How To Save on Taxes in Retirement

retired couple biking

If it’s time to retire and you haven’t started already to plan for taxes then you need to get started now. Even if retirement is still a ways off, you should always be thinking ahead. In any case, one of the most common question people have regarding retirement is how do I lower my tax bill? There are several things you can do that will help you keep your tax bill down after you retire.

One of your best bets is to open a Roth IRA. While these retirement accounts are created with after tax money, they also grow tax-free. Yes, you will have less expendable income when you deposit after-tax money into a Roth, but you won’t have to pay taxes on the gains you make when it comes time to withdraw the money. Another option is to simply convert some of your traditional IRA savings into a Roth IRA.

With all retirement accounts, at some point you will have to start taking money out, which is your required minimal distribution. However, if you don’t really need that money you can save on taxes by simply donating it to a good cause. In fact, you can donate up to $100,000 every year from a traditional IRA to charity.

You should also pay close attention to where you invest your money and make sure that you are putting it into the right kind of account. Having your income in the right place can help reduce your tax bill.

Lastly, although not an option for every taxpayer, you could move to a state with a lower tax rate. Florida, Texas and Nevada are some of the best options for those looking for a lower overall tax bill in retirement. However, there are many expenses to consider in retirement other than just your tax bill, so make this decision wisely, based on all the relevant factors.

http://time.com/money/4398857/retirement-taxes-lower/

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Some U.S. Businesses Not Happy With Obama’s Plan to Stop Inversions

obama

In recent years tax inversions have become increasingly popular as several large U.S. companies look to lower their corporate tax bills. This process consists of a company shifting its headquarters from the United States to a foreign country, which helps it greatly reduce its taxes. While this practice is completely legal many lawmakers, including President Obama, have called for measures to stop it, or at least make it a lot less attractive.

In fact, the president recently announced more proposals to prevent the practice. However, many banks and companies are crying foul over the latest proposals, claiming that they would be complex and expensive. Democrats in Congress are all for the proposed changes, as they want to prevent U.S. companies from skipping out on their tax bills. However, republicans claim the rules would discourage foreign investment in the U.S. and that the Obama administration is overstepping its authority.

Meanwhile, according to several trade groups and businesses that represent the many different sectors involved, including retailers, bankers and manufacturers, as well as oil producers, have argued that the Treasury’s proposal to put a stop to deductions by reclassifying the debt as equity would only serve to disrupt their operations and weigh down their businesses with more regulations and unnecessary red tape.

http://www.reuters.com/article/us-usa-tax-inversions-idUSKCN0ZT2OE

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Tax-Free Spinoffs Could Be Much Tougher Under Proposed New Rules

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Many U.S. companies take advantage of lower foreign taxes by creating tax-free spinoffs of their parent companies. It’s a great and legal way to lower their corporate tax bills. However, some lawmakers have long pressed for changes to these rules and it appears that changes could be coming.

The U.S. Treasury Department recently proposed some new rules that would make it more difficult for companies to create certain kinds for spinoffs. In order to avoid capital gains taxes on the transaction 5 percent of the amount of a spin-off must be an active trade or business.

The new proposed rules also aim to clear up the factors that determine when a spinoff cannot be used for distributing profits and earnings to shareholders. If the new rules pass, the transaction would be deemed a device if there was a large enough gap between the amount of the company that is made up of nonbusiness assets while the other company had a lot less.

At this point the new rules have only been proposed and they will not take effect unless the Treasury Department makes them official. Even at that time they still wouldn’t affect any transactions that were already planned before approval even if the transaction was finalized after.

http://www.wsj.com/articles/new-treasury-rules-would-make-it-harder-to-complete-tax-free-spinoffs-1468500481

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States to Avoid when Retiring

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Are you on the verge of retirement, or perhaps just a few more years away but you’re ready to start making some retirement plans? There are many things to consider when it comes time to retire, not the least of which where you choose to call home. For many people, the choice is easy; they just stay put where they’ve always called home. However, there are a lot of factors that go into this choice including children, grandchildren and of course taxes.

Speaking of taxes, if saving money is one of your top priorities, or the top priority, then you might want to consider closely where you live after you clock out for the last time. According to a report from Kiplinger you may want to avoid these 15 states if you want to save money and avoid more retirement expenses. These locations are not necessarily a bad place to live, but their tax and health care bills lack something to be desired, which is never easy for retirees.

15. Minnesota

14. West Virginia

13. Maine

12. Kentucky

11. Indiana

10. Wisconsin

9. Vermont

8. Montana

7. Rhode Island

6. Massachusetts

5. Illinois

4. Connecticut

3. California

2. New Jersey

1. New York

For most retirees, taxes are just one factor when it comes time to choose a place to live, but if you are serious about keeping your tax bill and your health care costs down then perhaps consider some other locations than the 15 states listed here.

http://www.kiplinger.com/slideshow/retirement/T006-S001-worst-states-for-retirement-2016/index.html

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How Frugal Entrepreneurs Avoid Excess Spending and Taxes

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Getting a business off the ground is never easy. It takes a lot of blood, sweat and tears, but smart entrepreneurs know that it also takes a lot of fiscal responsibility and the ability to say no. Most startup companies have to always be considerate and careful with their money. So what are some of the best moves to make to avoid overspending and to save on taxes?

