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Are Social Security Benefits Taxed?

Many people do not realize that their Social Security Benefits may be taxed. If you have a taxable income in retirement above a certain threshold, up to 85% of your social security benefits can be taxed. The calculation for the threshold income actually includes half of your social security benefits. Whether or not you trigger taxation on your benefits will depend on your “combined” income, which is a sum of your adjusted gross income (taxable income, which can include taxable sources such as qualified retirement plans), your nontaxable interest (from Muni bonds in particular, Roth IRAs are excludable), and half of your household Social Security benefits. Continue reading...

What is Chapter 7?

Chapter 7 is a type of bankruptcy filing that allows an individual to liquidate enough assets to repay their debts and to then be free and clear of debt obligations. This can help get a credit rating back on track sooner than another type of filing such as Chapter 13. Chapter 7 is for people with incomes below their state’s median income. By liquidating enough assets to pay off creditors, a debtor can use Chapter 7 to take care of all debts at once, or to have some of the debts forgiven if the debtor does not have adequate assets for liquidation. Continue reading...

Who Can Put Money into an IRA?

There are some income limits and contribution limits on who can contribute to an IRA. Generally speaking, as long as you or your spouse is earning taxable income, you can contribute money to an IRA, be it a Roth or a Traditional IRA. There are limits at which you cannot contribute to a Roth IRA (in 2016, the limit is $132,000 for a single filer and $194,000 for a married couple). There are also income limits at which you are no longer able to deduct contributions to a Traditional IRA, but these are only applicable if you or your spouse has a qualified retirement plan at work. 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...

Who Can Contribute to a Roth IRA?

Most people will be able to contribute to a Roth, but once your income hits certain limits, you may need to find another way. Many people use Roth IRAs to make after-tax retirement contributions that will not be taxable upon withdrawal. If you have earned income under certain income limits, you can fund a Roth for yourself and even for a non-working spouse. Roth IRAs cannot be opened by everyone: the income limits are based on your modified adjusted gross income (MAGI) and marital status. 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 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...

What is Income?

Income is a stream, series, or lump sum of cash or cash equivalents that is paid to an individual or entity based on work performed, goods sold, ownership rights, or by being a creditor to whom interest is paid. It is received when a net result is positive, and is sometimes referred to as the “bottom line.” Income can be viewed from a itemized, current perspective or as a balance sheet item for an entire accounting period, such as a year. It also might be discussed as a gross (pre-tax) or net (post-tax) amount. 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 Operating Income?

Operating income is essentially another term for EBIT, or earnings before interest and taxes. It is a company’s profits (revenue - COGS) minus operating expenses and depreciation. Operating income is different from net income in that it does not account for expenses such as taxes, interest from debt payments, or outside business activities. It offers a pure look at how a company effectively generates cash from internal operations. Continue reading...

What is Income Risk?

Income risk is the chance that an investment which is used for income will fluctuate in an unfavorable way if the interest rate environment or market conditions change. Some mutual funds and ETFs are branded as income funds when they use lots of corporate bonds that generate regular income payments, but they are often sensitive to interest rate changes. The Federal Reserve Board and the market can affect changes in the interest rate environment as times goes on. Continue reading...

What is residual income?

Residual income is a stream of income that persists from one work project or investment. Residual income is also known as passive income, and is income which comes from an investment of money or work in the past, where minimal or no additional money, work, or maintenance is required. Residual income could come from investments such income-generating real estate, or work completed such as a published book or acting in a commercial. Continue reading...

Will My Pension Payments Affect My Social Security Payments?

Not in the way you’re probably thinking, but the answer may be yes. Generally speaking, the answer is no. Your Social Security payments depend on two factors only: the age you started to receive Social Security benefits, and the amount of contributions you made to Social Security over the years. Your pension comes from your employer, and Social Security comes from the government. However, your tax liabilities might depend on the combination of your pension and Social Security benefits, and you social security benefits can actually be taxed. In one of the few calculations that has not been indexed for inflation lately, if your retirement income is over a certain number, up to 85% of your social security may be subject to tax as income. Continue reading...

What is Net Income?

Net income is the amount of earnings left over once expenses have been deducted from sales. In short, it is the net amount of profit or loss. It is calculated by taking total earnings in a period (such as a quarter), and deducting all elements of the cost of doing business (labor, depreciation, fixed expenses, overhead, etc…) Net income is ultimately a measure of a company’s profitability, and its calculation should be scrutinized closely to ensure all expenses are being accounted for accurately. 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 Income Property?

An income property is also called an investment property, which is a piece of developed commercial or residential real estate that is used by a third party tenant who makes rental or lease payments for the use of it. Income property can be a good source of income for an individual or business. It can include single- or multi-family residential or commercial properties. Sometimes people co-own income properties together, and receive a proportionate share of the proceeds according to the amount of the start-up capital they paid in. Continue reading...

What is an Income Statement?

An income statement is a business’s financial statement that gives the income results from operations and non-operations activity. It is also called a profit and loss statement or a statement of operations. It is one of the major financial statements in the world of corporate accounting. The others are the balance sheet, the statement of cash flows, and the statement of shareholder’s equity. The income statement will included revenues and gains from investments and “secondary operations”, but it will not include cash flows in or out which may stem from other accounting periods. Continue reading...

What is Income Tax?

Income tax is paid to the government based on the amount of income earned. There are federal income taxes, and some states have their own income taxes, too. As an employee for a company, income taxes will be withheld from paychecks using the company’s best estimation of your annual earnings. At the end of the year it may turn out that they withheld too much, and the government may give you a tax refund for what was overpaid. Continue reading...

What is Investment Income?

Also referred to as passive income, investment income is money paid to an investor from the dividends, premiums sold, or sale of assets in their portfolio. Some investors treat it like a part-time job, such that there is nothing passive about it. In retirement, investors often receive income from bonds, preferred stock, and dividend-paying common shares. Income can be pulled from several kinds of investments, including real estate, and it is likely to be taxed at ordinary income tax rates. 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...