COA 4131 1st Edition Lecture 33 Outline of Last Lecture I Importance of Estate Planning II Process of Estate Planning III Wills IV Probate V Tax Advisors VI Advise for Beginners Outline of Current Lecture I Saving Investing Planning II Manage Your Investment Accounts III Assess Your Taxes IV Create a Budget for the New Year V VI Increase Your Emergency Fund Consider Your Health Benefits and Insurance VII Update Your Beneficiaries VIII Do Not Miss Your Next Checkup IX X XI XII XIII XIV XV XVI Reaping Tax Savings for Large Transformations Marriage Divorce Birth Adoption Change of Employment Disasters Change of Household XVII Medical Expenses XVIII Retirement XIX Death Current Lecture A Saving Investing Planning a The end of the year is the perfect time to check out your financials i Not just investments ii All financial accounts B Manage Your Investment Accounts a Review account statements b Max out contributions to retirement and education savings accounts c Also i Review investments performance 1 Focusing on short term investment is usually a losing investment strategy ii Check your asset allocation 1 Consider rebalancing if your asset class is missing the target allocation by more than 5 C Assess Your Taxes a Of all your investment expenses taxes have the most potential to your reduce your returns b Remember to give to charity and to get a receipt D Create a Budget for the New Year a After determining your living expenses decide how much will go toward retirement education expenses if any and short term savings b Make sure the allotments you choose are in keeping with savings goals E Increase Your Emergency Fund a Revisit your emergency fund and as your living expenses and responsibilities increase so should your emergency fund F Consider Your Health Benefits and Insurance a Take advantage of flexible spending and dependent care i Allows you to use pre tax money to pay for common medical expenses child care and personal care for older family members G Update your Beneficiaries a The beneficiaries you designate for your retirement account and life insurance should be rechecked H Do Not Miss Your Next Checkup a Should checkup on financials at least once a year I Reaping Tax Savings for Large Transformations a Annual write offs and deduction should include examining big tax breaks i ii iii iv v vi vii viii ix Marriage Divorce Birth and Adoption Change of Employment Disasters Change of Household Medical Expenses Retirement Death J Marriage a Long standing tax code quirk i Couples earning widely different incomes pay lower taxes after marriage K Divorce a Who will claim the dependent exemption for children in time of divorce i Only one per child is allowed ii Higher earning spouse often gets more benefits b Starting in 2013 i The personal exemption phases out for single filers starting at 250 000 of AGI 1 Sometimes the lower earning spouse benefits more L Birth a Must obtain social security number for children b Child care credit for kids 12 years and under i 3 000 for 1 child ii 6 000 for 2 or more c Nanny tax i If another person care for your child M Adoption a Adoptive Parents i Can qualify for tax credit of up to 12 650 per child in 2012 1 12 970 for 2013 ii Keep careful records iii Recently the IRS has challenged 70 of adoption credits N Change of Employment a For workers who lost their job b Pay for unused vacation sick days are taxable i Employer might withhold taxes at a lower rate than before c Unemployment compensation i File from W 4V 1 Flat 10 withheld d Payments for extended health coverage are tax deductible i Medical expenses e Earned income credit i A dollar for dollar tax offset O P Q R S ii Can be worth more than 5 000 to couples with children who earn little income f Workers planning to return to school i Education benefits g Selling assets in 2013 i The rate of long term capital gains for couples with less than 72 500 1 32 500 for singles 2 Taxable income is attractive A New Business a New owners MUST keep detailed records in order to deduct many costs i Payments for 1 Meals travel automobiles health care equipment retirement plans b The IRS wants to see proof i Especially for meals and entertainment of expenses c Working home from claim up to 1 500 home office deduction for 2013 Disasters a Tax deductions for casualty losses i Are not generous ii Congress hasn t granted victims for super storm Sandy the expanded tax benefits it gave to Katrina victims b The IRS has extended until October 15th the deadline for deciding whether to take allowable storm losses against 2011 or 2012 taxes for Sandy victims Change for Household a For 2012 i The exemption for each dependent is 3 800 ii The assessment whether you supplied more than half of someone else s support 1 Even if that person isn t related to you or living with you Medical Expenses a For 2012 i Taxpayers can deduct expenses exceeding 7 5 of AGI 1 10 if you owe alternative minimum tax b For 2013 i The hurdle rises to 10 1 Unless 65 or older c Qualified Expenses i Payments for insurance premiums contact lens solution a doctor prescribed wig tuition for special education skilled nursing care and even some assisted living care Retirement a Common mistake is to take a bonus or pension lump sum before moving from a high tax state to one with lower taxes b Don t be quick to withdraw from your retirement plan c Recent retirees who have taken an income hit i Should consider converting some or all of a regular IRA to a Roth IRA 1 Roth accounts a Withdrawals don t raise Medicare premiums or taxes on social security payments and they don t help trigger the new 3 8 tax on other investment income T Death a Estate tax exemption i Now more than 5 million per individual and indexed for inflation many executors of estates under the limit might skip filing an estate tax return 1 It is important to file after one spouse dies to preserve any unused exemption for the partner
View Full Document
Unlocking...