Local Business Scholarship Accepting Applications from College Juniors
 
Gary DellaPosta, CPA & Business Advisors are pleased to announce their 2019 Scholarship for entering college juniors. They will be awarding $1000 to a qualified local student. To qualify, you must be from Falmouth, Bourne, Mashpee or Sandwich and entering your junior year in 2019. Applicant must be enrolled in a program leading to a bachelor’s degree in a business degree field at an accredited college or university.  Applicants are invited to download the application off of our website or contact them directly to receive a copy.  All applications are due June 1, 2019 and a winner will be announced on July 1, 2019.  The winner and their family will be invited to attend a luncheon to receive their honors. Prior winners include: Jacquelyn Grinnell of Falmouth (2016); Ian McKenna of Sandwich (2017); and Hannah Ghelfi of Falmouth (2018).
For more information visit their website:
​http://www.dellapostacpa.com/Scholarship.php
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Cape Cod Moms Advisor, Gary DellaPosta, CPA is pleased to announce Jacquelyn Grinnell as the winner of the 2016 Gary DellaPosta, CPA Business Scholarship for $1,000.   

Jacquelyn is a local 2014 Falmouth High School graduate who  has excelled in her studies at University of New Hampshire while majoring in Business Administration Accounting and Marketing.   She has received excellent grades in her accounting classes, has earned high honors twice and currently holds a cumulative GPA of 3.58.
 
Jacquelyn is a first generation college student in her family attending the University of New Hampshire.  Her parents Robert & Nanette both work within our community and her younger brother, Robert attends Lawrence Jr. High School.  She has grown up learning that nothing is handed to you in the real world and that one must work hard for what you want in life.  As a result she has paid her own way through college working full time as a manager in the summer in Falmouth at Jimmy’s of Woods Hole and the Surf Drive Snack Bar.  She is a valued employee who is trusted to help operate the business responsibly and takes ownership of her job.  She also works at the Dimond Library at the college during the school year.
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In addition to working and going to school, Jacquelyn also volunteers at a therapeutic art club.  Jacquelyn has demonstrated passion and dedication to her studies, her job, her family and to our community.  It is because of her strong work ethic and devotion to her all these that proves just how far in life this young woman will go.  She is a true asset to our community and we are extremely pleased to offer her this opportunity to help her finish her college education. Congratulations Jacquelyn!

Gary DellaPosta, CPA & Business Advisors are pleased to announce our 2016 Scholarship for entering college juniors. We will be awarding $1000 to a qualified local student. To qualify, you must be from Falmouth, Bourne, Mashpee or Sandwich and entering your junior year in 2016. Applicant must be enrolled in a program leading to a bachelor’s degree in a business degree field at an accredited college or university.  Applicants are invited to download the application off of our website or contact us directly to receive a copy.  All applications are due June 1, 2016 and a winner will be announced on July 1, 2016.  The winner and their family will be invited to attend a luncheon to receive their honors. 
To view and download our College Scholarship Application please select below:
College Scholarship PDF Version
College Scholarship Word Version

By: Gary M. DellaPosta, CPA

The best time to start instilling financial skills and values is when children are young. Start giving your kids an allowance once they reach school age. Let them participate in making the decision of how much their allowance should be.

Some parents may want to require kids to do household chores to earn the allowance. Or, parents might want to provide an allowance, but pay kids extra for the performance of tasks. This incentive plan is, of course, a matter of individual child-rearing philosophy, but it does get the message across that money does not grow on trees.

Give your kids control over their own money (their allowance and whatever monies you give them that are not earmarked for some particular purpose). You can make suggestions to them about what they should do with it-i.e., that they might spend half and save half-but allow them the final say on what happens to the money.

Let them see the consequences of both wise and foolish behavior with regard to money. A child who spends all of his money on the first day of the week is more likely to learn budgeting if he is not provided with extras to tide him over.

How much allowance to provide is a matter of parental discretion. Most parents provide about $7 per week to their elementary school children, and from $12 to $20 a week to kids in junior high.



Savings and Investment

Beyond the basics of budgeting and saving, you will want to get your child involved in saving and investing. The easiest way to do this is to have the child open his or her own passbook savings account.

If you want your child to get familiar with investing, there are various child-friendly mutual funds available. The mailings from the fund can be a source of education. Or you may want to get the child interested in individual stocks.

You may want to start a "matching" program with your kids to encourage saving. For instance, for every dollar that the child puts into a savings account or investment, you might match it with 50 cents.

