![]() The Cost of Raising A Child Birth through Infancy By: Gary M. DellaPosta, CPA Here are the costs you can expect up to birth and during the first year: Note: For a second or third child, you will spend much less on furniture, clothing, and toys, but health care, child care, and food will remain the same. Hospital Costs According to the Transforming Maternity Care Partnership, in 2011, an uneventful hospital delivery, on average, in the United States cost between $10,657 (vaginal birth, no complications) and $23,923 (cesarean section birth with complications). The actual costs you pay, of course, vary depending on your health care coverage. Baby Supplies and Equipment Before you bring the baby home, you'll buy a crib, a changing table, and a swing or bouncy seat. The moderately priced versions of these three things will cost you about $1,200. You'll also need at least one stroller that you can expect to pay about $400 for. A full-size infant car seat will cost you about $150-$200, and a full-size high chair will cost $150. Finally, you will spend several hundred dollars on washcloths, sheets, blankets, towels, undershirts, onesies, and other baby clothes. Also, think about whether you plan to use a diaper service, cloth diapers, or use disposable ones. Feeding and Diapers The American Academy of Pediatrics recommends exclusively breastfeeding your baby for at least 6 months. Many women, of course, choose to breastfeed longer than that. Nursing mothers will have to invest in several good nursing bras and nursing pads (about $50) as well as a nursing pillow (about $25). If you plan to return to work after 3 months, consider investing in a hospital-grade breast pump, which will run you about $400. In comparison, a year's worth of ready mix powder formula costs about $1,350. If you buy the ready-to-serve type of formula the cost, is even more, running well over $2,000. You'll also need a year's supply of bottles, at about $90, and you'll have to add another $40 to replace the nipples at least twice in a year. When your baby is ready for solid foods, you will also need to account for the cost of rice cereal and baby food. Diapers are another expense you need to consider. Cloth diapers are the least expensive option. Disposable diaper costs for the first year run about $850, and a diaper genie costs about $40. Child Care Child care expenses vary widely. Child care in a day care center costs much less than a live-in nanny (unless you have multiples, then a nanny or au pair is the less expensive option), and prices for daycare centers vary widely. Child care in a day care center costs much less than a live-in nanny. A mid-priced day care center charges on average $975 per month for your infant's care, or close to $12,000 per year. Health Care Your infant will visit the doctor about six times during his or her first year, including well-baby check-ups as well as the inevitable colds and fevers of infancy. How much you will spend for doctor visits during the first year depends on your health insurance. Toys and Clothes You will spend about $500-$600 on toys and clothing during the first year (in addition to what you bought for the layette.) Total for the First Year Your total expenses for the first year run about $15,000-$18,000. The biggest variable is the cost of health care.
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![]() Financial Friday Tax Tips for Children with Investment Income By: Gary M. DellaPosta, CPA Special tax rules may apply to some children who receive investment income. The rules may affect the amount of tax and how to report the income. Here are five important points to keep in mind if your child has investment income this year: 1. Investment Income. Investment income generally includes interest, dividends and capital gains. It also includes other unearned income, such as from a trust. 2. Parent's Tax Rate. If your child's total investment income is more than $2,100 then your tax rate may apply to part of that income instead of your child's tax rate. See the instructions for Form 8615, Tax for Certain Children Who Have Unearned Income. 3. Parent's Return. You may be able to include your child's investment income on your tax return if it was more than $1,050 but less than $10,500 for the year. If you make this choice, then your child will not have to file his or her own return. See Form 8814, Parents' Election to Report Child's Interest and Dividends, for more information. 4. Child's Return. If your child's investment income was $10,500 or more in 2016 then the child must file their own return. File Form 8615 with the child's federal tax return next April. 5. Net Investment Income Tax. Your child may be subject to the Net Investment Income Tax if they must file Form 8615. Use Form 8960, Net Investment Income Tax, to figure this tax. Visit our website for more great information and free tax calculators! Gary DellaPosta is a CPA and founder of the firm. 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 is a Director at The Cooperative Bank of Cape Cod, where he serves on audit, governance, and personnel committees, and is a former director of Eastern Bank and Plymouth Savings Bank. He is also the former Treasurer of the Community Health Center of Cape Cod and is a former trustee of Heritage Museum & Gardens. Visit his website for more info Check out the upcoming Cape Cod Five: Dollars for Degrees: Savings & Paying for College Programs taking place between September 17-November 12, 2015! Sign up at your local branch today!
