It’s March. The time of year when the early tax filers start to see their tax refunds in the mail. Marketers, sales people, car dealers and just about everyone with a product or service to sell knows this and are out to separate you from your money.
The IRS estimates that the average tax filer will receive a refund check of about $3,050. Here in MN, taxpayers can expect an average tax refund of $2,430.
That kind of money won’t change your life, but what you choose to do with it now can make a big difference over time. Rather than spending it on more stuff that you don’t need, consider leveraging your tax refund for even greater benefit in the future by using this easy hack:
Photo by Alexander Radelich on Unsplash
According to the National Philanthropic Trust (NPT), Americans donated over $389 billion in 2016. Most of that money, 72% to be exact, came from individual donors like you.
I imagine that most of those donations went directly to qualified 501(c)3 charitable organizations. However, more and more people are using donor advised funds as their charitable vehicle of choice.
If you plan to make a charitable gift before the end of the year, you may wish to consider a gift to a donor advised fund as well.
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Paying less in Federal income tax means you get to keep more of your hard-earned income for yourself, for your family and to share with others. You benefit, your family benefits and the economy as a whole benefits.
At least, that’s the way it’s supposed to work.
The new tax proposal is being pitched as a “tax cut for the middle class”. As with every tax overhaul there are winners and losers, but taxpayers need to be careful what they wish for.
As expected the Federal Reserve voted to keep interest rates unchanged at its most recent Open Market Committee meeting last week. This comes after four rate increases in the Federal Funds Rate since they began raising interest rates in December of 2015.
The Federal Funds Rate remains at 1.25%. The next FOMC meeting is scheduled for September 19-20 when many Fed watchers predict another increase or possibly a change in tactics.
Imagine getting hit with a $500,000 tax bill just because you checked the wrong box on a form.
If you inherit an IRA, what you do next determines how much tax you will owe on your inheritance. Make a mistake and the entire IRA balance becomes taxable. In addition to owing Federal income taxes on the inherited IRA, you may also owe state income tax and possibly even estate taxes when you inherit an IRA from someone other than a spouse.
Tally it all up and half or more of the IRA could end up going to the IRS.
The average IRA balance varies by age, but for people over age 65 the average balance exceeds $212,000. In many cases IRAs can exceed $1 million or more during the IRA owner’s lifetime. A wrong move by the beneficiary could result in a gut-wrenching six-figure tax bill.
When you inherit an IRA, follow these three steps to avoid a tax disaster.