Spring is in the air and it is a time when tax refunds start arriving. Outlined here are five smart uses for your refund. Given all the recent tax law changes, please review the tax planning article to ensure you take full advantage of them. Articles on managing student debt and a recap of Roth IRA’s round out this month’s newsletter.
Should you know of someone who may benefit from this information please feel free to forward this newsletter to them.
Five Smart Uses for Your Tax Refund
So you were fortunate enough to receive a tax refund this year. What are your plans for the money? Here are five ideas worth considering.
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Tax Planning Season is Now
Take multiple years of last minute tax law changes, add major sections of the tax code that expire each year only to be extended, and mix in major pre-formulated tax code changes. All this adds up to lots of potential for tax savings, but only if you plan accordingly. This is especially true in the following cases.
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Please call if you wish a review of your tax situation.
Small Business Tax Review May be in OrderThe recent tax legislation addresses a number of tax credits and other provisions that impact small business. Planning your business’ tax bill is now more important than ever. Here are some of the key changes:
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Time to Consider a Roth?
With interest rates close to zero and a newly received refund check in hand, you may wish to consider a contribution to a Roth IRA.
The Roth IRA basics
Using after-tax funds, you can contribute up to $5,500 each year in a Roth IRA. If you are at least 50 years old, you can contribute an additional $1,000. As long as your Roth IRA has been open for 5 years or more and your withdrawal of earnings occurs after 59½ years old, any earnings you receive from this account are yours tax-free.
The benefits
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If you earn more than $132,000 (single) or $194,000 (married filing joint) you are not allowed to make a Roth Contribution in 2016. You can, however, convert funds from a traditional IRA without these income limitations. |
Ideas to Manage the Burden of Student Debt
Each year a new crop of graduating high school seniors begin their collegiate careers while college graduates consider the opportunities that graduate school provides. As a result, the mountain of student debt continues to build. While this debt is unavoidable, here are some ideas to help make that mountain a little less insurmountable.
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Pay the interest. Some student loans accrue interest while you are in school. With the compounding of this interest, your student loan amount continues to grow with each passing year before repayment begins. Banks love this. You should not.Suggestion: Figure out how to make the interest payments while in school. This will not only lock the amount you owe, it will reduce the amount of interest payments you will be paying on your interest. |
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Pay a little extra in the early days. The math of loans benefits banks in the early years of the note. This is because the vast majority of interest is paid by you in the first years of repayment. The last year of your loan repayment is primarily principal payments.Suggestion: Pay extra every month as soon as payments start. While this seems impossible as you enter the workforce, even $10 extra a month can dramatically reduce the amount of total payments you make over the life of your loan. |
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Small savings yield big results. Having a hard time finding a few extra dollars to make extra payments? Consider observing and then changing your spending habits.Suggestions: Purchase one less latte a week. Occasionally order water versus another beverage with a purchased meal. Drop one monthly service from a bill. Place these savings in an envelope and use them as a bonus payment on your student loan principal. |
While student debt is an unavoidable outcome of getting a great education, it can be minimized if actively managed. Remember small changes can yield results if planned for in advance.
As always, should you have any questions or concerns regarding your situation please feel free to call.
This newsletter is provided by
R.D.M. Tax Service & Notary Public
47865 Stillwater Drive
La Quinta, CA 92253-7119
Office: 415.285.5384
Office: 760.564.1408
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