Taxes
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I moved recently with my wife to a small town. I wanted to get involved in the community so I have been going to some tax-increase meetings and Village meetings. I won’t kid you they are not the most exciting spectacle out there, but they provide a wealth of knowledge in understanding where your taxes are going. There was some bickering and wasted time going over topics ad naseum, but once you cut through that you get an understanding of what these government officials do and what they propose to do with your tax dollars. Remember, there are other options if you do not want to attend. Often you can get the transcript of the proceedings or watch on a local cable tv station.
I will continue to go to these meetings because there are only 2 per month. Once I get more familiar with the area and how the village works I will be more confident to express an educated opinion. Hopefully, with that I will have a voice in what direction our small town goes.
Written by Nagel on January 13th, 2007 with no comments.
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Tax day is coming. Yes, taxes are not due to the IRS until April 15, 2007, but it is never too early to get all your pertainent tax documents ready so you can get yourtax return in on time. W-2s and 1099s should arrive from your employer(s) from 2006 by the end of January. If not, make sure to talk to your employer and ask them to resend them because you will need them to file your taxes.
Remember, you do not want a big refund check from the federal and state government because that means they have had your money over the year and not paid you any interest. You want to come as close as you can to breaking even because otherwise you have lost out on that earning potential over 2006. If you do get a big tax return talk to your HR department or a tax professional to withhold the correct amount of taxes from each check.
Check out Blueprint for even more information on taxes.
Look over what Consumerism Commentary has to say about taxes too.
My Money has a good tax tip as well.
Written by Nagel on January 11th, 2007 with no comments.
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Many know of the benefits of buying a home and building equity instead of paying rent. Often, many do not realize that there are some important tax breaks out there for homeowners. You need to make sure you can capitalize on this so remember these tax break tips and if you have an accountant do your taxes let him or her know that you are elligible.
Read this article in Smartmoney.com to learn a wealth of knowledge that you can use when tax time comes.
Written by Nagel on December 14th, 2006 with no comments.
Read more articles on Household and Real Estate and Taxes.
Oil is up over $60, Wall Street was slow on Tuesday with little economic news and Black Friday is nearly upon us (shopping Black Friday, not Wall Street Black Friday). These are not all necessarily correlated in any way, but that is the economic news for the day. Trading of stocks is typically low before Thanksgiving and even slower on the half-day the stock market takes on the Friday following Thanksgiving.
Remember the 30-day wash rule. If you have stock that are down now is the time to harvest that loss. It can be used as a loss on your tax return for 2006 (up to $3,000 each year and it can be rolled over from previous years). Just sell a stock that is negative for you and wait 30 days. After the 30 days you are allowed to buy that stock back and still take the loss on it for this year’s tax return.
Written by Nagel on November 22nd, 2006 with no comments.
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When shopping for a home many buyers do not consider the impact on their monthly obligation. Obviously, it depends where you live to know if they are high or low, but you can do some homework when searching. Your county assessor’s office should be able to provide you with the most up-to-date property tax information for a property you are considering. If you are currently looking 2005 taxes should be available. If your house listing provides 2004 numbers you need to see about the 2005 numbers. Recently, while shopping for a home we discovered this problem.
We had calculate the mortgage monthly payment along with the taxes and the house was affordable. But 2004 taxes were listing and when went to the County Assessor’s website I discovered that the taxes went up 50%. This is because the owner’s previously had done some renovation to the home and the assessed value had not been considered in the property taxes until 5 years later—2006. We no longer could afford the home. Make sure of how much your property taxes will be when buying a home and calculate them into your monthly obligation along with home insurance and the mortgage.
AllFinancialMatters opines on how much house someone can afford.
Written by mike on October 19th, 2006 with 2 comments.
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Municpal bonds are another form of bonds that investors can choose. We will discuss the characteristics of munipal bonds.
- Investment objectives are strictly income
- Liquidity low to high
- There is a high to low fluctuation of pricipal and return
- Interest payments are exempt from federal taxes. You may be subject to the alternative minimum tax (AMT). Federal taxes apply to any capital gains
- You are a creditor of issuiong municipality and are subject to default risk
- Do not hold tax-exempt investments in retirement accounts.
Written by mike on September 24th, 2006 with no comments.
Read more articles on Investing and Taxes.
As stated before contributing to tax-deffered savings plans can help you when the taxman comes calling. The government entices people to save for retirement by allowing pre-tax contributions. Because it is pre-tax it will affect your bottom line of how much money you will take home.
Take two people: both gross $75,000. One sets aside 8% ($6,000) of pre-tax wages in a brokerage account while the other contributes 8% to a 401k at work. Both save the same amount of moeny, but the one contributing to the 401k takes home almost $2,000 more per year. That can make a big difference in the short and long term.
Written by mike on September 10th, 2006 with no comments.
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Cash-equivalents have historically been vulnerable to inflation and taxes. Taxes and inflation can completely eat away at any gains you receive by investing in them. Treasury bills, money market funds, and CDs can return negative growth when considering taxes and inflation.
Take $10,000 in 1980-2000. Their average was 6.6% resulting in an ending value of $36,072, but when you add in the effects of taxes the $10,000 became only $21,384. The average return after both taxes and inflation results in a -0.3%. So remember to consider these factors before investing in these instruments.
Written by mike on September 9th, 2006 with no comments.
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Obviously, taxes reduce the amount of return you receive on your investments. Here we will examine a hypothetical investor that has a normal long-term investment strategy and the tax consequences involved.
Assume that stocks after taxes were purchased and held for five years and then sold then capital gains kicks in. The net proceeds from the sale were reinvested as were any dividends. From 1926-2000 the average return for this portfolio was 11%, but only 8.5% after taxes.
Now bonds were turned over 20 times within this same 75-year period. Capital gains were reinvested at sale. Bonds averaged 3.8% after taxes compared to 5.3% before. This 3.8% barely outpaced inflation. Holding cash will earn you 2.2% after and 3.8% before taxes–you actually lose money this way.
Therefore, it is essential to understand the tax-impact on your portfolio to know your true return.
Written by mike on September 8th, 2006 with no comments.
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It is almost impossible to avoid taxes with most investments, but taxes can be deferred. Deferring your taxes can profit you substaintially over the long term.
IRAs, 401k, 403b, Keogh plans and tax-deferred annuities are all examples tax-deferred investment vehicles. Tax-deferred plans work by allowing interest, dividends and capital gains to accumulate without incurring taxes. Taxes are due when the investment is sold (once withdrawls begin).
Let’s say you invest $10,000 in a taxable and tax-deferred account. There is not much of a difference over ten years–approximately $50,000, but once you get to 20 years it is around $80,000 and at thirty years it is about $175,000.
Written by mike on August 4th, 2006 with no comments.
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