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What are the IRA Contribution Limits?
The IRS adjusts the contribution limits year to year to accommodate cost-of-living adjustments. There are limits to how much money you can deposit annually into your IRA, and these limits are adjusted for cost-of-living by the IRS. These limits change at least every few years, so you will want to check the current IRS tables on their website. There are full deduction limits, and there are also limitations that may make some or all of these contributions non-deductible. Continue reading...
What is IRS Publication 529 on Miscellaneous Deductions?
IRS Link to Publication — Found Here Publication 529 describes the possible deductions which can be taken in an itemized way on an individual’s tax return. Miscellaneous deductions can be filed using Schedule A of Form 1040. Someone should only take the time to fill out this form if they believe their total deductions will exceed the standard deduction amount, which is nearly $13,000 for a married couple filing jointly. Continue reading...
What is a foreign tax deduction?
Workers who earn income in foreign countries will frequently pay taxes on the income in the country in which the wages were earned. In such cases the worker may be eligible to take deductions for the amount of taxes paid so that their entire income is not subject to taxes again in their country of citizenship. Ex-patriot workers who earn income overseas are generally eligible for tax deductions, credits, or exclusions to account for the taxes that they have already paid on their income in the foreign country. Continue reading...
How Do Deductible and Non-Deductible IRAs Differ?
It is possible to make non-deductible contributions to an IRA, even if you have a qualified plan at work. Traditional IRAs are a good place to stash retirement money because of the tax treatment. Some people will choose to make contributions even when they are not deductible, which gives us two kinds of Traditional IRAs: deductible and non-deductible. Deductible IRAs provide a way to lower your taxes because you can deduct contributions to your IRA from your income. Nondeductible IRAs do not allow you to deduct your contributions, but they still retain their tax-deferred growth. Unlike a Roth, these after-tax contributions will be taxed upon withdrawal as income. Continue reading...
What is a Dividends Received Deduction?
A Dividends Received Deduction (DRD) is a tax deduction available to corporations when they are paid dividends from another corporation. This is a provision to reduce the number of times an amount of earnings can be taxed: company A, which is paying the dividend, will have already been taxed on it, and the shareholders of company B will be taxed as well, so the Dividends Received Deduction alleviates taxes at the intermediary stage when Company B receives it. Continue reading...
What is Adjusted Gross Income?
For tax purposes, Adjusted Gross Income is the basis of an individual’s income tax calculations, before “below the line” deductions. Adjusted Gross Income (AGI) is Gross Income (all of an individual’s earnings for the year) minus above-the-line deductions such as retirement plan contributions, education and medical expenses, Health Savings Accounts, alimony, military exemptions, and so on. After these adjustments, a person can take the standard federal deduction or itemize their other deductions. These are known as below-the-line deductions. Continue reading...
What is a Limit Order?
A Limit Order is a type of order to buy or sell a security, where the trader wants to set a specific price for the trade, or any price that’s better than the price set. From a buy and sell standpoint, a buy limit order would be designed to have the trade executed at the designated price, or any price lower than that. A sell order is just the opposite, where the trader hopes to execute the trade at a minimum set price. Limit orders typically have a period of time before they are canceled, if the designated price is not reached by a certain period. Continue reading...
What Part of the Contribution into My IRA is Tax-Deductible?
Traditional IRAs can get interesting if you or a spouse is covered by a qualified plan at work. You are able to deduct all of your contributions into a Traditional IRA as long as you (or your spouse) are not a participant in an employer-sponsored retirement program. If either of you are, there are certain regulations you should be aware of. The amount of your contribution that can be tax-deductible is determined by your (and your spouse’s) modified adjustable gross income (MAGI). Continue reading...
What is Form 2106-EZ: Unreimbursed Employee Business Expenses?
IRS Link to Form — Found Here Some necessary expenses paid in the course of performing the duties of a job will go unreimbursed by an employer but are eligible for tax deduction. These can be filed by the employee on a 2106 or a 2106-EZ. The 2106-EZ is, of course, the simpler of the two, and allows for standard mileage deductions and most of the common types of related deductions. Unreimbursed business expenses are expenses that can be considered necessary to performing a job, such as paying for business-related insurance or professional organization dues, that aren’t paid for by an employer. These can be used to file for tax deductions on a 2106 or 2106-EZ. Continue reading...
What is a Stop Limit Order?
A Stop-Limit Order basically automates the preferences of an investor or trader, to reduce exposure to price uncertainty even after a trade ticket is entered, by stipulating a price at which the search for a bid/ask price is to begin, but limiting the range of prices at which an order can actually be entered or executed. A Stop-Limit Order has two parts: the Stop Price and the Limit Price. The stop price is like an amendment or contract rider on a security that is held which stipulates that if the price of the security crosses the Stop price, the search for an agreeable price begins. Continue reading...
