3 Ways to Reduce Your Tax Bill When Paying for College


1) American Opportunity Tax Credit - Did you attend college for an undergraduate degree in 2016? Then you may be eligible for the American Opportunity Tax Credit. The credit is available up to $2,500 for qualified tuition, fees, and course materials. Also up to 40% of this credit is refundable. This means that even if you do not owe any taxes this year you will still be eligible for a refund of up to $1,000. The credit may not be available if you are single and have income over $90,000 or if you are married and have income over $180,000. Other limitations apply; you should check with your tax preparer to see if you qualify. Another thing to consider is that the credit is also only available for the first four years of post-secondary education. So what if you’re in grad school? You may not be out of luck! 2) Lifetime Learning Tax...

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Do new highs in the market mean it’s time to sell?


U.S. stock market indexes have been reaching new all-time highs repeatedly since last year’s Presidential election. Does this mean investors should be worried that the market is hitting a “top” and that prices are about to slump? In a word, no: New highs in the markets do not tell us anything about what comes next, say researchers at Dimensional Fund Advisors. In fact, much of the time stock prices continue to go higher even after the Standard & Poor’s 500 Stocks Index hits record levels, DFA research shows. Looking at returns on the S&P 500 Index from 1926 through 2016, DFA found that the market was higher 80.5 percent of the time a year after hitting a new monthly record high. That was an even better positive performance than just looking at the market’s 12-month performance after any index level, when it gained in value 74.7% of the time. “Looking at this data,...

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How to Streamline Your Tax Records


Are you still scrambling to put together your 2016 tax records so that you can get your taxes done? Now may be the time to systematize your tax record-keeping, while the pain is still fresh in your mind. Although we think electronic recordkeeping is the way to go and will discuss how below, let’s look at a simple folder system for those who prefer paper records. Get yourself nine manila folders and some type of larger file to hold them together. Label the large file “2017 Taxes” and label the manila folders this way: Pay: Put your pay stubs and/or 1099 earnings statements here, and, once you get them, all W-2 Forms. Interest and Investments: This is where you will file interest, dividends, and capital gains statements from your bank, brokerage account, mutual fund account, and any other savings or investment account that is not a tax-deferred retirement account. Retirement Distributions: All records related to...

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7 Quick Tips for Tax Season


1. Organize your paperwork. Review your prior year tax return to help you think about what you could be missing. Also consider what has changed this year compared to last year. Online access to your various accounts may expedite the process of collecting all your documents. Usually you will get an email when forms are ready rather than waiting for them to come in the mail. 2. Consider taking advantage of free filing. If your tax situation is fairly simple you may be able to take advantage of free filing websites. Depending on what website you use they have limits on how high your adjusted gross income can be to file for free. To see a full list of websites and limitations check out this page on the IRS website: https://apps.irs.gov/app/freeFile/jsp/index.jsp?ck 3. Call your CPA or tax preparer early. Due to high demand for their services during tax times CPAs and other tax preparers can have very...

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3 Ways To Reduce Your 2016 Taxes (There’s Still Time!)


It’s tax time again (collective groan).  But it doesn’t necessarily have to be painful, especially if you can find some tax savings that result in a nice refund.  Most people believe once December 31st passes there is nothing else that can be done to reduce the taxes owed for that year.  Fortunately, that isn’t true.  Here are three ways to reduce your taxes for 2016: 1) Make a Traditional IRA Contribution – You can make an IRA contribution up until April 18th, 2017 and have it count for 2016.  To be perfectly clear, there are two types of IRAs – traditional IRAs and Roth IRAs.  Traditional IRAs provide an upfront tax deduction but you will owe taxes on the money you take out in retirement.  Roth IRAs don’t provide an upfront tax deduction, but the money you take out in retirement is tax-free. The 2016 contribution limit is $5,500 and if you...

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Student Loans – Did You Know?


If you have federal student loans, the loans are discharged when the borrower dies. Federal Parent PLUS loans are are discharged when either the parent or the student dies. One important point to remember:  if the loan was discharged due to the student’s death, parents will receive a 1099-C from the IRS.  It will show the amount of remaining debt that was cancelled and is treated as taxable income.  Parents may be hit with a large tax bill. Private student loans are trickier. Some – but not all -  private student loan lenders offer a death discharge. Cosigners of private student loans may face a problem. Your cosigner is legally responsible for your debt after you pass away, regardless of the type of loan in question.  Plus, the full balance will likely be due immediately. If you are paying your children’s student loans, you may need to file a gift tax return. If you...

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Stock picking doesn’t work, but vested players keep on promoting it


A recent article in Barron’s, a weekly investment publication, concludes that technology and regulatory reform have made active investing obsolete. Active investing, for those not into market lingo, means the constant search for stocks or industry sectors that will beat the market. The article is no surprise (academic researchers have long concluded that active managers can’t beat the market), but its appearance in Barron’s is unusual, given that the old-line weekly concentrates on stories about individual stocks or investment sectors. But it acknowledges what has long been an open secret: since the turn of the century, there have been no five-year periods when active investment managers have beaten market indexes. “Active investment managers” in this sense are the thousands of mutual fund managers who run stock and bond portfolios. The article notes that Standard & Poor’s, which began comparing the results of its indexes to active management results at the turn of the...

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