As we get closer to the April 15th filing deadline, it’s important that you take advantage of every opportunity available to lower your taxes.
Last year the IRS issued almost 122 million refunds, and here are a few tax tips you can use to make sure Uncle Sam sends you the largest refund check possible.
Increase Your Retirement Contributions
One of the fastest and easiest ways to lower your taxes is by contributing as much as you can towards your retirement accounts.
For most of us, this means adding money to an IRA (individual retirement account). The benefit is that when you contribute to your IRA, your taxable income is reduced by the same amount.
With a traditional IRA the maximum you can contribute for the 2019 tax year is $6,000. If you are over the age of 50, you can contribute an additional $1,000.
The great news is that you can contribute up to this year’s tax deadline and still claim the deduction against last year’s (2019) taxes.
If you are self-employed and contributing to a SEP-IRA (Simplified Employee Pension IRA) you can contribute 25% of your net earnings, up to a maximum of $57,000.
Start a Health Savings Account (HSA)
With an HSA, you are setting aside money to pay for future medical bills like doctor visits, prescriptions and dental care.
Like an IRA, your contributions are pre-tax, helping to lower your overall tax bill. You can contribute up to $3,500 if you are single or up to $7,000 if the coverage is for a family, and if you are over 55 you can add an extra $1,000.
An additional benefit of HSA’s is that any unused money can roll over from year-to-year, so over time you can build up a nice nest egg that can be invested. And because the contributions are pre-tax, any gains are tax-deferred.
Deduct Investment Losses
If you lost money on some of your investments, you can turn that loss into a win by using it to offset some of your capital gains.
For example, let’s say you sold a few stocks that went up in value and you now have a capital gain of $6,000. If you also took a loss of $2,000 on a few bad stock picks, you can use this loss to offset your capital gains.
Instead of paying a capital gains tax on the $6,000 profit, you can deduct the $2,000 loss from your profit to reduce your capital gain down to $4,000. So you only pay capital gains tax on the net gain of $4,000.
The maximum you can deduct each calendar year is $3,000. Any losses above that can be carried forward to the next tax year.
Itemized vs. Standard Deduction
For single filers the standard deduction for the 2019 tax year is $12,200 and for married couples filing together its $24,400.
Most taxpayers simply elect to take the standard deduction. It’s quicker and easier, but for some taxpayers, it pays to itemize.
If your deductions for mortgage interest, state and local taxes, personal property taxes, etc. are more than the standard deduction, go ahead and itemize to reduce your overall taxable income.
Nobody likes doing their taxes, but don’t be afraid to spend a few minutes looking them over to make sure you are taking advantage of as many tax breaks as you can to reduce your tax bill.
As always, if you have any questions please meet with a tax professional.
Here’s When You Can Expect Social Security Cuts
Social Security is a retirement cornerstone for tens of millions of Americans. According to the Centers for Budget and Policy Priorities, every year it keeps 15 million retirees out of poverty.
Unfortunately, the program is facing massive financial hurdles. It has been collecting a net cash surplus for the last 38 years. However, starting next year, it is projected to run a $21.1 billion net cash outflow.
The program entered the decade with a reserve of $2.9 trillion in assets. Although, many expect the net outflows to increase each year and chip away at the reserve by $1.1 trillion. This leaves the program with only $1.8 trillion in reserves by 2029.
The program isn’t facing bankruptcy or insolvency. Instead, it is more and more likely that retirees will soon face reductions in their benefits to keep the program afloat.
Two trusts actually make up Social Security. The first one is the Old-Age and Survivors Insurance (OASI) trust. It provides payouts to retired workers and survivors of deceased workers. The other is the Disability Insurance (DI) trust. This one supplies payments to workers that are long-term disabled.
When reporting on the state of the program, the Social Security Board of Trustees generally lumps the two trusts together. However, each trust is independent and faces individual risks.
Of the two, the OASI is projected to be in financial distress the soonest. The latest Trustee report estimates that the OASI will deplete its asset reserves by 2034. Meanwhile, the DI trust could possibly depleat its reserves in 2065.