Can I Purchase Individual Health Insurance?
Yes, you can purchase individual health insurance if you are not covered by an employer-sponsored plan, or if you are too old to be on your parent’s plan. You can start your search at www.healthcare.gov, though you may end up finding the best plan on your state’s exchange (if your state has a health insurance exchange. Financial aid is also available for health plans if you are below a certain income threshold. Continue reading...
What are the 401(k) Contribution Limits?
The contribution limits of 401(k)s are generally increased year-to-year and published by the IRS. As of 2016, an individual can contribute up to $18,000, or 100% of compensation, into their 401(k) account on a pre-tax basis. This is the employee’s contribution only, and does not include employer contributions. There is a $35,000 window that can hold employer contributions, which may contain matching contributions as well as a profit-sharing component for a total of $53,000 in employee/employer contributions per year. Continue reading...
What is IRS Publication 502 on Medical and Dental Expenses?
IRS Link to Publication — Found Here Publication 502 outlines which types of medical and dental expenses are deductible, who can be included in your considerations, what the limits are on deductions, and more. This publication is primarily meant for individuals but businesses might find it useful as well. Publication 502 is a source of information for all tax information regarding deductions stemming from medical and dental expenses and insurance. Continue reading...
What is the Form 6251: Alternative Minimum Tax, Individuals?
IRS Link to Form — Found Here The Form 6251 is used to calculate the alternative minimum tax (AMT) for individuals who may have high income but relatively low taxes due after deductions. The individual first computes his or her adjusted gross income, which does not allow for some deductions that may have been taken for the tax filing. If the AMT is higher than the taxes already paid, the individual will have to pay the difference. Continue reading...
What is Gambling Income?
IRS Link to W2-G Form — Found Here IRS Link to Form 1040 — Found Here Winnings from gambling activity must be reported as income, and they will be subject to different kinds of taxes depending on how they were won and the amount. If you win over a certain amount through a lottery, raffle, horse track, keno game, slot machine, poker tournament, or other form of gambling, it will all be taxed at a 25% rate and will have to file form W2-G. Lesser winnings will still need to be reported as income. If an individual wins over $600, less the amount of the wager, and it is over 300 times the amount of the bet, they must file a W2-G on their taxes. Continue reading...
What is a Form 2106: Employee Business Expense?
IRS Link to Form — Found Here Form 2106 is the long-form way to request deductions for unreimbursed business expenses incurred by an employee in the course of work. This can include professional affiliation dues, continuing education, insurances, vehicle mileage and depreciation, and other possible deductions. Often, employees are not reimbursed for every out-of-pocket expense they incur in the course of their work. This might include wear and tear on a vehicle, professional dues, travel expenses, business meals, and many more items. For any amount to go towards a tax deduction, the itemized unreimbursed expenses must be over 2% of adjusted gross income. Continue reading...
What is a Home Office Expense?
IRS Link to Form — Found Here The home office expense deduction allows people who work from home to take a tax deduction reflecting the loss of square footage in their home for the purpose of doing business there. The space must be used exclusively for doing business on a regular basis and it must be the principal place of business, not just a place to work outside of the actual office. Many people fail to file for the home office expense deduction because they believe it will be more trouble than its worth or that it may even trigger an IRS audit of their reporting. Continue reading...
What is Depreciation?
Depreciation is the accounting practice of recording the decreasing value of a fixed asset, such as a building or piece of equipment, over time, or, effectively, spreading the tax deduction for the cost of the asset over time. The IRS has created set schedules which describe the number of years over which a business can amortize the cost of a business asset for the purpose of tax deductions. The number of years is different for each type of asset or equipment. Continue reading...
What are the contribution limits for my Roth 401(k)?
Roth 401(k) contributions have the same limits as regular 401(k) contributions. The contribution limits for your Roth 401(k) are the same as the contribution limits for a traditional 401(k), which, in 2016, is $18,000, but these limits are adjusted upwards to account for inflation. If you’re over 50, you can add a catch-up contribution of $6,000 on top of the $18,000 for a total contribution of $24,000. Continue reading...
What is Federal Income Tax?
The Federal Government has established several ways to generate the revenue needed to pay for the operations of government agencies and capital improvements benefiting society. The primary source of these funds is through income taxes, which are assessed based on the earnings of an individual. Federal income taxes are paid by individuals in proportion to their earnings, after reducing the considered earnings by the allowable tax deductions. Continue reading...