It will be factored in when considering financial aid eligibility. Unfortunately, having a 529 Plan may affect your child’s eligibility for financial aid in the future. If a parent owns the account, in 2016 the financial aid office will take 5.64% of the account’s value (and all other non-retirement investment accounts) into consideration when determining how much financial aid a student can receive. Continue reading...
529 plans are accounts designed to help families save for the future college expenses of young family members. A 529 Plan is designed to help you save money now to pay your child’s college expenses later. Investment companies who design a plan, which looks similar to a retail mutual fund account or IRA, will partner with state governments to offer the state’s official 529 plan. Families can invest in a 529 and gain access to an array of mutual funds. Continue reading...
You can technically use it however you see fit if you are willing to pay the 10% IRS penalty. Money from 529 Plans can be used for tuition, books, supplies, room and board and, as of recently, computers and electronic necessities. Always check if you’re not sure that an expense is covered by the 529 plan. Money used for anything other than the specified costs will be subject to federal income taxes and a 10% penalty on the earnings. You can also transfer the account to another beneficiary or yourself if you or someone else will need the money for college one day, without incurring any penalties or taxes. Continue reading...
The Lifetime Learning Credit is a federal tax credit to offset expenses associated with higher education. There is no age limit and the credit can be applied to part-time student courses, even if it is only one class. The credit is for 20% of the related expenses up to a maximum of a $2,000 credit per household. Tax credits are a dollar-for-dollar reduction of taxes due. The Lifetime Learning Credit can be used for higher education expenses, regardless of the age of the student, but there is a household limit per year. 20% of educational expenses up to a household maximum of $2,000 can be applied as an income tax credit. The credit exists to make it easier for Americans to increase their skill-set and education. Continue reading...
Coverdell ESA accounts can be used to cover educational expenses. Similarly to a 529 Plan, the money from a Coverdell ESA can only be used for qualified educational expenses. However, the definitions for “qualified” are broader with this plan, and can be used for educational expenses from Kindergarten through high school, in addition to postsecondary (college) expenses. The downside is that Coverdell’s have a low contribution limit of only $2,000 per year. Continue reading...
Roth IRAs have some interesting provisions that make them a little more liquid than other retirement accounts. Roth IRAs contain after-tax contributions that actually remain accessible to you at any time, without tax or penalty. The stipulations on withdrawals are only concerned with earnings in the account, not the principal amount. In order to withdraw earnings without paying a 10% penalty and income taxes, you must be at least 59½ and five years must have passed since you first began contributing. Continue reading...
Parents and family members, or actually anyone, can contribute up to the annual gift tax exclusion limits, and beyond. Several people can fund 529 plans for the same person or child, and any one person can maintain as many 529 plans as they would like. Each person can contribute up to the annual gift tax exclusion amount, which in 2016 is $14,000, per beneficiary. 529 plans have a special provision that allows the owner of the account to exceed the gift tax exclusion by contributing up to $70,000 at once – but no contributions can be made for 5 years after that, because this provision is really just allowing you to accelerate the contributions. Continue reading...
IRS Link to Form — Found Here Distributions from qualified educational accounts such as 529s will be reported on a 1099-Q. This will be submitted by the institution serving as the custodian of the account. Qualified tuition programs (QTPs) might include Coverdell Educational Savings Accounts (ESAs) or 529 plans, and distributions from these plans are not taxable when used for qualified educational expenses, such as college tuition. Continue reading...
Coverdell ESAs have low contribution limits, and an income limit that may keep you from contributing at all. Currently, in order to contribute to an ESA at all, you and your spouse must make less than $220,000 per year (combined). The annual contribution limit to an ESA is $2,000, and the contributions made to an ESA are not tax-deductible. These limits have not been adjusted for inflation in years, and these plans are quickly becoming obsolete. Continue reading...
You have about as many investment choices in a Coverdell as you would in a personal IRA account. Money in a Coverdell ESA can be invested in financial instruments such as mutual funds. You can establish a Coverdell ESA at any major brokerage or bank, and the investment choices will vary depending on the institution. The account will grow tax-deferred, and the withdrawals are not taxed as long as they are used for appropriate educational expenses. Continue reading...
A Coverdell ESA is an account which can be used to save for educational expenses. These used to be called Educational IRAs until someone realized that didn’t make sense. A Coverdell Educational Savings Account (ESA) allows you to save money for your child’s future education costs. As opposed to a 529 Plan, which is limited to post-high school education, money from an ESA can be used as early as Kindergarten. Continue reading...
Generally associated with mutual funds and exchange traded funds, the expense ratio represents the total annual management fee. The expense ratio is the annual management fee charged to shareholders by ETFs and mutual funds. The annual fee typically comprises the annual management fee, 12b-1 fees (which are associated with research costs), operating costs, and all other administrative type fees that go into the product. The expense ratio encompasses all of these fees as one percentage. Continue reading...
Operating expenses are the costs a company incurs as a part of everyday business operations. The goal of most every management team is to figure out how a company can minimize operating expenses while maximizing production and profitability. Operating expenses can involve buying inventory, the cost of running machines, rent, payroll, and so on. What it costs a company to undergo normal business operations and output. It is sometimes referred to as OPEX. Continue reading...
Keeping track of your expenses is one of the most important (and basic) steps to leading a responsible financial life. It might be tempting to “eyeball” your expenses and somehow get by without a plan, but in almost all cases, such carelessness will spell financial disaster. Budgeting your money for specific categories of expenses and carefully documenting the actual spending is critical. You should add up amounts spent on monthly mortgage and car payments, rent, groceries, clothing, entertainment, utilities, transportation, and other miscellaneous expenses, and try to get as close to possible to a monthly budget. Continue reading...
There may be fees and commissions involved in the purchase of ETFs, and ongoing expenses that reduce earnings over time. Purchasing an ETF will probably involve paying some fees or commissions to the service or broker through which you acquired the shares, but these days those commissions are fairly minimal. These fees will be the same or less than you might pay for using their services to acquire positions in other securities. ETFs are a relatively cheap way to gain an exposure to a particular sector of the market or to take a position that might otherwise be difficult and expensive to research, calculate, and engineer. Continue reading...
Medicare Part A is the standard, baseline hospital coverage that comes at no cost as part of everyone’s Medicare benefits. It will pay for inpatient stays at hospital and skilled care facilities, but only for a certain number of days. Medicare Part A is hospitalization and inpatient care insurance. It will pay fully for about 20 days of care, but only if there is an inpatient procedure first and the patient appears to be convalescing. If the patient is not gradually recovering, their Medicare benefits will be suspended. Continue reading...
Employers sponsoring 401(k) plans are required to give employees the information and ability to manage their own accounts, using the investment options provided to them by the plan administrator and custodian. Sometimes employers and 401(k) custodians will provide employees with simplified systems by which to determine what kinds of investments appeal to them, and how they would like to allocate their portfolio in pursuit of their retirement goals. Continue reading...
If you buy and sell securities, you may qualify for tax status as a ‘trader,’ which importantly may qualify you for certain business tax breaks. The rules governing this status can be confusing, however, making it difficult to determine whether you qualify as a trader, investor, or dealer. Let’s take a closer look at the qualifications for traders as defined by the IRS, as well as how to report income and expenses if qualified. Continue reading...
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...
IRS Link to Publication — Found Here Businesses can refer to Pub. 535 to get a better grasp on what expenses can help lower their corporate tax bill. Many of the costs required to do business can be deducted or depreciated. The guide addresses employee compensation, inventory, research and development, and much more. Many of the expenses that could fall into the category of “overhead” can be deducted by a business. Continue reading...