But because the OASI is much larger than the DI trust ($2.8 trillion of the combined $2.9 trillion in reserves), the combined trusts are projected to become insolvent in 2035.
So expect the first major cuts to come in 2035 in an effort to avoid insolvency. Those efforts will involve a potential bitter pill for retirees to swallow.
Unless Congress finds a way to raise additional revenue and/or reduce outlays, retired workers and survivors of deceased workers can expect a 24% reduction in monthly benefits starting in 2035. While that seems a long time from now, it’s only 15 years away and will be here sooner than you think.
In real numbers, a retiree who receives the average monthly Social Security benefit of $1,503 today would see their monthly benefit reduced to $1,142 per month, or $361 less to live on. A married couple receiving $2,531 in monthly benefits would see their check cut by $608 per month, down to $1,923.
While the monthly reduction stings, looking at it from a lifetime benefit approach magnifies the worries for retirees trying to live out their golden years. A hypothetical worker who retires this year and starts receiving benefits would typically expect to collect about $500,000 in Social Security benefits. A 25% reduction means they would see their benefits cut by $120,000, down to only $380,000 in retirement benefits.
A married couple would see their projected $1 million in benefits reduced by $240,000 down to $760,000. That’s not an easily-replaced amount of retirement income.
If there is a glimmer of hope, it’s that Congress can take action to avoid – or delay – the day of reckoning. Yes, they’ve known since 1985 that the program would one day run out of money. But if there is one thing that the government is good at, it’s waiting until the last minute to really dig in and find a solution.
Let’s hope they can set aside their differences and put America’s retirees first.
‘The Great Reset’ Will Push Socialist Agenda Across The Globe
Quietly, while the coronavirus pandemic distracted the world, a group of liberal “key global governmental and business leaders” met in Switzerland and planned the next coup d’etat to take over the global economy. Many call it The Great Reset. It also means “dangerous times for those who support individual liberties and free markets.”
The World Economic Forum will hold a summit next year to further their initiative. According to them, “The Great Reset is a commitment to jointly and urgently build the foundations of our economic and social system for a more fair, sustainable and resilient future. It requires a new social contract centred on human dignity, social justice and where societal progress does not fall behind economic development.”
What it really is trying to accomplish is using the coronavirus pandemic as a cover. They’re aiming for a renewed push for socialism and climate change initiatives.
The Economy and the Pandemic
You have to ask yourself, how did capitalism or climate change create the COVID-19 pandemic? They obviously didn’t, but remember, never let a crisis go to waste.
Klaus Schwab, the founder and executive chairman of WEF, said “COVID-19 has shown us that our old systems are not fit for the 21st century,” and “we need a global reset… we must not miss this unique window of opportunity.”
António Guterres, the UN Secretary-General, also weighed in on the topic. He said, “We must build equal, inclusive, sustainable societies, that are more resilient in the face of pandemics and climate change.”
Kristalina Georgieva, the Managing Director of the International Monetary Fund, made it very clear that the expansion of social programs should serve as the goal of The Great Reset.
“If we were to concentrate in investing in people, in the social fabric of our societies, in access to opportunities and education for all, in expansion of social programs – then we can have a world that is a better world for all.”
And Al Gore, Mr. Climate Change himself, spoke during the summit. “This is a time for a reset to fix a bunch of challenges,” he said. “First among them, the climate crisis.”
Folks, viruses don’t care about socialism or capitalism. Viruses don’t care if we have zero global carbon emissions. To hide behind these agendas and blame a global pandemic on capitalism and global greenhouse gas emissions is xxxxx.
A Complete Overhaul?
In a recent article on Fox Business, Justin Haskins, who’s no fan of the agenda, offers his two cents. He says, “The purpose of the Great Reset isn’t merely to enact policies that would lead to additional wealth redistribution, but rather to completely overhaul the world’s existing structures and institutions.”
