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5 Major Life Changes That Can Impact Taxes




5 Major Life Changes That Can Impact Taxes
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Getting married, buying or selling property, having children, or retiring are big life changes and also can have a big impact on a taxpayer’s taxes. Simply put — life changes a person’s taxes. Jackson Hewitt encourages taxpayers to understand how major life changes in 2019 may bring credits and deductions that may lower a taxpayer’s tax burden or increases their refund.

“Life changes bring on more than a new baby, a new spouse, or a new house; they also bring major tax implications,” said Mark Steber, Chief Tax Officer at Jackson Hewitt. “At Jackson Hewitt, we enjoy celebrating life’s milestones with our clients, and our Tax Pros specialize in finding the extra credits and deductions associated with these changes.”

1. Having a baby

As long as a taxpayer had a baby any time in 2019 before midnight on December 31, 2019, they are eligible for the full credits and deductions available for the child, as if they’ve cared for the child since January 1, 2019. The Child Tax Credit is equal to $2,000 per dependent child under age 17, and the Child and Dependent Care credit can get you a credit on up to $3,000 of childcare costs for a child under age 13. Additional incentives like the Earned Income Tax Credit (EITC), which could result in a credit of up to $6,557, are available to those who qualify. If a taxpayer is a single parent and this is their first child, they may now be eligible for the Head of Household filing status.

To celebrate the babies who bring on these extra tax breaks, participating Jackson Hewitt locations are giving away free “Cutest Tax Break Ever” baby onesies. Taxpayers can call their local offices and see if onesies are available. To help spread the word and make sure taxpayers know how much life can change their taxes, Jackson Hewitt is encouraging clients to use the hashtag #TaxBreakBaby on social media.

2. Getting married (or divorced)

For taxpayers who are changing their filing status from single to married filing jointly or back to single, they could see a big change in their standard deduction. For the 2019 tax year, the standard deductions are:

  • Single/Married Filing Single*
  • Head of Household
  • Married Filing Jointly/Qualifying Widow(er)

*Married Filing Single may have to itemize and claim less than the standard deduction

3. Buying a home

With the increased standard deduction, it may not be beneficial for people who don’t own a home to itemize. But if a taxpayer bought a home in 2019 they may have more deductions making itemizing deductions greater than the standard deduction, and this could lower taxes more. The deductions for owning a home include mortgage interest and real estate property tax. Additionally, certain home improvements that make the home more energy efficient may generate tax credits now and utility savings in the future.

4. Getting an education

There are nearly a dozen tax benefits designed to help higher education students save money, from the American Opportunity Tax Credit to the Lifetime Learning Credit. Qualified expenses include tuition, books, supplies, and possibly travel costs related to college.

5. Retiring

Individuals with employment changes, including retirement, may be eligible for new deductions or filing requirements. For those that are self-employed, don’t miss out on often-overlooked deductions for qualified vehicle expenses, home office supplies, and more.

Taxpayers who experienced a major life change this year should be sure to talk to a Tax Pro to ensure they take advantage of the tax breaks associated with their life changes. Jackson Hewitt Tax Pros are ready to help hard-working taxpayers find every credit and deduction available to them. Visit to find the nearest office location.


The Best Way to Transfer Wealth & Reduce Taxes




The best way to transfer wealth and reduce taxes

As we move through our working years, a plan for retirement and final expenses are key issues individuals assess when it comes times to leave the workforce. There are considerations in how to save funds and transfer to loved ones while reducing liabilities such as taxes. The best way to transfer assets to a spouse, children, and favorite charities are through different tools. A lawyer can draw up a will or a trust; however these tools are used to transfer assets, protect the estate and inheritances; not to generate wealth. Permanent life insurance is the best way to create wealth or transfer wealth on a tax favorable basis.

A tool that can leave funds behind, transfer wealth on a tax-favorable basis is through a life insurance policy. A term policy can not carry a cash value and individuals may opt for one to pay final expenses, and income replacement because of an unexpected death of an income earning spouse. However, a universal, variable universal or whole life policies can provide the transfer of wealth.