By: Gary M. DellaPosta, CPA
Got kids? They may have an impact on your tax situation. Here are eight tax credits and deductions that can help lower your tax burden.
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 is a Director at The Cooperative Bank of Cape Cod, where he serves on audit, governance, and personnel committees, and is a former director of Eastern Bank and Plymouth Savings Bank. He also serves as the Treasurer of the Community Health Center of Cape Cod and is a trustee of Heritage Museum & Gardens. 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). 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 is a Director at The Cooperative Bank of Cape Cod and is a former director of Eastern Bank and Plymouth Savings Bank. He also serves as the Treasurer of the Community Health Center of Cape Cod and is a trustee of Heritage Museum & Gardens.
Financial Friday ~ How can I increase the amount of financial aid my child is entitled to?6/20/2014 ![]() 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:
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:
Gary DellaPosta is a CPA and founder of the firm: Gary M DellaPosta, CPA's & Business Advisors. A graduate of Bryant ![]() By: Gary M. DellaPosta, CPA If you are considering divorce, it is vital to plan for the dissolution of the financial partnership in your marriage. Such dissolution involves dividing financial assets accumulated during the marriage. Further, if children are involved, future financial support for the custodial parent must be planned for. While it may not be at the top of your to-do list, taking time to prepare financially during divorce pays off in the long run. Here are some steps you can take to get started. Take Stock Of Your Situation Assessing your financial situation helps you in two ways:
Related Guide: For a system that makes it easy to organize and locate your records, please see the Financial Guide:DOCUMENT LOCATOR SYSTEM: A Handy Aid For Keeping Track Of Your Records Estimate Your Post-Divorce Living Expenses Figure out how much it will cost you to live after the divorce. This is especially important for the spouse who is planning to remain in the family home with the children; it may be determined that the estimated living expenses are not manageable. To estimate these expenses, add up all of your monthly debts and living expenses, including rent or mortgage. Then total your after-tax monthly income from all sources. The amount left over is your disposable income. Related Guide: Please see the Financial Guide: BUDGETING: How To Prepare A Workable Plan Cancel All Joint Accounts It is important to cancel all joint accounts immediately once you know you are going to obtain a divorce because creditors have the right to seek payment from either party on a joint credit card or other credit account, no matter which party actually incurred the bill. If you allow your name to remain on joint accounts with your ex-spouse, you are also responsible for the bills. Your divorce agreement may specify which one of you pays the bills. However, as far as the creditor is concerned both you and your spouse remain responsible if joint accounts remain open. The creditor will try to collect the bill from whoever it thinks may be able to pay while at the same time reporting the late payments to credit bureaus under both names. Your credit history could be damaged because of the co-signer's irresponsibility. Some credit contracts require that you immediately pay the outstanding balance in full if you close an account. If this is the case, then try to get the creditor to have the balance transferred to separate accounts. If Your Spouse's Poor Credit Affects You If your spouse's poor credit hurts your credit record, you may be able to separate yourself from the spouse's information on your credit report. The Equal Credit Opportunity Act requires a creditor to take into account any information showing that the credit history being considered does not reflect your own. If for instance, you can show that accounts you shared with your spouse were opened by him or her before your marriage, and that he or she paid the bills, you may be able to convince the creditor that the harmful information relates to your spouse's credit record, not yours. In practice, it is difficult to prove that the credit history under consideration does not reflect your own, and you may have to be persistent. For Women: Maintain Your Own Credit Before You Need It If a woman divorces, and changes her name on an account, lenders may review her application or credit file to see whether her qualifications alone meet their credit standards. They may ask her to reapply even though the account remains open. Maintaining credit in your own name is the best way to avoid this inconvenience. It also makes it easier to preserve your own, separate, credit history. Further, should you need credit in an emergency it will be available