Haskins then points to comments by Schwab. He says, “the world must act jointly and swiftly to revamp all aspects of our societies and economies, from education to social contracts and working conditions.”
Haskins continues, “How, exactly, are these leaders planning on convincing Americans and citizens of every other industrialized nation to abandon modern capitalism? By scaring people into believing that these changes are essential for stopping the next great ‘crisis’ the world will face when the COVID-19 pandemic finally subsides: climate change.”
“At the World Economic Forum’s June meeting, one speaker after another cited climate change and environmental sustainability as the key justifications for radical economic changes that would include massive new regulations and restrictions on economic activity, wealth taxes and expansive government programs comparable to the Green New Deal.”
Ultimately, according to Haskins, the goal is for the global elites to control more of our lives. This also comes under the guise of helping the world.
“The elites at the World Economic Forum can effectively control economic activity on a scale” that no one has achieved before, he says. “These are truly dangerous times for those who support individual liberty and free markets.”
4 Ways To Get Your Retirement Plans Back On Track
Whether you are nearing retirement or already enjoying your golden years, the recent market correction – and subsequent rally – has millions of Americans reconsidering their retirement plans.
If you’ve found that your retirement accounts aren’t quite where you would like them to be, don’t worry, there’s still time – and steps you can take – to improve your financial situation.
Play “Catch Up” In Your Retirement Accounts
If your nest egg isn’t as sizable as you had hoped it would be by this stage, there is some good news. If you are over the age of 50, you can make what are called “catch-up contributions to your retirement accounts. These allow you to put more money into your retirement account each year than is permissible for those under the age of 50.
For example, the 401(k) contribution limit for those 50-and-under in 2020 is $19,500. But for those over 50 years of age, you can contribute an extra $6,500 this year as a “catch-up” contribution, for a total of of $26,000.
The same thing goes for a traditional IRA. The typical limit for 2020 is $6,000 per person. But for those over 50, you can contribute an additional $1,000 to catch up, for a total of $7,000.
Convert Your IRA To a Roth IRA
As Suze Orman recommended a few weeks ago, if you have a traditional IRA, it might make sense to convert over to a Roth IRA this year. With a traditional IRA, your money is invested pre-tax and you don’t pay any taxes until you start withdrawals.
With a Roth IRA, your deposits are after-tax, so you don’t pay any taxes when you withdraw money in retirement. Given the massive budget deficits our country is running, there’s a very strong likelihood that taxes will be much higher in the future than they are today.
So while it may be appealing to let your money grow tax-deferred in a traditional IRA, you could end up paying a higher tax rate in the future. If you convert your IRA to a Roth IRA, you would pay your taxes in the year you convert. This could be extra-beneficial if you will fall into a lower tax bracket this year due to job losses or retirement. Pay the taxes this year at a lower tax rate and let the money grow tax-free going forward.
Review Your Social Security Blanket
Social Security is a major part of every retiree’s monthly income. Fortunately, that monthly income won’t ever decrease, and is automatically adjusted for inflation every year. So it makes the decision of when to start collecting Social Security very important.
You can start collecting as early as age 62, but your benefits will be permanently reduced as much as 30%. If you were born between 1943 and 1954, your full retirement age is 66, and for those born between 1955 and 1960 the full retirement age is 67 – and is also 67 for everyone born after 1960.
Here’s where some patience can pay off: if you can afford to wait until age 70 to collect your benefits, your monthly checks will be 8% larger for every year you delay claiming your benefits.
Pay Off Loans Against Your Retirement Savings As Soon As You Can
Pay off any 401(k) loans as soon as possible. A loan against your 401(k) is counter to your goal of saving for retirement. inadequately funded.
Also, the money you are paying your loan back with has already been taxed, so you are paying back pre-tax money with after-tax money. To further frustrate you about taking out the loan, when you eventually retire and start withdrawing from your 401(k) you will be taxed again.
So you will end up paying taxes twice. It’s better to not take a loan against your 401(k). Although, if you must, pay it back as soon as you can.
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