Inflation has increased the cost of everything, including health care. That's why many people, even before the recent jump in the cost of living, have chosen a high deductible health plan, or HDHP. As the name indicates, HDHPs require enrollees to pay more out-of-pocket costs, aka the high deductible amount, before policy coverage kicks in. However, HDHPs typically have lower monthly premiums than the traditional type of medical insurance. Many individuals, especially those in generally good health, accept the risk of a higher deductible in exchange for the immediate cash-flow benefit of lower premiums. Another part of the HDHP trade-off... Read more →
Inflation
Millions say "no, back off," to their taxes every year, as Tax Day nears. They get an extension to delay doing their annual returns. They also have some strong feelings, as the survey discussed below reveals, about taxes and the filing process. (Photo by Alena Shekhovtcova) Tax Day 2023 — that's Tuesday, April 18, in case you forgot — is almost here. As of April 7, the latest date of tax filings the Internal Revenue Service has tallied for its filing season reports, the agency has received just more than 101.3 million returns. That down almost 2 percent from the... Read more →
Photo by Emanuel-Kluge via Flickr When U.S. residents make international moves for work, there's one part of the country that goes with them. They remain U.S. taxpayers, filing federal tax returns on the on their overseas earnings. Uncle Sam, however, does provide some tax breaks to his citizens living and working abroad. Their filing deadline is June 15. Thanks to tax treaties, globally peripatetic taxpayers also get certain foreign earned income exclusions and/or foreign income tax credits. These exclusion amounts also are affected by the cost of living, as noted in Part 8 of the ol' blog's 2023 annual inflation... Read more →
Image via California Franchise Tax Board Individuals who got special tax or inflation relief payments from their states last year won't have to worry about handing over a portion to the U.S. Treasury. The Internal Revenue Service announced late Friday, Feb. 10, afternoon, that, "in the interest of sound tax administration and other factors," recipients of the payments won't have to report the amounts on their 2022 tax returns that are now being filed. Disaster and general welfare exemptions: The IRS said that it will not challenge the taxability of payments related to general welfare and disaster relief. This means... Read more →
UPDATE, February 10, 2023: There's good federal tax news for residents in 21 states who last year got some financial relief from their states. The Internal Revenue Service has determined that the stimulus/tax refund payment amounts are not subject to federal tax. Remember back in January when I listed 6 reasons why you should wait to file your federal tax return? The Internal Revenue Service has come up with a new one for taxpayers in several states. Specifically, the IRS is telling individuals who last year received special state-issued payments to help offset higher inflation costs to wait before submitting... Read more →
Drivers faced plenty of challenges in 2022, notably the dramatic jump this year in fuel prices. That prompted the Internal Revenue Service in June to hike 2022's optional standard mileage rates for the last six months of the year. Now the IRS has bumped up the business rate again as part of its annual adjustments to a variety of tax laws. Beginning on Jan. 1, 2023, the standard optional mileage rate for a car (or van, pickup or panel truck) used for business purposes will be 65.5 cents per mile. That's up 3 cents from the midyear increase that applies... Read more →
via GIPHY Seven days from now, many of us will be opening Christmas presents. Hanukkah is underway. Regardless of what or how you celebrate December holidays, your purchases probably increase this month. And this year, inflation, even though it's abated a bit recently, means you have or will pay more for all those gifts, food, and other festive trimmings of the season. Every year, PNC financial services issues its Christmas Price Index, or CPI. It measures, using a methodology similar to Uncle Sam's official CPI, or consumer price index, the current costs of the gifts given in the classic holiday... Read more →
Is your retirement plan on target? Maybe not, thanks (no thanks!) in part to the COVID pandemic and inflation. People have been, understandably, more focused of late on meeting daily living expenses than saving for the future. Such financial concerns likely are partially responsible for the results of a new retirement savings report from Fidelity. The Boston-based investment company found that the average 401(k) balance declined for the third straight quarter. It dipped below the six-figure mark, coming in at $97,200. That's 23 percent lower than a year ago. The average individual retirement arrangement (IRA) balance also dropped. The average... Read more →
The United States' tax system depends on voluntary compliance by taxpayers. But Uncle Sam is no fool. He and his tax collectors are believers of the adage "trust, but verify." The Internal Revenue Service also follows up on that verification with penalties when it finds taxpayers — and the professionals we pay to take care of our taxes — aren't fulfilling our tax responsibilities on our own. The most severe punishments come via criminal tax prosecutions. The IRS also employs civil actions to get due taxes. And many of us are familiar with the various fines and fees that are... Read more →
Fornillo Beach in Positano along Italy's Amalfi Coast. (Photo by Mihael Grmek via Wikipedia Commons) The hubby and I just finished watching the second season of Stanley Tucci's culinary trek across Italy. So, at least for a few more weeks, we're thinking (OK, dreaming) about moving to that boot-shaped Mediterranean peninsula. If we did, which we won't, we wouldn't renounce our U.S. citizenship. That comes with too steep a tax price. But officially remaining American nationals also carries a tax cost. Most Americans who move abroad still owe U.S. taxes on their income, regardless of where it's earned. That's because... Read more →