when you need it. Do not use only your husband's name (for example, Mrs. John Wilson) for credit purposes. Tip: Check your credit report if you have not done so recently. Make sure the accounts you share are reported in your name as well as your spouse's name. If not, and you want to use your spouse's credit history to build your own credit, write to the creditor and request that the account be reported in both names. Also, carefully review your credit report to determine whether there is any inaccurate or incomplete information. If there is, write to the credit bureau and ask them to correct it. The credit bureau must confirm the data within a reasonable time period, and let you know when they have corrected the mistake. Related Guide: Please see the Financial Guide: CREDIT REPORTS: What You Should Know-And Do-About Yours. If you have been sharing your husband's accounts, building a credit history in your name should be fairly easy. Call a major credit bureau and request a copy of your report. Contact the issuers of the cards you share with your husband and ask them to report the accounts in your name as well. If you used the accounts, but never co-signed for them, ask to be added on as jointly liable for some of the major credit cards. Once you have several accounts listed as references on your credit record, apply for a department store card, or even a Visa or MasterCard, in your own name. If you held accounts jointly and they were opened before 1977 (in which case they may have been reported only in your husband's name), point them out and tell the creditor to consider them as your credit history also. The creditor cannot require your spouse's or former spouse's signature to access his credit file if you are using his information to qualify for credit. Tip: If you do not have a credit history, a secured credit card is a fairly quick and easy way to get a major credit card. Secured credit cards look and are used like regular Visa or MasterCard's, but they require a savings or money market deposit of several hundred dollars that the lender holds in case you default. In most cases, the creditor will report your payment record on these accounts just like a regular bankcard, allowing you to build a good credit record if you pay your bills promptly. Consider the Legal Issues The best way to plan for the legal issues involved in a divorce including child custody, division of property, and alimony or support payments is to come to an agreement with your spouse. If you can reach an agreement, the time and money you will have to expend in coming up with a legal solution--either one worked out between the two attorneys or one worked out by a court--will be drastically reduced. Here are some general tips for handling the legal aspects of a divorce:
Division of Property The laws governing division of property between ex-spouses vary from state to state. Further, matrimonial judges have a great deal of latitude in applying those laws. Here is a list of items you should be sure to take care of, regardless of whether you are represented by an attorney.
How To Prepare Financially For Re-Marriage When considering remarriage, it is important to plan for the following:
As for the estate planning aspects of providing for children from a previous marriage, trusts and/or life insurance are the vehicles most often used to do this. Tip: Be sure to update your will before you remarry to ensure that your assets will be divided among your heirs after your death in the manner and proportions you desire. Government and Non-Profit Agencies
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 Welcome 2014! As the new year rolls around, it's always a sure bet that there will be changes to the current tax law and 2014 is no different. From health savings accounts to retirement contributions and standard deductions, here's a checklist of tax changes to help you plan the year ahead. Filing Season Delayed by 10 Days Taxpayers should note that the 2014 tax season opens on Jan. 31, 2014. In most years, the filing season opens on Jan. 21; however, due to the 16-day government shutdown that took place in October 2013, the filing season is delayed by 10 days this year. No returns, paper or electronic, will be processed by the IRS before this date. The April 15 tax deadline is set by statute and will remain in place, although taxpayers can request an automatic six-month extension to file their tax return. Individuals For 2014, more than 40 tax provisions are affected by inflation adjustments, including personal exemptions, AMT exemption amounts, and foreign earned income exclusion, as well as most retirement contribution limits. For 2014, the tax rate structure, which ranges from 10 to 39.6 percent, remains the same as in 2013, but tax-bracket thresholds increase for each filing status. Standard deductions and the personal exemption have also been adjusted upward to reflect inflation. For details