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Will You Owe Taxes When You Sell Your House?


For married couples selling their primary home and filing jointly, you may exclude up to $500,000 of your capital gain from tax ($250,000 for singles.) To claim the whole exemption, you must have owned and lived in your home, as your principal residence, an aggregate of at least two of the five years before the sale. How do you calculate the capital gain on your sale? Your home’s selling price Minus Deductible Closing Costs (Points, Prepaid Interest and your share of prorated property taxes) Minus your Selling Costs (Real Estate Broker’s Commission, Title Insurance, Legal Fees, Advertising Costs, Escrow Fees and Inspection Fees) Minus your Tax Basis in Property (Purchase Price + Purchase Expenses + Capital Improvements minus Any depreciation, minus any casualty losses or insurance payments) If you don’t meet the requirement, because you haven’t lived in your home a total of two out of the last five years, you may still be eligible for a partial tax break in...

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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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The Basics of Long Term Care Insurance


What is long-term care insurance?  Long-term care insurance (LTCI) is an insurance product, sold in the U.S., U.K. and Canada, that helps pay for the cost of long-term health care.  LTCI policies reimburse policyholders a daily amount (up to a pre-selected limit) for services to assist them with activities of daily living such as bathing, dressing, or eating.  You can select a range of care options and benefits that allow you to get the services you need and where you need them. When should you consider buying long-term care insurance?  The ideal time to buy long-term care insurance is between ages 52 and 64. Those who wait longer face higher premiums and an increased possibility of being denied coverage since LTCI premiums are based on medical history and people tend to develop chronic conditions as they age, such as high blood pressure. What are some things you should consider? What is your family...

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401k Beneficiary Rules: What you need to know if you divorce and remarry


If you are married, federal law mandates that your spouse is automatically the beneficiary of your 401k.  If you want to name a beneficiary who is someone other than your spouse, your spouse must sign a waiver allowing you to do this. What happens if you get divorced?  When your divorce is final, you have the opportunity to name a new beneficiary to your 401k.  An example:  Joe and Mary were married and have three children.  Mary has a 401k that lists Joe as the primary beneficiary and the children as contingent beneficiaries.  Once her divorce was finalized she was able to change the primary beneficiary.  Mary could name anyone she wants as her beneficiary of her 401k and later decides to name her three children as her primary beneficiaries. Fast forward five years. Mary is getting remarried.  Mary, with three children from her previous marriage, and her new spouse Bob, who...

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Do You Need to Do Something With Your Bonds?


The Fed raised interest rates.  What happened to your bonds? The value of your bonds will decrease as interest rates increase. Also, the change in interest rates does not affect all bonds equally.  The longer the bond’s maturity, the more it is affected by changing interest rates. If you bought a bond and hold it to maturity, rising interest rates won’t affect the income you receive.  You will continue to receive the interest income and will receive the face value of the bond when it matures.  For example:  If you buy a 10 year bond with a face value of $10,000 at a 5% interest rate, you will receive $500 each year for 10 years.  When the bond matures in 10 years you will receive $10,000. If you need to sell your bond before it matures and interest rates are increasing, the value of your bond could have gone down and you...

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