Congress did lower income Americans a favor over the last decade. They have progressively moved to make capital gains income completely tax free for the individuals making less than $36,250 and couples filing jointly making less than $72,500.
If you fall into that category, congratulations because you will owe no capital gains tax on your investments, assuming they are "long-term" capital gains. What is long-term? Hold a security (stock/bond) for more than 365 days constitutes it as being a long-term security. Now if you follow my advice and put money away into a low fee ETF for decades, then you don't need to worry about this. But if you fall into the above category and you own some stock and need some money, you may need to talk to your tax pro to see if you can sell it without a penalty this year. Taxes change every year, so who knows if this will still apply next year. Just something to think about as we approach the end of the year.
1 Comment
For 2013 tax year only! Tax law changes every year, sometimes multiple times a year. With that said everything you read that has to do with taxes is time sensitive. Meaning whatever you read or hear about it will eventually be updated. With that said, read on...
There is a little known combination of the gift tax and also the Section 529 Plan that everybody should know, especially those who have either wealthy parents or wealthy grandparents. I hope all of you remember that a gift of up $14,000 can be given away without incurring a taxable event according to the IRS, right? Nod your head yes… The govt will allow you to use up to 5 years at once, IF it is given to a Section 529 Plan that will be used for education. Since 2 parents or grandparents can each give a child $14,000, you’re talking about being able to start a child’s college education fund off with $140,000 (2 x 14,000 x 5). The catch is you cannot then give them any gifts for another 5 years. Here’s another situation, if you have 5 grandchildren, then you can give the same $140,000 to them, but together as a whole, not each. In other words you can’t give away $700,000 (5 x $140,000) at once. The whole point of allowing this is to jump start a college savings plan. These funds will then grow tax free until they are needed for college. If your family is able to start your college fund off with $140k from the beginning. Watch out Harvard, here they come! By the time junior graduates from high school s/he will have amassed around $500,000 for school assuming you invest it wisely and can get a 7.2% return on average. Be nice to your grandparents kids! This benefits the parents and grandparents because it now takes the $140,000 out of their taxable estate, thus paying less in death taxes. Keeping it in the family is a wonderful thing. "Cocaine is a helluva drug." -Rick James If you make your living or possibly have a little side business that is through illegal means. You may be surprised (or not) that you owe taxes on those earnings. According to IRS Code you are actually required to report these earnings to the IRS and pay taxes on them. Why would somebody do this? Have you ever heard of Al Capone? He went to prison on tax evasion, not for mob activities. It fluctuates every year, but only about 1-2% of tax returns get audited, so you're rolling the dice no matter how small the chance. Here's a few things you need to know. If you run an illegal business (pimp, gambling house, extortion, etc.) then you are allowed to deduct your normal and ordinary business expenses. Just like every other business! Are you a prostitute? Guess whose slutty outfit is now tax deductible? Yippie! Gambling house? Your rent, electricity, insurance; all deductible. Here's the bad part for you drug dealers. If you sell drugs, then you can only deduct the "cost of goods" sold. So if you buy a kilo for $1,000 then that's the only cost you get to deduct. The gas for the cigarette boat that picks up the stash? Sorry that's not tax deductible :-( Now just to be clear, I'm not advocating that you report this and I'm not advocating you don't report this. GO ASK YOUR LAWYER AND CPA! |
AuthorThis website was created due to the atrociously misguided financial advice that I've heard over the decades. Financial freedom is not intellectually strenuous, but it takes discipline. Categories
All
Archives
October 2017
|