Before law changes, the now inflation-indexed Alternative Minimum Tax, known as the AMT, seemed to work like an ATM for the Internal Revenue Service, allowing it to collect this parallel tax from more than the wealthy for whom it was created. (Photo by Erik Mclean) Calculating one tax bill is bad enough, but some people have to deal with a second one at tax filing time. The Alternative Minimum Tax, or AMT, is a separate tax system created to ensure that the wealthiest pay at least some tax. The parallel AMT was added to the Internal Revenue Code in 1969... Read more →
Plus a look at how higher costs of living affect capital gains, youngsters' investment earnings, gifts, and more. Image via Giphy Them that got, are them that get. Not only is that a lyric (and theme) from a fabulous Ray Charles song, it's a good synopsis of the current estate tax law, especially with 2023 inflation adjustments. Many of the current wealth-related tax provisions help the richest among us stay that way. But some of them can help all of us, regardless of our income level, increase our relative wealth. And, as reviewed in this Part 6 of the ol'... Read more →
If you've been to a doctor recently, refilled a subscription, had to go to an emergency room, or just bought over-the-counter medications, you know that all these cost a lot more than in previous years. It's enough to make you sick, or at least nudge up your blood pressure a bit. However, the tax code might have an Rx that can help. There are a variety of medical tax breaks that can help lower your federal tax bill. Several of them are adjusted each year to account for inflation. Here, in today's Part 5 post of the ol' blog's annual... Read more →
Very few of us share the same tax circumstances. However, there is one thing every taxpayer can agree on. We all want to pay the least amount of federal tax as possible. Deductions, like the standard amounts discussed in Part 2 of the ol' blogs annual tax inflation series, are a major way of reducing our annual tax bill. But wait. There's more. There are the adjustments to income, listed on Form 1040 Schedule 1 and still known as above-the-line deductions. You can claim all of these 25 tax breaks regardless of whether you itemize or take the standard deduction.... Read more →
With some tax planning now, along with some help from tax-favored accounts, you can ensure your retirement is full of smiles, love, and flowers. (Photo by RODNAE Productions) It's always a good time to start saving for your eventual retirement. The U.S. tax code helps via a variety of tax favored retirement options. And the Internal Revenue Service helps every year by making cost-of-living (COLA) adjustments that boost the amounts you can put into your post-work accounts. The tax agency today announced how much you can stash in 2023 in tax-deferred — or tax-free — retirement accounts and pension plans.... Read more →
Tax year-in and tax year-out, most filers claim the standard deduction instead of itemizing. The standard option has always been appealing because it's easy. There are no receipts to save, no added calculations. Even better, the Internal Revenue Service provides the standard amount you can claim, based on your filing status, right there at the bottom of the first page of Form 1040. The standard deduction train picked up even more passengers after the Tax Cuts and Jobs Act (TCJA) of 2017 essentially doubled the standard amounts. And those now more valuable deduction amounts are getting even better, thanks to... Read more →
At times, it seemed like inflation was heading to infinity and beyond. (Photo by Edvin Richardson) Inflation replaced COVID as the daily topic back in 2021, and things just escalated as that economic figure kept climbing in 2022. Most of the time, the focus has understandably been on how inflation is costing us at the grocery, the gas station and, well, just about everywhere. But we're finally getting some good inflation news from the Internal Revenue Service. Really. Some sections of the Internal Revenue Code are tied to inflation. Every year, the IRS takes a look at these numbers and,... Read more →
The Social Security Administration (SSA) gave retirees and other recipients of the program's payments good news this week. Next year, they'll get an 8.7 percent cost-of-living increase. That's the highest in more than 40 years, and comes on the heels of this year's bump that, at the time, was the largest retirement benefits bump in decades. Some higher earners, however, aren't so happy. Today's SSA announcement also noted that the amount of income subject to payroll taxes also is going up in 2023. This amount, known as the Social Security wage base, is the maximum earnings, by both salaried workers... Read more →
I loved this couch, but it was starting to wear so we donated it away while it was still in good shape. Some folks, however, would have sold the sofa. Now, such transactions could trigger a confusing tax situation. With inflation still squeezing budgets, some people have taken to selling old items. Garage sales are the traditional route, but if your neighborhood limits when you can put old items out for sale (dang those HoAs), then there's always the internet. A tax law change, however, could mean a tax hassle for infrequent, small-time online sellers. They could get a tax... Read more →
Photo by Karolina Grabowska I have money in the stock market. When I was a younger investor, I checked my assets a lot. Like almost every day. Then I realized that was just going to make me crazy(ier), so I shifted to a monthly review of where my holdings were. Now I just check quarterly. Most of the reason for my reduction in the frequency of my equity evaluations is that I'm at that part of my life where my holdings are pretty much set for my fast-approaching retirement years. The good news is that the recent market dive, while... Read more →