the property in service.


Note: Daycare centers, travel by air, cruise ships and rental income have a special set of rules as it relates to deductions.


You should keep adequate records to prove your expenses or have sufficient evidence that will support your own statement.


You must generally prepare a written record for it to be considered adequate.


This is because written evidence is more reliable than oral evidence alone!


However, if you prepare a record on a computer, it is considered an adequate record.


Be sure to record the Cost—Date—and Purpose—especially on Gifts, Travel and Transportation.


If you do so in written form that is acceptable.  Also, if done on your computer that is usually ok as well!


You should keep the proof you need in an account book, diary, log, statement of expense, trip sheets, or similar record.


You should also keep documentary evidence that, together with your record, will support each element of an expense.


Documentary evidence


You generally must have documentary evidence, such as receipts, canceled checks, or bills, to support your expenses.




Documentary evidence is not needed if any of the following conditions apply:


• You have meals or lodging expenses while traveling away from home for which you account to your employer under an accountable plan, and you use a per diem allowance method that includes meals and/or lodging.


  • Your expense, other than lodging, is less than $75.


  • You have a transportation expense for which a receipt is not readily available.


Adequate evidence


Documentary evidence ordinarily will be considered adequate if it shows the:




-place, and

-essential character of the expense


For example, a stay at an Air BnB where you get a receipt is enough to support expenses for business travel if it has all of the following information.


  • The name and location of the Air BnB.
  • The dates you stayed there.
  • Separate amounts for charges such as lodging, meals, and telephone calls.


A restaurant receipt is enough to prove an expense for a business meal if it has all of the following information.


  • The name and location of the restaurant.
  • The number of people served.
  • The date and amount of the expense.


If a charge is made for items other than food and beverages, the receipt must show that this is the case.


Canceled check


A canceled check, together with a bill from the payee, ordinarily establishes the cost.


However, a canceled check by itself does not prove a business expense without other evidence to show that it was for a business purpose.


Timely-kept records


You should record the elements of an expense or of a business use at or near the time of the expense or use and support it with sufficient documentary evidence.


A timely-kept record has more value than a statement prepared later when generally there is a lack of accurate recall.


You do not need to write down the elements of every expense on the day of the expense.


“If you maintain a log on a weekly basis that accounts for use during the week, the log is considered a timely kept record.”


If you give your employer, client, or customer an expense account statement, it can also be considered a timely kept record.


This is true if you copy it from your account book, diary, log, statement of expense, trip sheets, or similar record.


Proving business purpose


You must generally provide a written statement of the business purpose of an expense.


However, the degree of proof varies according to the circumstances in each case.


If the business purpose of an expense is clear from the surrounding circumstances, then you do not need to give a written explanation.


What if you have incomplete records?


If you do not have complete records to prove an element of an expense, then you must prove the element with:


  • Your own written or oral statement containing specific information about the element, and


  • Other supporting evidence that is sufficient to establish the element.


If the element is the description of a gift, or the cost, time, place, or date of an expense, the supporting evidence must be either direct evidence or documentary evidence.


Direct evidence can be written statements, or the oral testimony of your guests or other witnesses setting forth detailed information about the element.


Documentary evidence can be receipts, paid bills, or similar evidence.


If the element is either the business relationship of your guests or the business purpose of the amount spent, the supporting evidence can be circumstantial, rather than direct.


For example, the nature of your work, such as making deliveries, provides circumstantial evidence of the use of your car for business purposes.


Invoices of deliveries establish when you used the car for business.




Another record keeping strategy that many are unaware of but could prove helpful is the use of sampling.


You can keep an adequate record for parts of a tax year and use that record to prove the amount of business or investment use for the entire year.


You must demonstrate by other evidence that the periods for which an adequate record is kept are representative of the use throughout the tax year.


Separating expenses


Each separate payment is generally considered a separate expense.


For example, if you entertain a customer or client at dinner and then go to a show on broadway, the dinner expense and the cost of the broadway tickets are two separate expenses.


You must record them separately in your records.


Combining items


You can make one daily entry in your record for reasonable categories of expenses.


Examples are taxi fares, telephone calls, or other incidental travel costs.


Meals should be in a separate category.