It seems like such a simple thing, but a lot of companies end up spending much more than they need to on meal expenses. It’s great to buy your employees lunch on occasion, but don’t go crazy because it adds up fast and your business can only cover about half of your meal expenses.

Having a good credit card with positive rewards is another way to save. It can be a sky miles card or just a card with rewards points. If you put everything on that card the rewards add up and you can end up earning enough points or money to pay for other business expenses.

You can also use your business to pay for continuing education expenses, which is a much better option than taking out a student loan that you’ll be paying off for years to come. Another smart way to save is to hold onto proof of all your bad debt. If a customer doesn’t pay you for goods or services that you’ve fulfilled or completed keep the invoice and use it to show bad debt, which will lower your income and reduce your taxes.

It’s tough enough to start a new company, so make sure your entrepreneurial spirit equals your spirit of frugality. You’ll save money and have more resources to put back into your business.

 

http://www.forbes.com/sites/moiravetter/2016/06/27/the-pragmatic-entrepreneur-5-ways-to-reduce-taxes-or-avoid-wasting-money/#5154bdf02543

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How to Ignite Your Inner Spirit to Pursue Your Passions

ignite your passions

We are all made up of a body and a spirit, or a soul. It’s our soul or spirit that really drives us to do everything we do. Our body is just the tool we use to carry out the desires and passions of our spirit. Many people think of a spirit only in religious terms, while others don’t believe in religion at all. However, whatever your beliefs there’s no arguing that we all have a spirit within us that motivates us to think, feel, act and live. Some people have no trouble finding the necessary passion or motivation to pursue their goals and dreams, while others find it much more difficult to find the drive it takes to be successful. So how can people ignite their inner spirit, which allows them to follow after their own passions and desires?

Don’t Let Logic Stop You

I asked this question to Prasad Kaipa when he joined me as a guest on my radio program, American Dreams. Among his many titles, Prasad is an executive coach, mentor, author and founder of the Centre for Leadership, Innovation and Change at the Indian School of Business. “When we are dreaming, when we are envisioning, we do not look at abstractions in making them happen. So first we need to learn to dream.” Prasad said that many times people let logic or certain data or statistics get in the way of having big dreams. He also pointed out that people should ask themselves not only what are they dreaming about, but also who they are dreaming them for? He said that being able to look outside of the box and not just focusing on one’s self, but rather expanding one’s horizon as far as possible, can be very powerful. That is the first step.

Follow Your Passion

The second step, according to Prasad, after you have been able to dream and envision what you want to create and why you want to create it is to passionately go after it. However, Prasad said you have to go after it the right way. “Don’t look it at like my project and it is all for myself, but keep remembering to enroll other people into your ecosystem to be part of it. You help them to make their dreams come alive and they will help you to make your dreams come alive.” That is where the enlightened self-interest, according to Prasad, will create significant results for both you and them.

Keep You Focus on the Passion Not the Outcome

Lastly, Prasad emphasized the importance of not getting too wrapped up in the outcome and the results. It’s important to detach yourself from the outcome and what the outcome means. Instead, he said you should focus on the passion, the process and the people. Do not get emotionally tied up with what you will do if you achieve the dream. “Detached engagement will give your role clarity and also make sure your ego gets out of the way.”

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Estate Planning for High Net Worth Foreigners

indian couple with lawyer

While the U.S. is considered by many to be a place where the wealthy move their money away from, there are also many wealthy people from other countries that are moving more of their money into our country. So what’s behind this big increase of foreigners shipping their wealth to the U.S.? America has never really been considered a tax haven, but thanks to an increase demand in multinational estate planning, the country is seeing an unprecedented number of immigrants either keep or shift their money to the U.S.

One of the biggest reasons for this increase is that U.S. tax law has almost completely eliminated estate transfer taxes. As more and more wealthy families from other countries want their children to receive an education in the United States, American colleges and universities continue to see an increase in the number of international students enrolling for classes.

Many of these students come to the U.S. and end up staying here for work, and many of them end up marrying a U.S. citizen. With their children and grandchildren now living in the U.S. many of these wealthy families are choosing to move more money to the U.S. in the form of trusts, which allows them to plan for their families and save on estate taxes.

Additionally, with the number of foreign students enrolled in U.S. educational institutions increasing to a record high of about 975,000 in 2104-2015, this trend is likely to continue.

 

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Windy City Tax Burden Will Hit NBA Star Hard

nba

So how much is $47.5 million really worth? The answer is it all depends on where you live. Most of the NBA’s top free agents recently signed their new contracts, many with new teams, including former Oklahoma City Thunder Star Kevin Durant, who is now a member of the Golden State Warriors. No doubt all NBA players are very wealthy, of course, some more than others.