If you want to get your kids involved with investing, it will usually have to be done through a custodial account. There are generally two types of widely used custodial accounts-one is set up under the Uniform Gifts to Minors Act, and the other under the Uniform Transfers to Minors Act. The type of custodial account available depends on which state you live in.

With a custodial account, the child is the owner, but the custodian (usually a parent) manages the property until the child reaches the age of majority under relevant state law-either 18 or 21. The custodian must follow certain rules concerning management of the property in the account. These rules are intended to ensure that the custodian does what is in the child's best interests.

IRAs for Kids

If your child has earned income-from a paper route or baby-sitting, for example, or from working in the family business he or she can contribute earnings to an IRA. The IRA can be an extremely effective investment for a child because of the IRA's tax-deferral feature and the length of time the money is left in the IRA. If $3,000 per year is contributed to the child's IRA for ten years and the money is left to grow until the child reaches age 65, the amount in the IRA could reach $600,000 or more, depending on the returns on the investment. In 2014, your child can contribute the lesser of his or her earned income for the year or $5,500, either to a traditional IRA or a tax-free Roth IRA. The contribution limits are the same for both types of accounts.

To replace the "lost" earnings, the parents can give $3,000 per year to the child (or the amount of earned income the child has, if less). The child may have to file tax returns.

The drawback of course is that, with some exceptions, the money cannot be withdrawn before age 59-1/2 without tax penalty.

Related Guide: For tax rules on IRA withdrawals for higher education, please see the Financial Guide: HIGHER EDUCATION COSTS: How To Get The Best Tax Treatment.

Taxes and Credit

Kids can learn to use automatic teller machine cards for their savings accounts. They can also start using credit cards at an early age-with parental counsel and involvement. They can learn the concepts of incurring and paying off debts both from credit card use and from small loans that parents make them.

It is important to familiarize kids with paying taxes as well. If children have to file tax returns-as they would with an IRA--allow them to participate in the process; this will get them used to the idea of yearly tax payments, and can also be an opportunity for learning about how governments are run with tax revenues.

Note: One side benefit of getting your kids involved in money management is that it may help to avoid the "math phobia" some kids experience in junior high school.

Tip: Professional guidance should be considered for a life event change as major as a marriage of divorce.

Source: Expenditures on Children By Families 2013, US Department of Agriculture Publication Number 1528-2013. Before-tax Income of $61,530 and $106,540 (Average = $82,790).

By: Gary M. DellaPosta, CPA

Here is a summary of the possible sources of financial aid. The types of aid and tax implications change frequently, so consult your financial advisor for specifics when you're approaching the time to seek financial aid.

Grants, the best type of financial aid because they do not have to be paid back, are amounts awarded by governments, schools, and other organizations. Some grants are need-based and others are not.

• Federal Pell Grant Program. Pell grants are need-based.

Tip: Don't assume that middle class families are ineligible for needs-based aid or loans. The assessment of whether a family qualifies as "in need" depends on the cost of the college and the size of the family.

• State education departments may make grants available. Inquiries should be made of the state agency. Employers may provide subsidies.


• Private organizations may provide scholarships. Inquiries should be made at schools.


• Most schools provide aid and scholarships, both needs-based and non-needs-based.


• Military scholarships are available to those who enlist in the Reserves, National Guard, or Reserve Officers Training Corps. Inquiries should be made at the branch of service.

Tip: Try negotiating with your preferred college for additional financial aid, especially if it offers less than a comparable college.

Loans may be need-based, and others are not. Here is a summary of loans:

• Stafford loans (formerly guaranteed student loans) are federally guaranteed and subsidized low-interest loans made by local lenders and the federal government. They are needs-based for subsidized loans; however an unsubsidized version is also available.
• Perkins loans are provided by the federal government and administered by schools. They are needs-based. Inquiries should be made at school aid offices.
• Parent loans for undergraduate students (PLUS) and supplemental loans for students are federally guaranteed loans by local lenders to parents, not students. Inquiries should be made at college aid offices or by calling 800-333-4636.
• Schools themselves may provide student loans. Inquiries should be made at the school.

Work-Study Programs. This is a program that is federally funded and based on the family's financial need. The student works on-campus and receives partly subsidized pay. The receipt of work-study funds does not affect the level of "need" for purposes of need-based grants and loans.

To make a thorough investigation, you should fill out the financial aid application, which you can obtain from the school's financial aid office. You will have to provide tax returns. The amount you are determined to be eligible for depends on your income, the size of your family, the number of family members currently attending college, and your assets.

