Like most tax credits, I would wager most aren't aware of this.
You're right. It's out there in the stacks of vague and jargon-filled information, with every other tax credit.
I am not at this point in my life, but as someone who will hopefully retire one day, as well as someone who will possibly have kids one day, this article brings up some good points which cross over both subjects. We all know, higher education is absolutely expensive, and it is becoming more and more difficult for families to save up for such a thing, especially middle to low income households. Then again, saving for 25 years of retirement income is a lot harder than paying for a four year college. At least there are grants, loans and scholarships for college.
So what does the article say? You should save for your retirement first. For example, let's say it costs 80k for four years of college. Now, let's say you have an annual income of 50k. If you're determined to replace that income after you retire at the age of 60, it's going to be rather difficult. So if you live until the age of 85, then you'd be looking at having to save $1.25 million for your retirement, and that's not even accounting for inflation.
You should consider loans, grants and scholarships at least to pad the college budget. I think the population of those who saved and drop cold hard cash on their kid's education is getting smaller by the year. Have your kid look into AP classes, community college classes, or, perhaps have them join the armed forces and have them take advantage of the Post 9/11 G.I Bill.
College aid formulas do not count what you already have in your 401k, IRA or any other retirement account. The article states that you should put your funds into your 401k, then fund your Roth or traditional IRAs, which can be used for college if needed.
So there you have it, does anyone else have any other strategies that I have listed here?
I can't agree with you more on that one. They make it a mess on purpose to discourage anyone interested in government help. It's sad, really.
Just like my last thread, this one brings more concerning news, regarding our favorite government agency. According to this article, the agency has reduced its auditors by 25%, from 13k to 10k, in the past 6 years due to $900 million in budgets cuts over those years. As a result, the IRS recovered way less from audits since 2010. It dropped from $16 billion in 2010 to $9 billion last year. That's definitely a hefty loss. Now let's think about how much a recent executive proposal of cutting the funding further by $239 million will do. Yeesh...
Of course, some of us are thinking that we could all use a little bit a of a break from the tax baby sitter. If you think about it though, what unpaid taxes slip through the cracks only has us paying more later. It all comes out in the wash anyway. Also, this loss of vigilance really only benefits the rich who'd rather not pay as much or at all.
Like the article said:
"the government is forgoing billions to achieve budget savings of a few hundred million dollars."
Where's a sober accountant when you need one?
There you have it, folks. The Taxman cometh with the aid of little helpers, private debt collectors. Are you as shocked as I am? Like this article from the Chicago Tribune says, such a thing is being deployed during a time in our country where Americans are being victimized by con artists, posing as the IRS, threatening jail and garnished wages. It's bad timing if you ask me, which makes me wonder what kind of difficult times has the IRS found itself in for it to turn to one of America's public enemies, telephone debt collectors.
Congress passed a law back in 2015 requiring the IRS to start up the program, even after the IRS stopped using private debt collectors in 2009. The IRS was certain that their own employees could do a better job. Apparently congress doesn't agree.
Soon, the IRS will begin turning over the accounts of 100 taxpayers a week to four different debt collecting agencies. It will later increase to 1,000 accounts a week for each agency, as early as the end of summer. Each agency is allowed to keep up to 25% of what they collect.
So how is the IRS going to win the fraud game, you ask? They are going to send letters. Yep, letters. I can't remember receiving actual mail that didn't go directly into the trash with the coupons and lawn care flyers. The debt collectors will send their own letters, following those from the IRS.
Honestly, I don't see how that will deter any scammer from continuing to rob people of their hard-earned money. If anything, the IRS just opened up the playing field, broadening the scope, giving scammers more tools for their tool box. Since 2013, more than 1.9 million people have been called by fake government agents. Over 10,300 victims have paid more than $55 million to scammers.
Three guidelines to go by:
1. You won't be contacted unless you have unpaid taxes which go back several years, as well as having a history of calls from the IRS.