You can include tips for meal-related services with the costs of the meals.


Expenses of a similar nature occurring during the course of a single event are considered a single expense.


Car expenses


You can account for several uses of your car that can be considered part of a single use, such as a round trip or uninterrupted business use, with a single record.


Minimal personal use, such as a stop for lunch on the way between two business stops, is not an interruption of business use.


Allocating total cost of travel or entertainment


If you can prove the total cost of travel or entertainment but you cannot prove how much it cost for each person who participated in the event, you may have to allocate the total cost among you and your guests on a pro-rata basis.


To do so, you must establish the number of persons who participated in the event.


If your return is examined, you may have to provide additional information to the IRS.


This information could be needed to clarify or to establish the accuracy or reliability of information contained in your records, statements, testimony, or documentary evidence before a deduction is allowed.


How long should you keep records and receipts?


You must keep records as long as they may be needed for the administration of any provision of the Internal Revenue Code.


Generally, this means you must keep records that support your deduction (or an item of income) for 3 years from the date you file your income tax return on which the deduction is claimed.


A return filed early is considered filed on the due date.


There are certain nuances and rules for independent contractors and clients, fee-basis officials, certain performing artists, Armed Forces reservists, and certain disabled employees–so if you fall in one or more of those categories be sure to consult your tax professional for more up to date information.


You report your gift expenses and transportation expenses, other than car expenses, on line 27a, and you report your car expenses on line 9 of schedule C if you file as a sole proprietor.


You would also complete Part IV of the form unless you have to file Form 4562 for depreciation or amortization.


Employee Business Expenses no longer deductible


If you are an employee and your employer included reimbursements in box 1 of your Form W-2 and you meet all three rules for accountable plans, ask your employer for a corrected Form W-2.


The three simple guidelines an Accountable Plan must follow to be considered valid are:


1) all expenses to be reimbursed through the plan must have a business connection,


2) expenses must be “timely substantiated,” and


3) any excess advances provided to the employee must be “timely repaid.”


“Employee” expenses for business use of the home are no longer allowed.


If you are an employee, you can no longer claim any miscellaneous itemized deductions on Schedule A, including expenses for using your home as an employee.


Miscellaneous itemized deductions are those deductions that would have been subject to the 2% of adjusted gross income limitation had they not been eliminated for most with the 2017 Tax and Jobs Act.


You cannot claim a deduction for mortgage insurance premiums for expenses paid or accrued after 2017 if you have a home office.


Home Office Deduction


You can use two methods to claim the home office deduction:


When figuring the amount you can deduct for the business use of your home, you will use either your actual expenses or a simplified method.


  • Square Foot Approach, or


  • Simplified method for business use of home deduction.


Actual Expenses (Square Foot Approach)


You simply divide your business usage area by the square foot area of your house to come up with the business percentage.


All expenses associated with your home office and home would be multiplied by the percentage in order to come up with your business deduction.


To qualify to deduct expenses for business use of your home, you must use part of your home:


  • Exclusively and regularly as your principal place of business (defined later),
  • Exclusively and regularly as a place where you meet or deal with patients, clients, or customers in the normal course of your trade or business,
  • In the case of a separate structure which is not attached to your home, in connection with your trade or business,
  • On a regular basis for certain storage use (see Storage of inventory or product samples, later),
  • For rental use, or
  • As a daycare facility (see Daycare Facility, later).


“You can deduct expenses for a separate free-standing structure, such as a studio, workshop, garage, or barn, if you use it exclusively and regularly for your business.


The structure does not have to be your principal place of business or a place where you meet patients, clients, or customers.”


After you determine that you meet the tests under Qualifying for a Deduction, you can begin to figure how much you can deduct.


Simplified Method


The IRS provides a simplified method to figure your expenses for business use of your home.


Electing to use the simplified method.


The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses.


“You choose whether or not to figure your deduction using the simplified method each tax year.”


With the simplified method you receive a standard deduction of $5 per square foot, up to 300 square feet (the deduction can’t exceed $1,500).


$5 multiplied by 300 square feet equals $1,500 is your maximum deduction!


Qualified Business Income


Although not a direct expense QBI or qualified business income—may help you lower your taxes and can be quite helpful to those who qualify.