see the article, "Tax Brackets, Deductions, and Exemptions for 2014," below. Alternative Minimum Tax (AMT) Exemption amounts for the AMT, which was made permanent by the American Taxpayer Relief Act (ATRA) are indexed for inflation and allow the use of nonrefundable personal credits against the AMT. For 2014, the exemption amounts are $52,800 for individuals ($51,900 in 2013) and $82,100 for married couples filing jointly ($80,800 in 2013). "Kiddie Tax" For taxable years beginning in 2014, the amount that can be used to reduce the net unearned income reported on the child's return that is subject to the "kiddie tax," is $1,000 (same as 2013). The same $1,000 amount is used to determine whether a parent may elect to include a child's gross income in the parent's gross income and to calculate the "kiddie tax". For example, one of the requirements for the parental election is that a child's gross income for 2014 must be more than $1,000 but less than $10,000. For 2014, the net unearned income for a child under the age of 19 (or a full-time student under the age of 24) that is not subject to "kiddie tax" is $2,000. Health Savings Accounts (HSAs) Contributions to a Health Savings Account (HSA) are used to pay current or future medical expenses of the account owner, his or her spouse, and any qualified dependent. Medical expenses must not be reimbursable by insurance or other sources and do not qualify for the medical expense deduction on a federal income tax return. A qualified individual must be covered by a High Deductible Health Plan (HDHP) and not be covered by other health insurance with the exception of insurance for accidents, disability, dental care, vision care, or long-term care. For calendar year 2014, a qualifying HDHP must have a deductible of at least $1,250 for self-only coverage or $2,500 for family coverage (unchanged from 2013) and must limit annual out-of-pocket expenses of the beneficiary to $6,350 for self-only coverage (up $100 from 2013) and $12,700 for family coverage (up $200 from 2013). Medical Savings Accounts (MSAs) There are two types of Medical Savings Accounts (MSAs): the Archer MSA created to help self-employed individuals and employees of certain small employers, and the Medicare Advantage MSA, which is also an Archer MSA, and is designated by Medicare to be used solely to pay the qualified medical expenses of the account holder. To be eligible for a Medicare Advantage MSA, you must be enrolled in Medicare. Both MSAs require that you are enrolled in a high deductible health plan (HDHP). Self-only coverage. For taxable years beginning in 2014, the term "high deductible health plan" means, for self-only coverage, a health plan that has an annual deductible that is not less than $2,200 (up $50 from 2013) and not more than $3,250 (up $50 from 2013), and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $4,350 (up $50 from 2013). Family coverage. For taxable years beginning in 2014, the term "high deductible health plan" means, for family coverage, a health plan that has an annual deductible that is not less than $4,350 (up $50 from 2013) and not more than $6,550 (up $100 from 2013), and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $8,000 (up $150 from 2013). AGI Limit for Deductible Medical Expenses In 2014, the deduction threshold for deductible medical expenses remains at 10 percent (same as 2013, but up from 7.5 percent in 2012) of adjusted gross income (AGI); however, if either you or your spouse were age 65 or older as of December 31, 2013, the new 10 percent of AGI threshold will not take effect until 2017. In other words, the 7.5 percent threshold continues to apply for tax years 2013 to 2016 for these individuals. In addition, if you or your spouse turns age 65 in 2014, 2015, or 2016, the 7.5 percent of AGI threshold applies for that year through 2016 as well. Starting in 2017, the 10 percent of AGI threshold applies to everyone. Eligible Long-Term Care Premiums Premiums for long-term care are treated the same as health care premiums and are deductible on your taxes subject to certain limitations. For individuals age 40 or younger at the end of 2014, the limitation is $370. Persons more than 40 but not more than 50 can deduct $700. Those more than 50 but not more than 60 can deduct $1,400, while individuals more than 60 but not more than 70 can deduct $3,720. The maximum deduction $4,660 and applies to anyone more than 70 years of age. Medicare Taxes The additional 0.9 percent Medicare tax on wages above $200,000 for individuals ($250,000 married filing jointly), which became effective last year, in 2013, remains in effect for 2014, as does the Medicare tax of 3.8 percent on investment (unearned) income for single taxpayers with modified adjusted gross income (AGI) more than $200,000 ($250,000 joint filers). Investment income includes dividends, interest, rents, royalties, gains from the disposition of property, and certain