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It's never too early to start thinking about your children's college education. The sooner you start saving, the greater the chance your child will have enough money to get through college with no worries. But when considering college savings, many parents are unsure just what they should do with the money.
You could stuff it in a sock drawer, but it would have no chance of drawing interest there. A savings account might be slightly better, but any interest earned would be taxed. A 529 plan is a much better option.
529 plans are similar to 401K plans, but they're for higher education instead of college. Parents, grandparents or anyone else can put money into one for a specified beneficiary. Any interest earned is tax-deferred, and … continue reading.
If you want to send your children to college, starting to save while they are young will leave you better prepared to handle the expense. We all know that it's best to put money into something that will draw interest, but what about the tax implications? Wouldn't it be great if we could invest in something similar to a 401K that would pay out tax-free when it was time for college?
Actually, we can. It's called a 529 plan, and it offers the opportunity to save up for higher education without forfeiting a percentage of the interest earned to the government. Named from Section 529 of the Internal Revenue Code, 529 plans have only recently become well known. But their tax advantages have led to … continue reading.
We've all heard about trading shares on the stock market. Investors often buy and sell stocks in an effort to turn a profit fairly quickly. They buy when prices are lower than normal, then sell when they rise. But this is only one of the ways to make money with stocks.
If you hold on to a stock rather than selling it, you have a chance to receive dividends. A dividend is a portion of the company's profits that is distributed to shareholders. Shareholders may receive dividends even when a stock's value goes down. As long as a corporation is financially healthy, shareholders can expect to receive dividends at regular intervals.
When a publicly owned company receives profits, it has two options. It can reinvest the … continue reading.
If you have a 529 plan and the assets’ fair market value is less than when you put them into the plan, (which unfortunately, for most of us, they are due to the recent two years of huge declines in stocks), then if you completely liquidate the plan, you can take the loss as an ordinary loss, not a capital loss. Remember, only the earnings portion of a 529 plan is subject to tax and possibly the 10% penalty if used for anything other than qualified education expenses. But in this case, there are no earnings, so there is no tax. It is an amazing opportunity for many people to take an ordinary loss and then reinvest the proceeds into a new 529 plan … continue reading.
1. Document Your Expenses Well!
This may be the single most important tax tip. You can plan and do everything correctly, but in the event of an audit, many of your legitimate expenses and deductions may be disallowed if they are not documented well. Ask yourself if you believe your documents will survive a tax audit. Have you kept a mileage log so that you can prove the percentage business use you claim for your vehicle? Have you kept receipts for all your entertainment expenses and listed the business purpose on the back of each receipt?
2. Participate In A Retirement Planning Vehicle.
There are numerous retirement planning vehicles (IRA, SEP IRA, Simple IRA, Defined Benefit, Defined Contribution, 401(k), 403(b), Nonqualified Plans). In general, if your employer … continue reading.