QBI: If your business is a specified service, trade or business and operates as a sole proprietor, partnership, LLC member or S corporation stockholder—you could possibly qualify for the QBI deduction or pass-through deduction (if otherwise eligible) provided you have taxable income below certain amounts.




By landing on this page you have learned about business expenses in great detail.


For those individuals or companies that are new to business or existing companies or individuals who want to maximize their deductions—you can now do so by planning effectively.


The most common fully deductible business expenses in alphabetical order include the following:


  • Accounting fees


  • Advertising


  • Bank charges


  • Commissions and sales expenses


  • Consultation expenses


  • Continuing professional education expenses


  • Contract labor costs


  • Credit and collection fees


  • Delivery charges


  • Dues and subscriptions


  • Employee benefit programs


  • Equipment rentals


  • Factory expenses


  • Insurance


  • Interest paid


  • Internet subscriptions, domain names, and hosting


  • Laundry


  • Legal fees


  • Licenses


  • Maintenance and repairs


  • Office expenses and supplies


  • Pension and profit-sharing plans


  • Postage


  • Printing and copying expenses


  • Professional development and training fees


  • Professional fees


  • Promotion


  • Rent/Lease payments


  • Salaries, wages, and other compensation


  • Security


  • Small tools and equipment


  • Software


  • Supplies


  • Telephone


  • Trade discounts


  • Travel


  • Utilities


  • Web Services


By utilizing the above expenses to offset against your income for the year you can use the above expenses to strategically increase or decrease your tax position as it relates to your payment of business taxes.  Keep in mind most of the expenses covered in this discussion apply to sole proprietors, LLC’s, LLP’s, partnerships, S corporations and C corporations.


Whether you are a sole proprietor, LLC, partnership or corporation—you can manage your tax position so that you can achieve the goals that you desire as far as your business and personal growth are concerned.


If your goal is to get in position to use credit in your future—you may want to maximize your income and minimize your expenses to get the loan that you need at an appropriate rate and terms.


By doing so you can possibly put yourself in stronger position in the eyes of financial institutions when you apply for credit or a particular type of loan that will look at your “businesses financials” and/or “personal financials” to determine if you or your company meet the lending criteria that they require.


If you anticipate no need to use credit in the short or intermediate time period you may want to maximize your expenses and lower your tax payments.


If your goals fall in the middle you can plan accordingly as well.


All the best toward minimizing or maximizing your expenses and improving your circumstances as we enter 2020 and beyond.


Success lives in you—now is the time that you make your dreams come true…


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Tax Projections & Wealth Building

Learn what you must know about short term and long term individual tax planning if you desire to build wealth more efficiently…

More on Tax Strategies…

In the current economy tax planning is critical as proper planning could allow you to avoid costly mistakes that many make without even realizing that they are making mistakes.


It is important that you have a conceptual understanding of what you can do now to help improve your tax position when you file your 2019 taxes in 2020.


However, a conceptual understanding is only the starting point.


You must put into action tax moves that can help you in the short term (12 months or less) and the long term (12 months or more) so that you can benefit optimally as you move along at the various stages in your life.


After doing tax projections for many during the 2019 tax year the creator of realized that he had not done tax projections for the creator of


Ok, now is a great time to show  you what you can possibly do to lighten your tax burden and also a time that the creator of could also take inventory and make positive moves as well “before” the 2019 tax year ends.


*Determine your current financial position


You must at this time determine where you are financially and that all starts with creating a budget or cash flow statement so that you can know your inflows and outflows of cash on a monthly basis.


By knowing what you take in and pay out you put yourself in a better position to make tax moves that you can benefit from for the current and future tax years.


Or another way of looking at it is–in order to know where you want to go–you must first know where you are at. By looking at your finances in advance of your tax planning you put yourself in position for “more” effective tax planning.


*Determine if you are maximizing your credit effort


Your credit or debt level must be at an acceptable level and there are moves that you can make to get to a level where you are maximizing your credit effort.


Are you managing your debt load effectively?  Do you have a debt payoff or debt pay down plan that is realistic and doable by you?


By maximizing your credit effort you put yourself in a much better position for short and long term tax planning.