There are other uses with a permanent life insurance policy such as loans, savings, or providing an income stream if you need it now versus giving it later. A policy holder can use the benefits of a life insurance policy while the policy holder is alive and leaves benefits for loved ones and charities.
• Can take a loan against the cash value in the policy.
• Generate an income stream from the cash value once they pay it up.
• Single pay policies give options in transferring wealth to charities and loved ones.
• Some policies will deliver a death benefit and the cash value combined.
• The recipient of the death benefit proceeds does not have to pay income taxes from the benefits. (must be reported to IRS however)
• Life Insurance is not probated if there is a will.
• Alternative to risky investments in the stock market.

Generate Income

What about after the working years have passed? What if you want to supplement your retirement? Maybe you want to retire early? Maybe you just want to make sure that when you pass away your wealth transfers to your loved ones without the worry of other aspects such as probating a will.

If you own a permanent life insurance policy, then these types build a cash value over time, minus the cost of insurance. Each year your insurance company should send an illustration that shows your death benefit, the cash value, and what your annual premiums are. If you want to retire early and take a distribution of the funds from your policy, the great news is, that it is an F.I.F.O. or (first in, first out) meaning your principal comes out first and interest comes out last so you won’t be taxed until you collect your money that came from interest.

Beneficiary Does Not Pay Taxes on the Funds

Life insurance does not exempt an estate from paying federal or state estate taxes and any wealth distribution. They calculate any proceeds of an estate toward the total estate, and each year those figures are subject to tax laws. However, a person can transfer cash and build wealth through life insurance, avoiding probate and income taxes to the recipient. As always, consult your certified public accountant if you have questions regarding estate taxes and laws.

Check Policy Provisions

If you are looking for a way to transfer a large sum of money upon your death, there are some policies out there that can pay out a death benefit and the cash value. Be careful, not all policies do this, and it is important to ask before you drop a large amount of money for a single pay life insurance policy. If you opt for the cash value and the death benefit, the initial investment will be a little more than if you are funding the death benefit only.

C.D. Alternative

For those of you who do not want to expose your funds to risk in the stock market, or you have exhausted your contribution limits with IRAs or 401ks, then instead of putting money in the bank where it draws little to no interest, check into the interest rates the life insurance policies are paying. A good solid company will offer a reasonable rate of return on cash inside the policy with a guaranteed interest rate when the optimal interest rate drops.

Life Insurance Can Generate Wealth and Security

There are many tools for retirement and planning for final expenses. As we move toward our golden years, it is important to reallocate investments to reflect what stage in life you are in. In our younger working days, we have the time to recoup the losses from the cycles of the stock market. As we age and seek ways to generate income in retirement, our resolve in high-risk investments quells and many need to reevaluate where funds should be allocated. Life insurance is a tool that can generate wealth, transfer wealth and have a death benefit attached. Talk to your accountant and estate attorney to find out what is best for you and your family. Consult a financial representative and find out what life insurance policies are suitable for your unique situation. A financial representative can assist you in positioning your assets based on your needs.

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Big Surprise! Ya Ready? Wait for it…




First, apologies for the click bait; a surprise is something unexpected like a hot Fed Ex chick who really is a stripper on your birth day shows up at work. But according to the Internal Revenue Service, the number of non-wage earner filers penalized for underpaying estimated taxes rose nearly 40% between 2010 and 2015; to 10 million from 7.2 million.

This is not a surprise… growing number of people who pay taxes quarterly are getting their payments wrong and incurring penalties as a result. These taxpayers often owe estimated taxes because they have income that’s not subject to the same withholding as wages earned by employees. Yeah, it’s called 1099 or schedule C income. You know what the beauty of that is? Unlike a W-2 income where the government jacks your paycheck, business owners and self employed people pay their taxes last after they write everything off! It’s all legal. This is not news and I have an idea, that is, if you want true equanimity in the tax system.

First off, don’t bitch…

The simple part first; anyone can generate a 1099 income and write off expenses, especially, in the gig economy. Secondly, the IRS is useless. Just look at what Eric Smith, an IRS spokesman has to say, “The data suggest that millions of people don’t understand they need to pay quarterly taxes, or at least increase their withholding to avoid penalties.” Um, yeah we do! But we don’t like it or you.

Since estimated tax payments are Congress’s way of keeping non-wage earners from having an advantage over wage earners, I ask, “Why?” We create income in many cases and yet while more than 80% of taxpayers have wages that are typically subject to withholding, and most people pay most of their income tax this way, the Feds still can’t stay ahead. Thus the law requires people with other types of income to make quarterly payments based on amounts received during each period.