passive activity income. Estates, trusts and self-employed individuals are all liable for the new tax. Foreign Earned Income Exclusion For 2014, the foreign earned income exclusion amount is $99,200, up from $97,600 in 2013. Long-Term Capital Gains and Dividends In 2014 tax rates on capital gains and dividends remain the same as 2013 rates; however threshold amounts are indexed for inflation. As such, for taxpayers in the lower tax brackets (10 and 15 percent), the rate remains 0 percent. For taxpayers in the four middle tax brackets, 25, 28, 33, and 35 percent, the rate is 15 percent. For an individual taxpayer in the highest tax bracket, 39.6 percent, whose income is at or above $406,750 ($457,600 married filing jointly), the rate for both capital gains and dividends is capped at 20 percent. Pease and PEP (Personal Exemption Phaseout) Both Pease (limitations on itemized deductions) and PEP (personal exemption phase-out) have been permanently extended (and indexed to inflation) for taxable years beginning after December 31, 2012, and in 2014, affect taxpayers with income at or below $254,200 for single filers and $305,050 for married filing jointly. Estate and Gift Taxes For an estate of any decedent during calendar year 2014, the basic exclusion amount is $5,340,000, indexed for inflation (up from $5,250,000 2013). The maximum tax rate remains at 40 percent. The annual exclusion for gifts also remains at $14,000. Individuals - Tax Credits Adoption Credit In 2014, a non-refundable (only those individuals with tax liability will benefit) credit of up to $13,190 is available for qualified adoption expenses for each eligible child. Earned Income Tax Credit For tax year 2014, the maximum earned income tax credit (EITC) for low and moderate income workers and working families rises to $6,143, up from $6,044 in 2013. The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children. Child Tax Credit For tax year 2014, the child tax credit is $1,000 per child. Child and Dependent Care Credit If you pay someone to take care of your dependent (defined as being under the age of 13 at the end of the tax year or incapable of self-care) in order to work or look for work, you may qualify for a credit of up to $1,050 or 35 percent of $3,000 of eligible expenses in 2014. For two or more qualifying dependents, you can claim up to 35 percent of $6,000 (or $2,100) of eligible expenses. For higher income earners the credit percentage is reduced, but not below 20 percent, regardless of the amount of adjusted gross income. Individuals - Education American Opportunity Tax Credit and Lifetime Learning Credits The American Opportunity Tax Credit (formerly Hope Scholarship Credit) was extended to the end of 2017 by ATRA. The maximum credit is $2,500 per student. The Lifetime Learning Credit remains at $2,000 per return. Interest on Educational Loans In 2014 (as in 2013), the $2,500 maximum deduction for interest paid on student loans is no longer limited to interest paid during the first 60 months of repayment. The deduction is phased out for higher-income taxpayers with modified AGI of more than $65,000 ($130,000 joint filers). Individuals - Retirement Contribution Limits The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan remains unchanged at $17,500. Contribution limits for SIMPLE plans remains unchanged at $12,000. The maximum compensation used to determine contributions increases to $260,000 (up $5,000 from 2013). Income Phase-out Ranges The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by an employer-sponsored retirement plan and have modified AGI between $60,000 and $70,000, up from $59,000 and $69,000 in 2013. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by an employer-sponsored retirement plan, the phase-out range is $96,000 to $116,000, up from $95,000 to $115,000. For an IRA contributor who is not covered by an employer-sponsored retirement plan and is married to someone who is covered, the deduction is phased out if the couple's modified AGI is between $181,000 and $191,000, up from $178,000 and $188,000. The modified AGI phase-out range for taxpayers making contributions to a Roth IRA is $181,000 to $191,000 for married couples filing jointly, up from $178,000 to $188,000 in 2013. For singles and heads of household, the income phase-out range is $114,000 to $129,000, up from $112,000 to $127,000. For a married individual filing a separate return who is covered by a retirement plan, the phase-out range remains $0 to $10,000. Saver's Credit In 2014, the AGI limit for the saver's credit (also known as the retirement savings contribution credit) for low and moderate income workers is $60,000 for married couples filing jointly, up from $59,000 in 2013; $45,000 for heads of household, up from $44,250; and $30,000 for married individuals filing separately and for singles, up from $29,500. Businesses Standard Mileage Rates The rate for business miles driven