Are you using mortgage interest, real estate taxes and other housing related deductions in a way that maximizes your tax position.


*Thoroughly analyze all areas of your finances including tax moves that you can make now to help in the short and long term


You must know how to review and effectively analyze your insurance, investments, taxes, education planning, estate planning/wills and retirement panning in a way that benefits you and your family the most.


You must look at the taxes that you pay to the IRS in an overall and comprehensive manner to see where and if improvements can be made.


Did you know that if you sell your personal residence you can receive tax-free treatment on the gain as long as several conditions are met?


In the following paragraphs you can learn about tax moves that you could possibly make to help lighten your tax burden now–and in your future!


Short Term Tax Moves


You can in the short term make charitable donations (the creator of will be donating a car this year as a result of reviewing tax moves at this time), possibly pay medical expenses in a way that allows you to maximize the 10% of AGI deduction for the 2019 tax year–and if you are self-employed–plan your growth in a manner that maximizes your tax position.


You may be able to adjust your w-4 to ensure that you don’t owe taxes or you get the tax refund or pay the amount (when you owe taxes) that you are comfortable with.


It is important that you know your state income tax withholding and sales tax payment position now–so that you can plan accordingly.  If you are self-employed or make some of your income from self-employment you can plan more effectively and know in advance if you will have to pay estimated taxes that are normally due if you earn income during the year (January 15, April 15, June 17 and September 16–in 2019).


By knowing your current or expected income, your federal and state withholding and your tax projections for the 2019 tax year and beyond you can plan for success and win in your financial life.


If you invest “outside of your retirement accounts” during the year you can use capital losses to offset capital gains up to $3,000 per year and carry forward the rest.


If you invest “inside your retirement account(s)” you can possibly avoid and/or delay the payment of your taxes.


You can plan your family size and educational ambitions with the current and possibly future tax advantages in mind.


Long Term Tax Moves


You can in the long term make retirement contributions in a wise manner by contributing at least to the match level of your employer, and even higher if your financial position allows you to do so.


You must know your federal and state withholding and tax projections for the 2020 tax year and beyond where possible.


If you own rental property  or other depreciating assets you can accelerate or decelerate depreciation so that it will benefit you now—and/or in future years.


Be sure to deduct student loan interest and use education credits in a way that benefits you and your family the most!


Be sure to invest both inside and outside of your retirement accounts in a manner that provides a balance between what you need and your tax position.


Again, if you invest “inside your retirement account(s)” you can possibly avoid and/or delay the payment of your taxes.


Be sure to use pre-tax accounts such as Retirement Accounts, HSA’s and MSA’s and other tax advantage accounts including both ROTH and traditional IRA’s.


If you invest “outside of your retirement accounts” during the year–you can use capital losses to offset capital gains up to $3,000 per year–and carry forward the excess into future year(s).


You can use a start up business or farm to possibly help offset your personal income taxes–if you file as a business or farm on your personal tax return.


If your income is too high or too low you can do short and/or long-term planning to correct that situation in a way that makes the tax system work for or with you—not against you!




The above strategies are proven ways that tax burdens have been lifted or eliminated and if you get a handle on your finances now and look out into the horizon you can discover more effective ways of minimizing your taxable income and lowering your taxes for the 2019 tax year and beyond.


Keep in mind that what is considered short or long term planning will depend on your individual and family situation as what might be short term planning for you could be long term planning for others—and vice-versa.


Also realize that all tax filing situations are unique so what might be effective for your neighbor or co-worker might not be effective for you.


And with the new tax law changes many middle class tax filers who were getting larger refunds in the past are seeing a difference–and in many cases a reduction.


Likewise many who got a smaller refund are seeing an increase, particularly younger families with children and household income under $100,000.


Almost all of those in the $400,000 and up categories have seen an increase in their refund or a decrease in the taxes that they pay.


Always try to maximize your retirement contributions (401k, 403(b), Federal TSP or other employer provided retirement plan) as you are allowed (2019) to contribute up to $19,000–and if age 50 plus an additional $6,000.


By doing so you can not only ensure that you have your retirement funds that allow you to enjoy retirement–you can also get a pre-tax benefit and lower your current taxable income–and possibly pay a lower tax rate during your retirement years, (your AGI will also be lower  when you file your 2019 tax return–thus your taxable income will be lower–giving you both a long-term and short-term benefit)!


