News & Articles

Financial Survival Tips for Recent Graduates

Posted on Wed, May 03, 2017

Graduation can be one of the most exciting — and intimidating — times in your life. You're officially an adult, and with that new-found independence comes financial responsibilities. No pressure, but the decisions you make today about spending and saving can mean the difference between struggling for the rest of your life and building a solid financial future.

Read More

Tags: Retirement, Vehicle, Planning, Insurance

Financial Scrapbooking Event - April 25, 2017

Posted on Wed, Apr 19, 2017

EHTC's own Vanessa Birman, CPA, will be leading a class on "financial scrapbooking" at the Caledonia Branch of the Kent District Library on April 25, 2017. The class will offer insight on creating a scrapbook for important financial records such as insurance policies, retirement accounts and investments. The scrapbook is beneficial for financial planning, emergencies and end-of-life arrangements. This is a valuable asset to enable all documents to be stored in one location.

Read More

Tags: Accounting, Planning, EHTC, Individual

10 Midyear Tax Planning Moves Inspired by the PATH Act

Posted on Thu, Jun 02, 2016
Numerous tax breaks have been retroactively expanded for 2015 and beyond — or, in some cases, been made permanent — under the Protecting Americans from Tax Hikes (PATH) Act of 2015. Now that the dust from the new law has settled, individuals and small business owners can plan ahead with these 10 midyear tax strategies inspired by the recent legislation.

5 Tax Breaks for Individuals

1. Consider tax breaks for college students. If you have a child in college this year, you may be eligible for tax benefits. The PATH Act makes the American Opportunity credit permanent and extends the tuition and fees deduction through 2016. Both of these breaks are subject to phaseouts based on income level. For each student, you may claim either the American Opportunity credit or the tuition and fees deduction, but not both. Thus, while it is possible to claim the credit and the deduction in the same year, you may not claim both for the same student. If your income is too high to take one of these breaks, your child might be eligible.

The PATH Act also permanently treats computers, computer equipment, software and Internet service as qualified expenses for Section 529 savings plans, so distributions for this purpose are tax-free. Summer planning can help maximize your tax benefits for costs incurred for the fall semester.

2. Shop for a new car. If you itemize deductions on your federal income tax return, you can generally deduct state and local income taxes paid for the year. As an alternative, however, you may claim a deduction for state and local sales taxes. This option — which has been permanently extended by the PATH Act — is generally beneficial to taxpayers in locales with low or no state or local income taxes. But it can also benefit taxpayers who make large purchases during the year, regardless of where they live.

The sales tax deduction is determined based on actual receipts or an IRS table that lists amounts for each state. If you opt to use the IRS table, you can add on the actual sales tax paid for certain "big-ticket items," such as cars or boats. If you're in the market for a new vehicle, remember this alternate tax deduction.

3. Transfer IRA funds directly to charity. After you turn age 70½, you must take required minimum distributions (RMDs) from your traditional IRAs, whether you want to or not. These RMDs are taxable in the tax year they're received.

Under a provision made permanent by the PATH Act, if you're age 70½ or older, you may transfer up to $100,000 directly from your IRA to a charity without any tax consequences. In other words, you can't claim a charitable deduction for these transfers, but the payouts aren't taxable either — even if they're used to satisfy your RMD. Act sooner rather than later to avoid year-end scrambling. Keep in mind that this is a per person benefit. Although both spouses may individually transfer up to $100,000 from an IRA to a charity, one spouse cannot "borrow" the other spouse's $100,000 to make a $200,000 transfer.

4. Gift property to a charity. Real estate owners can deduct the value of "conservation easements" made to a charity that preserve the property in its original condition. Charitable deductions for long-term capital gains property (appreciated property that's been held more than one year) are generally limited to 30% of the taxpayer's adjusted gross income (AGI). Any excess may be carried forward for up to 15 years.

Under enhancements made permanent by the PATH Act, the deduction threshold is raised to 50% of AGI (100% for farmers and ranchers) for conservation easements. Any excess may still be carried forward for up to 15 years. One catch, however, is that all such conservation donations must be made in perpetuity.

5. Install energy-saving equipment. Are you dreading the summer heat? It may be time to install a central air conditioning system. There are various requirements to qualify for the credit. First, the home must be your main home. Also, while the credit is generally equal to 10% of the cost of qualified energy-saving improvements, there is a lifetime credit limit of $500. Thus, if you've claimed the credit in a prior year, your current-year credit will be reduced accordingly. Other special dollar limits may apply. It's available for a wide range of items from central air to insulation.

The PATH Act extended the residential energy credit only through 2016. So, it's important to act before this tax-saving opportunity expires. (It may be extended again, but there are no guarantees.)

5 Tax Breaks for Small Businesses

Read More

Tags: Tax, Gifts, Vehicle, Planning, Tax Breaks, College Expenses, PATH Act

Master the Fundamentals of Estate Planning

Posted on Sun, Nov 16, 2014

For many people, mapping out an estate game plan is something they intend to think about later. But too often, later never comes.