However, concerning free agent deals, the numbers aren’t always what they seem. Take for example the case of former Miami Heat star Dwyane Wade. Wade wanted a two-year $50 million deal from his former team, while the Heat offered a two-year $40 million contract. Ultimately, Wade decided to take his talents to the Chicago Bulls for a two-year $47.5 million deal. It’s a no-brainer right? That’s $7.5 million more than the Heat offered.

However, in choosing to move to Chicago Illinois, Wade will now be subject to a much higher tax rate. For starters, Florida has no state income tax. Illinois on the other hand has a 3.75 percent income tax, which means, Wade will owe close to $900,000 of his annual salary to the state. Additionally, Illinois does not give tax credits to resident athletes that pay taxes to other states for games played on the road. That means he will be double taxed for income earned in those games.

The city of Chicago also has some additional taxes that Wade will be subject to, all of which means his take-home pay could actually be about the same as it would’ve been had he signed for less total money with the Heat. So in the world of NBA contracts and taxes, the numbers aren’t always as they seem.

http://www.rebootillinois.com/2016/07/13/editors-picks/joe-kaiser/a-pricey-homecoming-dwayne-wades-890000-illinois-tax-bill/61516/

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How to Save Money on Your Social Security Taxes

saving for retirement

Most people look forward to the day when they start to receive the rewards for putting all their hard-earned money over the years into social security. However, some people end up with a lot less than they had planned on because they end up paying more taxes on those benefits than they had expected. So what can you do to help lower the tax bill on your Social Security benefits?

For starters you need to know what tax table you fall into. It all depends on how much provisional income you make, which is determined by adding your adjusted gross income, your nontaxable interest and half of your Social Security benefits. If you earn less than $25,000 as a single or $32,000 for a joint return then you won’t have to pay taxes on your SS benefits.

However, as much as 50 percent of your benefits could be taxable if your provisional income is between $25,000 and $34,000 for singles and $32,000 and $44,000 for joint filers. If you surpass those figures as much as 85 percent of your benefits could be taxed.

So in order to avoid these taxes you have a few options. You can give as much as $100,000 tax free a year to charity from an IRA if you are 70.5 years or older. You can also put as much as $125,000 into a Qualified longevity Annuity Contract (QLAC). This amount does not count against you when your required minimum distribution is calculated.

Another move you can make is to withdraw money from a tax-free Roth IRA or you can roll money over from a traditional IRA to a Roth many years before you start collecting SS benefits, which will help you reduce taxes in retirement. Of course, for high net worth individuals it might be very difficult to get below the 85 percent threshold, which is why it’s important to have an overall tax-efficiency plan instead of simply focusing on saving on Social Security taxes.

http://www.kiplinger.com/article/retirement/T051-C001-S003-how-to-limit-taxes-on-social-security-benefits.html

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How to Identify and Utilize Your Core Competencies

man looking at board

Over the years that I’ve been working for GROCO and doing my radio program, American Dreams, I have met with a lot of people, many of whom are counted among the most successful and wealthiest individuals in the world. Most of my guests are also great leaders in their own right and they understand that being a leader isn’t about coming from a position of authority, it’s actually about learning to love those that you work with. To that end, I want to talk about identifying and keeping your core competencies within an organization. At the end of the day in order to implement any leadership strategy or any process, the person giving the process has to know his or her organization very well. He or she has to know the employees and they have to understand what it takes to motivate those individuals.

Identifying Your Core Competencies

When someone is looking to start a business the first thing they need to do is look at their core competencies. That means those in charge have to determine what advantages they have and what strengths they have to offer. They have to decide what their company is all about. So how do you go about identifying your core competencies? You need to look at whether or not it will have potential access to a wide variety of markets. Another question to ask is whether or not it makes a significant contribution to the perceived customer benefit of the end product? Is it something that will be difficult for your competitors to imitate?

Take Full Advantage of Your Core Competencies

It’s also important to understand that competencies are not the same as capabilities. You might have 20 or 30, or even more capabilities, but that doesn’t mean those are all core competencies. If you are about to launch a company you must be able to identify your core competencies, those things that you do well or better than anyone else. The business world is always changing, new technologies come and go, so it’s imperative that your core competencies are built on a rock solid foundation or your business will likely fall. You should be focused on building up the base of your core competencies and not get too focused on the outside sources and forces affecting you. You need to use those core competencies to your utmost advantage.

Building Your Business on a Solid Foundation

One of the most common debates that takes place in the corporate world is whether or not you should grow your company holistically or go out and buy other organizations and merge them in to acquire different customers? Both of these strategies have their pros and cons but if you prefer to have stronger core competencies that are built on a rock-solid foundation then building your company holistically is the better method. So as you prepare to launch a business, make sure that from the very first day you understand what the business is all about, what are the core competencies, know how build a vision and a mission statement off this competency and determine if the competency is actually scalable to the markets that you intend to serve.

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