Even if you don’t have a retirement plan at your job you can still contribute to a ROTH or Traditional IRA up to $6,000 per year and $7,000 if age 50 plus (income thresholds apply).


If you are self employed you can contribute up to $56,000 ($62,000 if age 50 plus) by setting up a solo 401k  by December 31st of this year–and you can contribute up until April 15, 2020–the filing deadline!


Keep in mind your contributions cannot exceed your self-employment income for the year.


Or you can set up a SEP-IRA which is limited to 20% of your self-employment income up to a maximum contribution of $56,000.


You must always know about marginal tax rates which has been reduced for many, however “more of their income” such as pension and social security is now possibly taxable–thereby increasing the amount of taxes they owe even though they are paying a lower marginal tax rate.


What you really must be aware of is your effective tax rate  as that is the actual taxes that you will pay based on your unique filing position.


Always consider how tax moves at the “federal level” will affect your tax position at your “state and local level”–where applicable.


Your goal is to maximize your tax refund or minimize your tax liability in an overall (state and federal) manner–now–and in future tax years.


All the best toward your short and long term tax success…



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Taxing Subjects & Wealth Building

Learn more about taxes and how you can use that knowledge to build wealth…

Understanding your income taxes at a basic level is important in the current economy and with recent changes to the tax laws it is more important than ever that you understand your taxes at the state and federal level and know some of the ways that you can minimize your taxes and build wealth more efficiently.


In this discussion will briefly discuss a number of individual tax topics as it relates to the IRS that could possibly be of benefit to you or a loved one.


It is important that you understand that you have a “bill of rights” that came into effect in 2014 (give thanks to National Taxpayer Advocate Nina Olson) that outlines what you can and can’t do as it relates to filing your federal income taxes and your relationship with the IRS if you are a U.S. citizen or subject to taxation by the IRS.


Your Rights:


*Be Informed *Quality Service *Pay no more than the correct amount of tax * Challenge the IRS’s position and be heard *Appeal an IRS decision in an independent forum *Finality *Privacy *Confidentiality *Retain representation *A fair and just tax system


Go to to learn in more detail about your rights…


What is the difference between injured spouse and innocent spouse?


Injured Spouse

A: An injured spouse is simply someone whose tax refund is used to cover the past-due debts of a spouse or exspouse. When married taxpayers file a joint return, each spouse has an interest in the jointly reported income and in the debt.


Generally: If you file Form 8379 with a joint return electronically, the time needed to process it is about 11 weeks. If you file Form 8379 with a joint return on paper, the time needed is about 14 weeks. If you file Form 8379 by itself after a joint return has already been processed, the time needed is about 8 weeks.


It will primarily benefit you if you file form 8379 and you are the spouse who is injured (the injured spouse) on a jointly filed tax return when the joint over-payment was (or is expected to be) applied (offset) to a pastdue obligation of the other spouse.  By filing Form 8379, as the injured spouse you may be able to get back your share of the joint refund that was initially taken by the IRS to settle a debt that was owed by your spouse.


To qualify for an injured spouse claim, you must meet the following conditions:


You are not required to pay the past-due amount.


This means that the debt is one which your spouse incurred before you got married or that the debt is one for which only your spouse is liable.


Form 8379 lets you (the “injured spouse“) get back your portion of a jointly-filed refund if it’s seized or offset to pay your spouse’s debt. You must file jointly to use this form. Filing an 8379 will delay your federal refund by up to 14 weeks.


But it could — if you file the injured spouse form allow you to get back a portion of the refund.


As an injured spouse, you are in essence asking the IRS to pay attention to whether you or your spouse has the refund and who has the debt. 


It’s not just federal tax debt that gets collected. A potential refund could be used to offset past-due child support, defaulted student loan payments, state or local taxes, or any other money owed to a state or federal agency. The IRS will inform you and your spouse if an offset takes place. A formal Notice of Offset will be mailed to the taxpayer’s address, which gives the taxpayer time to respond by filing Form 8379 as an injured spouse [source: IRS].


