Taxes - Perspective Financial

Year End Tax Tip – Prepay Education Expenses

Here’s a quick year end tax tip or two.

If you’re the parent of a college student, you may be able to lower your 2022 tax bill by prepaying some 2023 tuition. The American Opportunity Tax Credit is worth up to $2,500 for each student in their first four years of undergraduate study. This is a tax credit, not a deduction, so you don’t need to itemize to take advantage of the opportunity.

The Lifetime Learning Credit is another way to reduce your tax bill if you plan on taking classes yourself in 2023. By prepaying the January bill before the end of 2022, you can claim up to 20 percent of your costs for tuition, fees, and books, up to $2,000. This credit is not limited to undergraduate expenses, nor to full-time students.

For both credits, married couples filing jointly with modified adjusted joint income (MAGI) of up to $160,000 can claim the full amount. Those with a MAGI of up to $180,000 can claim a partial amount.

Want another year end tax tip? Read our article about tax loss harvesting.

Source: Sandra Block, Senior Editor, Kiplinger’s Personal Finance.

Photo courtesy of Andrea Piacquadio via Pexels.com

By Perspective Financial Services|2022-10-20T12:50:06-07:00October 25th, 2022|Taxes|

Smooth Sailing Tax Strategies

The boat you stand in rocks and sways as the waves roll and churn and crash across the stern. That’s how it can feel when tax rules are up in the air, soon to change, or recently changed. If you’re a high earner or have a sizable portfolio, this unsteady feeling intensifies. Wouldn’t it be great to have smooth sailing tax strategies?

Many people make the mistake of leaving things “as is” when laws change, leaving potential tax savings on the table. They don’t realize that there often are small adjustments they can make before new rules take effect to lock in savings.

What if you viewed changes to tax law as an opportunity? The wealthiest Americans tend to embrace tax changes and find hidden savings as the tax tides ebb and flow. They ask questions.

How much of my income and which of my investments will be affected?
How can I use the current unpredictability around taxes to my benefit?
Are my investments still aligned with my tax strategies?
Is there a way to lock in savings now before rules change?

At Perspective, we ask and answer those questions for you. We recommend and help you implement solutions that best fit your unique situation. We do all this because being proactive can steady your tax strategy and provide greater peace-of-mind.

Smooth Sailing Tax Strategies

In the final three months of 2022, we’ll be focusing on tax-loss harvesting, portfolio rebalancing, and other techniques to help ensure you get the most out of your income and investments.

By Perspective Financial Services|2022-09-23T15:22:38-07:00October 11th, 2022|Investing, Taxes|

IRS Impersonation Scams on the Rise

As the new year begins, the Internal Revenue Service (IRS) is reminding taxpayers to protect their personal and financial information. Be aware there are many IRS impersonation scams that try to trick people out of their hard-earned money via text, email, and phone. This tax season, the IRS also warns people to watch out for signs of potential unemployment fraud.

Text Message Scams

Last year, there was an uptick in scam text messages that impersonated the IRS and referenced COVID-19 and/or stimulus payments. These messages often contain bogus links claiming to be IRS websites or other online tools.

Other than IRS Secure Access, the IRS does not use text messages to discuss personal tax issues, such as those involving bills or refunds. The IRS also will not send taxpayers messages via social media platforms.

Unemployment Fraud

Many states have experienced a surge in fraudulent unemployment claims filed by organized crime rings using stolen identities. Criminals are using these stolen identities to fraudulently collect benefits. You may be a victim of unemployment identity theft if you’ve received:

mail from a government agency about an unemployment claim or payment for which you did not file. This includes unexpected payments or debit cards, and they could be from any state;
an IRS Form 1099-G reflecting unemployment benefits you were not expecting or did not receive. Box 1 on this form may show unemployment benefits you did not receive or an amount that exceeds benefits you did receive. The form itself could also be from a state in which you did not file for benefits; or
a notice from your employer indicating the employer received a request for information about an unemployment claim.

For more on keeping your financial data safe, click here to read our article on cyber security.

By Perspective Financial Services|2022-02-11T15:32:34-07:00February 28th, 2022|Current Affairs, Cyber Security, Taxes|

Year-End FSA Reminder and Update

As the end of 2021 approaches, anyone with a flexible spending account (FSA) should check the balance. If there are remaining funds, make a final trip to the drug store, dentist, or eye doctor. Keep reading for a year-end FSA reminder and important update.

Sometimes called a flex plan, an FSA is a benefit many companies offer employees. It allows you to direct part of your pay into a special account. Those funds can then be used to pay for childcare or medical expenses. Money that goes into the account avoids both income tax and Social Security tax. However, any money left in the account by the end of the year must be forfeited.

One temporary change to FSA rules, instituted as a stimulus measure during the pandemic, is a grace period that extends the spending deadline for 2021 funds into the year 2022. The catch is your employer must have adopted the extension for it to be in effect. If you have a flex plan, be sure to check with your boss or human relations department to confirm the 2021 deadline.

Did you know? The cost of home testing for COVID-19 is an eligible medical expense that can be paid with FSA funds. Click here for more information at the official IRS website.

By Perspective Financial Services|2021-11-09T08:41:55-07:00November 15th, 2021|Current Affairs, Health Care, Taxes|

2021 Tax Planning Update

In December 2020, the $2.3 trillion Consolidated Appropriations Act 2021 became law and several provisions from the earlier Tax Cuts and Jobs Act were extended. Income tax brackets, eligibility for certain deductions and credits, and the standard deduction for income-tax payers all saw increases in 2021 as a result. Following is another important 2021 tax planning update.

Inflation Calculation Changes

Another significant change within the law relates to how the U.S. tax code calculates inflation. Traditionally, tax law has tied inflation calculation to the Consumer Price Index (CPI); this index measures the average change in prices paid by urban consumers on goods and services over time. Now, with recent tax reform, inflation is measured by Chained CPI.

According to TurboTax, the Chained CPI figure “measures inflation in a different, often slower way that accounts for consumers’ tendency to shy away from items that undergo a large price increase.” That means some taxpayers may get pushed into a higher marginal bracket than before, due to cost-of-living pay increases or other raises in income that outpace Chained CPI.

Q3 2021 Tax Planning Update

The third quarter is the time to assess your total estimated income, deductions, and credits for 2021. That way adjustments can be made before year-end to help reduce your overall tax bill. If you have questions or concerns, your Perspective advisor is available to help.

By Perspective Financial Services|2021-10-12T10:57:04-07:00October 25th, 2021|Current Affairs, Taxes|