By: Gary M. DellaPosta, CPA
Here are some strategies that may increase the amount of aid for which your family is eligible:

Try to avoid putting assets in your child's name. As a general rule, education funds should be kept in the parents' names, since investments in a child's name can impact negatively on aid eligibility. For example, the rules for determining financial aid decrease the amount of aid for which a child is eligible by 35 percent of assets the child owns and by 50 percent of the child's income.

Example: If your child owns $1,000 worth of stock, the amount of aid for which he or she is eligible for is reduced by $350. On the other hand, the amount of aid is reduced by (effectively) only 5.6 percent of your assets and from 22 to 47 percent of your income.

Reduce your income. Income for financial aid purposes is generally determined based upon your previous year's income tax situation. Therefore, in the years immediately prior to and during college, try to reduce your taxable income. Some ways to do this include:

1. Defer capital gains.
   
   
2. Sell losing investments.
   
   
3. Reduce the income from your business. If you are the owner of your own business, you may be able to reduce your taxable income by taking a lower salary, deferring bonuses, etc.
   
   
4. Avoid distributions from retirement plans or IRAs in these years.
   
   
5. Pay your federal and state taxes during the year in the form of estimated payments rather than waiting until April 15 of the following year.
   
   
6. Since a portion of discretionary assets is included in the family's expected contribution from income, reduce discretionary assets by paying off credit cards and other consumer loans.
   
   
7. Take advantage of vehicles which defer income, such as 401(k) plans, other retirement plans or annuities.

Detail any financial hardships. If you have any financial hardships, let the deciding authorities know (via the statement of financial need) exactly what they are, if they are not clear from the application. The financial aid officer may be able to assist you in explaining hardships.

Have your child become independent. In this case, your income is not considered in determining how much aid your child will be eligible for. Students are considered independent if they:

1. Are at least 24 years old by the end of the year for which they are applying for aid
   
   
2. Are veterans
   
   
3. Have dependents other than their spouse
   
   
4. Are wards of the court or both parents are deceased
   
   
5. Are graduate or professional students
   
   
6. Are married and are not claimed as dependents on their parents' returns

By: Gary M. DellaPosta, CPA
Tax-deferral can have a dramatic affect on the growth of an investment. With a state-sponsored 529 College Savings Plan your contributions can grow tax-deferred (some states allow contributions to be partially or completely deductible) and distributed income tax-free as long as distributions are used for qualified education expenses such as tuition, fees, room and board at higher education institutions.

There is no limit on contributions but some states tend to limit contributions once the plan assets have reached a defined maximum (typically $200,000 - $250,000). You may make contributions of up to $55,000 per beneficiary in a single year without triggering a federal gift tax. Married couples may contribute $110,000 per beneficiary in a single year.*

Assets are professionally managed by fund managers selected by the state. Participants can choose from two to almost 30 mutual fund-type investments. Control of the account remains with the contributor regardless of the age of the beneficiary.

On my website I provide a calculating tool for 529 plans, visit my page for this specific calculation: 529 Calculation.

Gary DellaPosta is a CPA and founder of the firm: Gary M DellaPosta, CPA's & Business Advisors.  A graduate of Bryant University, he is a member of the American Institute of CPA's as well as the Massachusetts Society of CPA's.  In addition to providing accounting, tax and advisory services to individuals and businesses, he also provides litigation support to attorneys and has been recognized as an expert in numerous Massachusetts' courts.  Mr. DellaPosta serves on the Board of the Barnstable County Mutual Insurance Co., where he serves on the audit, investment and employee benefit committees.  He also serves as the Treasurer of the Community Health Center of Cape Cod, is a Director at The Cooperative Bank of Cape Cod and is a former director of Eastern Bank and Plymouth Savings Bank.

By: Gary M. DellaPosta, CPA
Two tax credits are available for education costs - the American Opportunity Credit (formerly the Hope Credit) and the Lifetime Learning credit. These credits are available only to taxpayers with adjusted gross income below specified amounts (see Income Phase-Outs below).

How These Credits WorkThe amount of the credit you can claim depends on (1) how much you pay for qualified tuition and other expenses for students and (2) your adjusted gross income (AGI) for the year.

You must report the eligible student's name and Social Security number on your return to claim the credit. You subtract the credits from your federal income tax. If the credit reduces your tax below zero, you cannot receive the excess as a refund. If you receive a refund of education costs for which you claimed a credit in a later year, you may have to repay ("recapture") the credit.