Ok, here’s the simple, tried and true idea; a 10% flat tax. Write your congressman and ask for two things;

1. Any American based company can no longer have off shore shelter accounts, guaranteeing a near zero tax burden. Apple pays .005% and W-2 earners pay 25% with a small “refund” That is over.
2. Any American based company must have 40% of its operations on United States soil. Bethlehem Steel in Los Angeles once employed 2,000 workers. Now, it’s 150 people who “expedite” shipments from China throughout U.S. projects.

The mass exodus of U.S. jobs started in 1961 and has gone unabated through NAFTA. It’s time to bring those jobs, and higher corporate taxes back. Going after the gig economy, raking Airbnb operators and Uber drivers are not going to make up for the $4 trillion in untaxed overseas assets and lack of U.S. jobs…and I don’t mean Burger King…Sleep tight.


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Trump’s Tax Reform Plan Benefits All Classes — But Has One Major Hurdle…




Fresh on the heels of scrapping his America First Health Plan, President Trump is turning his attention to his promised tax reform. But after finding resistance from not only the Democrats, but his own party, as well, will Trump change his strategy? While there is as yet no official look into Trump’s tax reform plan, based on his campaign promises and actions thus far in office, we can make some educated predictions.

What Can We Expect from Trump’s Tax Reform Plan?

After his health plan fiasco, Trump is looking to work more closely with not only those within his own party, but with Democrats, too, in order to get his tax plan passed. The GOP has always been looked at as a collective of rich white men. So with Trump honing his tax plan to more closely reflect the GOP’s platform, it should come as no surprise that the group to benefit the most from the next tax reform would be the ultra wealthy, and corporations.

#1 What Can We Expect from Trump’s Tax Reform Plan? | Trump's Tax Reform Plan Benefits All Classes -- But Has One Major Hurdle...

Trump’s plan looks to consolidate the current seven income brackets into three, with cuts for income taxes to all. Single taxpayer thresholds will be half of joint filers, getting rid of the marriage penalty, with head-of-household filing status thrown out, as well.

Standard deduction amounts would more than double from current levels, but personal exemptions would be eliminated. Another plus comes for families. Taxpayers would see a larger allowable deduction for child care costs — regardless of whether those expenses are itemized or not — for up to four children, whereas current tax law allows for just two children. Additionally, the lowest tax bracket would see even more childcare benefits for taxes.

But the biggest break would be for the wealthy, who would at long last be free of the estate tax, which taxes money passed down through inheritance even after being taxed when earned. That tax only applies to estates worth more than $5.45 million, meaning that savings would be massive.

But the biggest winner would be corporations.

#2 What Can We Expect from Trump’s Tax Reform Plan? | Trump's Tax Reform Plan Benefits All Classes -- But Has One Major Hurdle...

The goal of Trump’s corporate tax cuts would be to give businesses more money to invest back into their business and, in theory, create more jobs. As such, Trump wants to more than halve the top corporate tax rate from 35% to 15%. In addition, any overseas funds could be brought back into the country one time with a 10% “repatriation” tax.

And while all of that sounds great to taxpayers, there’s one big issue — who will cover the lost funds?

Tax dollars go into effect for public programs and projects, such as veterans benefits, transportation, unemployment, and Medicaid. Those dollars also pay for defense spending. And since Trump is asking for a $54 billion increase in military spending, that makes reducing taxes across the board a puzzle.

For programs and spending taxes don’t cover, the government borrows from other countries. So with nothing but cuts, paired with increased government spending, the U.S. debt could grow significantly. In fact, according to the Committee for a Responsible Federal Budget, the reform would cost $10-12 trillion in lost revenue over 10 years.

Watch this video from PBS News Hour to know more about Trump’s tax reform plan:

Some of Trump’s plan should pass without any problems, such as consolidating the tax brackets. However, a lot of the plan, specifically the corporate tax rate, will need to be compromised for this plan to get passed. But tax reform is a significantly less controversial topic than health reform, meaning that if Trump works with lawmakers, he has an opportunity to affect tax reform change for years to come.

Kansas Medicaid Expansion has been approved. Find out more here.

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