For example, if you were newly married, and were filing taxes jointly for the first time and you always filed individually in the past and you were used to getting a nice refund and your spouse doesn’t usually receive a refund because the IRS garnishes any tax over-payments to cover past-due student loans–you could potentially file as an injured spouse using form 8379.


Once you file as a couple, your refund will be used to cover your spouse’s back student loan payments. By filing for injured spouse relief, you are asking the IRS to keep your refund away from your spouse’s debt.


The IRS takes many things into account when calculating how much the injured spouse might be due. There are two formulas used, including subtracting your share of joint liability from your share of the credits and income. There is also a separate tax formula, which looks something like this [source: IRS]


IRS Formula:


(Injured spouse’s separate tax liability / Total of spouses’ separate tax liabilities)
x Joint tax liability shown on return= Injured spouse’s share of liability

Instructions for filing…

Innocent Spouse

By requesting innocent spouse relief, you can be relieved of responsibility for paying tax, interest, and penalties if your spouse (or former spouse) “improperly reported items or omitted items” on your tax return.


The IRS will figure the tax you are responsible for “after” you file Form 8857!


In contrast, as mentioned above an injured spouse is someone “whose tax refund is used to cover financial obligations” of a current or former spouse.


Please note that the financial obligations can be outside of your federal income taxes as mentioned above!


You are an injured spouse if “your share of the over-payment” shown on your joint return was, or is expected to be, applied (offset) against your spouse’s legally enforceable past-due debts.


IRS Definition:


Innocent spouse relief provides you relief from additional tax you owe if your spouse or former spouse failed to report income, reported income improperly or claimed improper deductions or credits.


If you qualify for Innocent Spouse Relief, you “will not” be held responsible for your spouse or ex-spouse’s unpaid taxes.


You may qualify as an Innocent Spouse if all of the following are true:


*You filed a joint tax return.

*Due to the circumstances, it would be unfair to hold you liable for the unpaid taxes.


Am I responsible for my spouse’s debt?


If you were married when your spouse incurred the back taxes, then yes.

When you file jointly, then you assume “joint and several” liability.


Instructions for filing…

You must file Form 8857, Request for Innocent Spouse Relief, to request any of the methods of relief. Publication 971, Innocent Spouse Relief, explains each type of relief, who may qualify, and how to request relief.


What is the benefit of purchasing a home as it relates to the filing of my income taxes?


If you purchase a home you will enjoy the benefits of your own dwelling (privacy, equity build up, peace of mind and the like) along with a number of potential tax advantages at the federal and possibly state level as well.


Those advantages will be unique to you based on your income, family size, state of residence, loan amount, real estate taxes paid, interest paid, whether you have mortgage insurance and the timing of your purchase among other factors.


It is important that you put yourself in position for success by knowing on the front end whether you are properly prepared to purchase and you know how you will benefit in a proactive way–not after your purchase.


What effect does interest and investment income have on my taxes?


It depends on the amount and whether the interest and/or investment income was earned inside or outside of your retirement account.


If earned outside of your retirement account(s) you may have to pay annual taxes at your ordinary income or capital gains tax rate depending on the type of account and the amount of your income.


Your family size and whether you itemize deductions and other factors will have some effect on the overall taxes that you will pay or the amount of refund you will receive.


If earned inside of your retirement account(s) you may defer or possibly avoid taxation until your retirement years or possibly later depending on the “type” of investment and your (including your spouse if filing jointly) overall income at the time of retirement and the years thereafter.




Taxing Subjects can be a broad area and this discussion only touched the surface as far as taxes are concerned.


Even so, your high level of comprehension and proper application of the subject matter that you learned in this discussion that you can use in your life at this time (or later on down the road) can put you far ahead of those who go about their daily life with no real concern or understanding of their tax position and where they want to go in life.


Also be aware of and look for ways that you can improve your tax position in other areas outside of your income taxes.  Can you improve on the payment of your real estate taxes, ad valorem taxes, sales taxes, utility fees, telecommunication fees and other taxes or fees that are not defined as taxes but have the same effect?


All the best toward paying less and continued 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 thought that helping prepare you and others who desire more success in the coming tax seasons was in order.  In this discussion 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.




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.




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 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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