Caution: If you file married-filing separately, you cannot claim these credits.

Which costs are eligible? Qualifying tuition and related expenses refers to tuition and fees, and course materials required for enrollment or attendance at an eligible education institution. They now include books, supplies and equipment needed for a course of study whether or not the materials must be purchased from the educational institution as a condition of enrollment or attendance.

"Related" expenses do not include room and board, student activities, athletics (other than courses that are part of a degree program), insurance, equipment, transportation, or any personal, living, or family expenses. Student-activity fees are included in qualified education expenses only if the fees must be paid to the institution as a condition of enrollment or attendance. For expenses paid with borrowed funds, count the expenses when they are paid, not when borrowings are repaid.

Tip: If you pay qualified expenses for a school semester that begins in the first three months of the following year, you can use the prepaid amount in figuring your credit.

Example: You pay $1,500 of tuition in December 2014 for the winter 2015 semester, which begins in January 2015. You can use the $1,500 in figuring your 2014 credit. If you paid in January instead, you would take the credit on your 2015 return.

Tip: As future year-end tax planning, this rule gives you a choice of the year to take the credit for academic periods beginning in the first 3 months of the year; pay by December and take the credit this year; pay in January or later and take the credit next year.

Eligible students. You, your spouse, or an eligible dependent (someone for whom you can claim a dependency exemption, including children under age 24 who are full-time students) can be an eligible student for whom the credit can apply. If you claim the student as a dependent, qualifying expenses paid by the student are treated as paid by you, and for your credit purposes are added to expenses you paid. A person claimed as another person's dependent can't claim the credit. The student must be enrolled at an eligible education institution (any accredited public, non-profit or private post-secondary institution eligible to participate in student Department of Education aid programs) for at least one academic period (semester, trimester, etc.) during the year.

No "double-dipping." The tax law says that you can't claim both a credit and a deduction for the same higher education costs. It also says that if you pay education costs with a tax-free scholarship, Pell grant, or employer-provided educational assistance, you cannot claim a credit for those amounts.

Income Limits. To claim the American Opportunity Credit your modified adjusted gross income (MAGI) must not exceed $90,000 ($180,000 for joint filers). To claim the Lifetime Learning Credit, MAGI must not exceed $63,000 ($127,000 for joint filers). "Modified AGI" generally means your adjusted gross income. The "modifications" only come into play if you have income earned abroad.

The American Opportunity Tax CreditThe American Opportunity Tax Credit (AOC) was extended through tax year 2017 by the American Taxpayer Relief Act of 2012. The maximum credit, available only for the first four years of post-secondary education, is $2,500 for tax years 2013 to 2017. You can claim the credit for each eligible student you have for which the credit requirements are met.

Special Qualification Rules. In addition to being an eligible student, he or she:

• Must be enrolled in a program leading to a degree, certificate, or other recognized credential;
• Must be taking at least half of a normal full-time load of courses, for at least one semester or trimester beginning in the year for which the credit is claimed; and
• May not have any drug-related felony convictions.

Amount of credit. The maximum amount of the AOC credit is $2,500. Generally, 40% of the AOC is now a refundable credit for most taxpayers, which means that you can receive up to $1,000 even if you owe no taxes.

The Lifetime Learning CreditYou may be able to claim a Lifetime Learning credit of up to $2,000 (20% of the first $10,000 of qualified expense) for eligible students (subject to reduction based on your AGI). Only one Lifetime Learning Credit can be taken per tax return, regardless of the number of students in the family.

• The credit can help pay for undergraduate, graduate and professional degree courses, including courses to improve job skills.
• For courses taken to acquire or improve job skills, there are no requirements as to course loads, so that even one or two courses can qualify.
• The number of years for which this credit can be claimed is not limited.

Choosing the Credit. You can't claim both credits for the same person in the same year. But you can claim one credit for one or more family members and the other credit for expenses for one or more others in the same year - for example, an AOC for your child and a lifetime learning credit for yourself.

Electing Not To Take the Credit. There are situations in which the credit is not allowed, or not fully available, if some other education tax benefit is claimed - where the higher education expense deduction is claimed for the same student, see below, or where credit and tax exemption (under a Section 529 or 530 program) are claimed for the same expense. In that case the taxpayer - or, more likely, the taxpayer's tax adviser - will determine which tax rule offers the greater benefit and if it's not the credit, elect not to take the credit.