2. All payments will and should be made to the U.S Treasury.
3. They will never call and threaten to bring police to your house, or have you arrested.
Do you think this is a good idea? I can only see this get uglier as it goes on.
Here's a video of hundreds of scammers being busted by the U.S in India.
Why am I not surprised? It'll be into the 70's by the time I begin thinking of retirement because of "lengthening life expectancies". This is definitely a reminder to younger generations not to rely solely on Social Security, partially, or maybe at all.
This little guide shed shed some light on a topic that is infamously vague. One could say it is done on purpose. I've said it before and I'll say it again, knowledge is power when it comes to the U.S Government and you money. We have to sometimes fight tooth and nail to hold on to every cent.
A quick overview of key tax deductions:
Remember, significant savings can be had when tax breaks are combined.
Home owner deductions - This includes mortgage interest, property taxes, mortgage points, and PMI premiums.
Traditional IRA Contributions - Your deduction depends on your income, coupled with whether or not you have a sponsored retirement plan with an employer.
Donations - This one is dead simple, cash and non-cash contributions count.
Medical Expenses - This is if expenses exceed 10% of you adjusted gross income.
Moving Expenses - Yes, this too, say you move for a job that increases your commute by 50 miles or so, this can be deducted.
Job search costs - If the costs exceed 2% of your gross income while you're searching for a job. This doesn't count for newbie job seekers.
Student loan interest - It cancels out at higher income brackets, but it's a good one if you can get it.
Earned Income - According to the article, this one could be worth up to $6,318, depending on how many children you have in your household.
Child Tax Credit - This one could be worth up to $1,000 per child under 17.
Child and Dependent Credit - This gives higher earners who pay for child care a piece of their costs back.
American Opportunity Tax Credit - This one is worth up to $2,500 per student in your household who has higher education expenses.
Lifetime Learning Credit - This one is worth up to $2,000 per student.
Saver's Credit - Worth up to $2,000 per filer for contributing money to a retirement savings account.
Don't get discouraged by the mountains of information out there. According to the IRS, 20% of American tax payers miss out on a tax break worth up to $6,269. Now that is something to think about.
All it seems this month it is taxes this, and taxes that. Which is understandable. Property tax breaks could be on the chopping block according to some GOP proposed tax plans, which could eliminate it and other tax breaks altogether. To remind us of the sheer advantages and disadvantages of the Property tax, I found a decent article with the breakdown. According to the first article:
Nearly 35 million families deducted their taxes on their home or other real estate from their federal taxable income in 2016. They saved a total of $33 billion.
If property tax breaks were to go the way of the Dodo, how much of an impact would this have on the majority of Americans, come tax season? I suppose, we should ponder the statistics of who owns vs rents property etc. Thoughts?
JaredS Wrote: Interesting. I'm no Trump fan, but I totally can envision him vetoing any bill he doesn't like. Would be a big moment in history for the Republican party if he does.
I actually think the opposite. I have a feeling that President Trump would sign anything the Congress sends him and then try to spin it to his advantage. I just can't see him vetoing something that the House and Senate sends him which privatizes Medicaid and cuts Social Security.
Agreed, but I don't think he'd take that risk. At this moment, I'm sure he is focusing on creating a solid legacy for reelection. To be obtuse to the party-controlled congress would be career suicide, especially when the GOP is slightly polarized when it comes to their approval of him.
Good thread. Wanted to bump to include this:
4 Tax Breaks Millennials Can’t Afford to Miss
Includes some that we haven't yet covered here, mainly:
Retirement Saver's Credit. If you make less than $30,500 and are already putting money back for retirement, then you qualify for a $1000 tax credit.
Lifetime Learning Credit. If you are paying for your schooling mostly out of pocket and make less than $64k, you can possibly qualify for as much as a $2,000 credit as well.
Moving Expense Deduction. If you relocated because of a job switch more than 50 miles away, you can deduct - driving expenses, shipping and storage fees, plus the costs of hiring a moving van.
Share more if you can find any.
Thanks for the update on this. Knowledge is power, especially when it comes to government programs etc.