- What Is Unearned Income and How Does It Work?
Unearned income, also known as passive income, is derived from sources other than employment or business operations and can act as a financial safety net during times of job loss or financial crisis. It can also be a significant source of income during retirement. Unearned income is sometimes taxed differently than earned income. You might… read more…
- Can My Capital Gains Push Me Into a Higher Tax Bracket?
If you’re investing successfully, then it might be nice to see the total value of those investments growing over time, but are you aware that significant growth can put you in a higher tax bracket? This is one way that many people end up owing a lot more tax than they anticipate. Long-term capital gains… read more…
- Stock Market Losses: This Tax Break Could Save You Money Throughout Your Lifetime
Losing money in the stock market stings, but capital losses don’t have to be all bad news for your finances. A tax rule known as the capital loss carryover offers a major long-term tax break investors can use strategically to reduce what they owe the IRS for years, or even decades, into the future. The… read more…
- How Rental Income Is Taxed in Retirement
Retirement involves thoughtful planning and strategic financial decisions. Understanding rental income taxation is an important component of such planning, especially for retirees. Here’s what you need to know about rental income taxation, its benefits, potential risks and how it can serve as a strategic tool during the golden years of one’s life. A financial advisor… read more…
- Ways to Reduce Your AGI
When it comes to your finances, understanding the various components that make up your taxable income is crucial. Adjusted gross income (AGI) is a key element of that equation. It’s essentially your total income from all sources after you’ve made certain deductions and adjustments. However, there are a number of ways to reduce your AGI… read more…
- Gross Income vs. Taxable Income: What’s the Difference?
They may sound similar, but it’s critical to understand the difference between gross income and taxable income. While gross income encompasses all the money you earn from various sources throughout the year, your taxable income comprises only the portion of your gross income that’s subject to taxes after deductions. A financial advisor can help you… read more…
- Do I Have to Pay Capital Gains Tax Immediately?
Understanding when to pay capital gains tax is important for both individual investors and businesses. This tax is applied to the profit, or capital gain, made from selling assets like stocks, bonds, property and precious metals. It is generally paid when your taxes are filed for the given tax year, not immediately upon selling an… read more…
- Tax Benefits of Owning a Home
The financial implications of owning a home go beyond just pride of ownership, as it can offer potential tax benefits. In the U.S., owning a home can lead to significant tax benefits, which might include deductions for mortgage interest, property taxes and home sale exclusion, among others. A financial advisor can help you determine how… read more…
- Is Social Security Included in Your AGI?
Social Security benefits are included in your adjusted gross income (AGI) if your total income, which consists in half of your Social Security benefits and other sources of income, exceeds a certain threshold. This can affect the taxation of those benefits and your eligibility for various tax credits and deductions, which in turn can impact… read more…
- MAGI vs. AGI: What’s the Difference?
Adjusted gross income (AGI) and modified adjusted gross income (MAGI) are two ways to calculate what your income might be for tax purposes. Both these figures directly influence your tax obligations, qualifying for certain tax benefits and deductions. Therefore, knowing when each applies can support your tax-saving strategies and inform financial decisions. Consulting with a… read more…
- What Does It Mean If Something Is Tax-Advantaged?
Tax-advantaged investments can help you maximize your returns. Simply put, a tax-advantaged investment is any type of investment, account, or savings plan that offers notable tax benefits to the investor. These investments allow you to minimize the amount of taxes you pay, either by deferring, reducing, or, in some cases, completely avoiding them. You may… read more…
- Tax Efficiency of ETFs: What Benefits Do They Offer?
The tax efficiency of exchange-traded funds (ETF) derives from their unique structure and trading mechanisms. Unlike mutual funds, the trading of ETFs does not trigger capital gains taxes until the investment is sold. This factor can prove advantageous for investors wanting to minimize the impact of taxes on their investment returns. Imagine an investor who… read more…
- Are Legal Fees You Pay Tax-Deductible?