Read More

Tags: EHTC Article, Estate Planning, Assets, Planning, Estate, Newsletter, Articles

Need a New Vehicle? Save Money with Hot End-of-Summer Deals

Posted on Wed, Jul 30, 2014

Shiny new 2015 vehicles are arriving at car dealerships around the country. But shoppers willing to forego the latest bells and whistles may be able to get a hot deal on a new 2014 model. Dealers and manufacturers offer large incentives to move last year's models off the lot.

Informed Shoppers Are Smart Shoppers

Websites -- such as Cars.com or Kelley Blue Book (kbb.com) -- can be valuable resources during the car-buying process. Here are four facts to consider before test driving vehicles:

1. The market prices of the cars you're considering,

2. The trade-in value of your current vehicle,

3. Your personal credit score if you are financing, and

4. Current financing rates.

People who buy new cars in August or September save an average of $500 over purchases made in other months, according to TrueCar.com, an online car buying service. TrueCar also reports that the month with the highest monthly transaction price is actually December, challenging conventional wisdom that year-end is the best time to buy a new car.

One well-known tenant of car buying is: Never pay sticker price. But how low can you go? Here's one strategy to pay less than the manufacturer's recommended selling price (MRSP):

Step 1: Research First

What's most important to you in a new car (reliability, prestige, fuel-efficiency)? Decide on your budget and must-have features. Then, compile a list of cars that fit your needs and preferences. 

Remember Economics 101? Low supply plus high demand equates with over-paying for a new car. Observe the inventory levels of local dealerships. High volume models (or even unpopular colors) tend to receive the biggest rebates and discounts. Consider narrowing down your preliminary list to include models with higher inventory levels.

Studies show that most buyers research online before setting foot in the showroom. Salespeople work deals all day long and become very skilled at negotiating. Doing your homework evens the balance of power.

Step 2: Test Drive

The salesperson will likely say something like: "What can I do to put you in a new car today?" You can reply that you're just window shopping and didn't even bring a checkbook (or credit card). But reassure him or her that you're planning to buy in the next few weeks -- and take a business card to confirm that you're a serious buyer.

Pick your top vehicles from Step 1 and take them for a test drive. Get a written quote from each dealership that lists the price for the new vehicle and the trade-in value separately. (The internet can be a great way to request quotes without even stepping into a showroom.) Ask that prices include all hidden costs, such as taxes and title, registration and environmental fees.

Salespeople might pressure you to buy on the spot, but impulsive decisions can be costly. If sales tactics become too high-pressured, stay unemotional and be prepared to walk. If you hate to haggle, consider bringing along an even-tempered friend or relative who is good at negotiating to help keep you grounded.

Step 3: Focus on Total Cost, Not Monthly Payments

Finance and leasing terms can be confusing. But only one number counts in the end -- the total cost. Salespeople like to talk in terms of monthly payments, and they might try to persuade you that an extra $1,000 equates to only $20 per month over the course of a four-year loan. But don't get sucked into playing that game -- you don't have to tell them your monthly budget. Instead, explain that you're looking for the lowest overall price.

Nowadays, many dealers will openly share their invoices. But don't settle for simply paying a few hundred dollars over invoice. What the invoice doesn't tell you is how much -- and if -- the manufacturer will refund the dealer for rebates and holdbacks on your sale -- or for reaching their monthly sales quotas. Remember, these incentives are paid by the manufacturer. The dealer should offer you a separate discount on their end, too.

When it comes to financing, you may want to follow these rules of thumb. Put at least 20 percent down on a new car purchase. And avoid loans that last more than four years. Otherwise, you may end up owing more than the car is worth.

Note: Your downpayment should come from a savings or checking account, of course. But, if you put it on a credit card that offers reward points and pay it off at next month, you could earn significant points on your purchase.

Step 4: Buy Add-Ons Later

Some dealerships offer rock-bottom prices, hoping to make up profits on the back-end. Any extras the finance manager offers you -- such as rustproofing, extended warranties, service contracts and fabric protection -- can generally be purchased after closing, often at a lower cost by aftermarket retailers.

Add-ons are the bread and butter of many car dealerships today. New vehicle sales generally earn a 3.8 percent gross margin on average. But finance, insurance, service contracts and other add-ons account for almost 40 cents of every dollar of gross profit earned on vehicle sales, according to NADA Data 2014, a report on dealership sales and financial trends published by the National Automobile Dealership Association (NADA) every year.

Major Long-Term Purchases Require Planning

Buying a car is one of the biggest purchases consumers make -- and it's a choice that buyers usually live with for several years. Choose wisely and take your time. But if you're currently feeling the itch to buy a new car, end-of-summer sales may be a smart time to act.

Read More

Tags: EHTC Article, Vehicle, Purchasing, Planning, Research, Informed Shopping, Newsletter, Articles