is 56 cents per mile for 2014, down from 56.5 cents per mile in 2013. Section 179 Expensing For 2014 the maximum Section 179 expense deduction for equipment purchases decreases to $25,000 of the first $200,000 of business property placed in service during 2014. The bonus depreciation of 50 percent is gone, as is the accelerated deduction, where businesses can expense the entire cost of qualified real property in the year of purchase. Transportation Fringe Benefits If you provide transportation fringe benefits to your employees, in 2014 the maximum monthly limitation for transportation in a commuter highway vehicle as well as any transit pass is $130 down from $245 in 2013. The monthly limitation for qualified parking is $250. While this checklist outlines important tax changes for 2014, additional changes in tax law are more than likely to arise during the year ahead. 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 This year's tax deadline may have come and gone already but it's never too early to start planning for next year. With that in mind, here are six things you can do now to make next April 15 easier. 1. Adjust your withholding. Why wait another year for a big refund? Now is a good time to review your withholding and make adjustments for next year, especially if you'd prefer more money in each paycheck this year. If you owed at tax time, perhaps you'd like next year's tax payment to be smaller. 2. Store your return in a safe place. Put your 2012 tax return and supporting documents somewhere secure so you'll know exactly where to find them if you receive an IRS notice and need to refer to your return. If it is easy to find, you can also use it as a helpful guide for next year's return. 3. Organize your recordkeeping. Establish a central location where everyone in your household can put tax-related records all year long. Anything from a shoebox to a file cabinet works. Just be consistent to avoid a scramble for misplaced mileage logs or charity receipts come tax time. 4. Review your paycheck. Make sure your employer is properly withholding and reporting retirement account contributions, health insurance payments, charitable payroll deductions and other items. These payroll adjustments can make a big difference on your bottom line. Fixing an error in your paycheck now gets you back on track before it becomes a huge hassle. 5. Consult a tax professional early. If you are planning to use a tax professional to help you strategize, plan and make financial decisions throughout the year, then contact your tax professional. You'll have more time when you're not up against a deadline or anxious for your refund. 6. Prepare to itemize deductions. If your expenses typically fall just below the amount to make itemizing advantageous, a bit of planning to bundle deductions into 2013 may pay off. An early or extra mortgage payment, pre-deadline property tax payments, planned donations or strategically paid medical bills could equal some tax savings. Each household's financial circumstances are different so it's important to fully consider your specific situation and goals before making large financial decisions. Gary DellaPosta is a CPA and founder of the firm: Gary M DellaPosta, CPA's & Business Advisors. A graduate of Bryant ![]() By: Gary M. DellaPosta, CPA Children who receive investment income are subject to special tax rules that affect how parents must report a child's investment income. Some parents can include their child's investment income on their tax return, while other children may have to file their own tax return. If a child cannot file his or her own tax return for any reason, such as age, the child's parent or guardian is responsible for filing a return on the child's behalf. Here's what you need to know about tax liability and your child's investment income. 1. Investment income normally includes interest, dividends, capital gains and other unearned income, such as from a trust. 2. Special rules apply if your child's total investment income is more than $2,000 ($1,900 in 2012). The parent's tax rate may apply to part of that income instead of the child's tax rate. 3. If your child's total interest and dividend income is less than $10,000 ($9,500 in 2012), then you may be able to include the income on your tax return. If you make this choice, the child does not file a return. Instead, you file Form 8814, Parents' Election to Report Child's Interest and Dividends, with your tax return. 4. If your child received investment income of $10,000 or more in 2013 ($9,500 or more in 2012), then he or she will be required to file Form 8615, Tax for Certain Children Who Have Investment Income of More Than $2,000, with the child's federal tax return for tax year 2013. If you have any questions about tax rules for your child's investment income in 2013, don't hesitate to send us an email or give us a call. |
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