Whether you’re hiring an attorney for personal reasons or business-related issues, legal fees can quickly add up. Many individuals and businesses wonder whether these expenses can be deducted from their tax returns. While personal legal fees are generally not tax deductible, legal fees related to business often are. To ensure compliance and maximize your deductions,… read more…
- How to Convert Rental Property to a Primary Residence
Converting a rental property into a primary residence is a significant financial move with potential tax implications that necessitate careful planning. By leveraging tools like Section 121 of the IRS code and 1031 exchanges, homeowners can navigate the complexities of this process. However, understanding the intricacies of these laws is crucial. Here’s how to convert… read more…
- What Are Section 199A Dividends?
Section 199A dividends are distributions from the profits of domestic real estate investment trusts (REITs) that qualify for a special 20% tax deduction. Investing in Section 199A dividends can provide a valuable tax deduction for investors, and income limits don’t apply to Section 199A income from REITS. Understanding the ins and outs of this tax… read more…
- Pros and Cons of Taking a Foreign Tax Credit vs. Deduction
For U.S. citizens with foreign income, knowledge of foreign tax credits and deductions is a crucial aspect of financial planning. These mechanisms are designed to prevent double taxation – when someone pays both foreign and domestic taxes on the same income. Both options have their advantages and drawbacks, and understanding them is crucial for making… read more…
- What Is the Limit on Taking the Foreign Tax Credit?
Double taxation can occur when laws from two distinct countries require the same income to be taxed. The Foreign Tax Credit (FTC) is a non-refundable tax credit designed to alleviate this burden for U.S. citizens who earn income abroad by offsetting taxes paid to foreign governments and reducing a taxpayer’s U.S. tax liability. A financial advisor… read more…
- What Is Non-Passive Income?
Non-passive income, also known as active or earned income, refers to the money that you earn through your active efforts, typically by trading your time and expertise for compensation. This is the inverse of passive income, which is earned with minimal effort or active involvement. However you earn your income, a financial advisor can help… read more…
- Is Your Retirement Income Taxable?
Understanding how retirement income from various sources like Social Security benefits, IRA distributions, and pensions are taxed can lead to smarter financial planning decisions. If you find this difficult to navigate alone, consider seeking advice from a financial advisor. Retirement income can be quite diverse, comprised of several sources, each with its own taxation rules.… read more…
- IRS to Use AI to Ramp Up Audits on Wealthy Americans: What You Should Know
Earlier this month, the IRS announced that it will begin using AI to identify tax returns for examination and audits. This is, as the agency wrote in its announcement, part of an effort to shift attention toward high-earners, large corporations and complex partnerships. Among other changes, the agency will use “improved technology as well as Artificial… read more…
- The Tax Consequences of Transferring Stock to a Trust
Considering a savvy move to bolster and shield your assets by transferring stock to a trust? There are significant tax implications associated with this strategic decision that you should keep in mind. Understanding the elements of how your finances will be impacted will empower you to plan your finances efficiently to mitigate any potential tax… read more…
- This Little Known Tax Credit Helps Low-Income Workers Catch Up on Retirement Contributions
Retirement has gotten harder for low-income Americans. In July, the Government Accountability Office studied the impact of tax-advantaged retirement accounts. In doing so, they found that the disparity in retirement savings between low-income and high-income workers between ages 51 and 64 grew significantly between 2007 and 2019. This means people nearing retirement today are in… read more…
- Definition of a Household Employee and How to Pay Them
Household employees like nannies, housekeepers and landscapers make our busy lives easier, but paying them comes with tax and additional obligations that can’t be ignored. Failure to comply can lead to IRS audits and penalties, among other problems. To avoid trouble, you need to understand who is and isn’t a household employee, decide how you’re… read more…
- Passive vs. Non-Passive Income: What’s the Difference?
The key to effective financial planning are two primary types of income: Passive and non-passive. It’s important to understand both passive and non-passive income types that you may have and how each type affects tax planning for improved overall financial management. By mastering these, you will be better informed to strategically plan your finances and… read more…
- What Are the Tax Consequences of Being Added to a Deed?
Property deeds are not just pieces of paper – they hold the power to impact your fiscal situation considerably. Property deeds are legal documents that provide proof of ownership. When you extend ownership rights by adding someone to your property deed, there are tax implications and potential risks associated with the transaction. A financial advisor… read more…