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You're Invited to Our Complimentary Presentation
Tax and Basic Financial Planning
Issues Applicable to Young Health Care Professionals
We're proud to be hosting our annual complimentary presentation
on the tax and basic financial planning issues that affect you
and your colleagues. The presentation will be held
Wednesday evening, January 29th, in Boston, and again on
February 5th, in Westchester County, NY.
Our presentation will focus on the tax issues
surrounding moonlighting and deducting professional expenses.
We'll also discuss many of the tax law changes that arose from the 2001
Tax Act but didn't take effect until 2002.
For more information about
the presentation in Boston,
(800) 471-0045 or e-mail us, and for more information about the
presentation in NY, please call (914) 381-8900 (and ask to speak
with Bob Weinstein), or e-mail us at
NEW YEAR'S RESOLUTIONS TO IMPROVE YOUR FINANCES
Making New Year's resolutions is a piece of cake, especially after a few
glasses of champagne. Following through on your resolutions is much
more challenging. Last January 1st, did you make any resolutions
concerning your personal finances? If so, how'd you do? Did you attain
your financial goals, or was 2002 a total financial washout?
The good news about New Year's resolutions is that you get to make new
ones each year. Below are some New Year's resolutions to improve
Pay Some Extra Principal With Your Mortgage Payment
Looking for a risk-free return on your money? By paying extra toward
your mortgage each month, you'll get a risk-free return on that money equal to your
mortgage interest rate. Plus, you'll cut down on the number of years it
will take to pay off your mortgage. As a rule of thumb, try to pay extra
principal each month equal to at least 10% of your total mortgage payment.
If You Don't Own A Home, Try to Qualify For the Home
If you're a renter, the rent you pay generally isn't deductible on your
federal tax return. By claiming the home office deduction, you make a
portion of your rent deductible. To qualify, you
need to use a portion of your home regularly and exclusively in connection
with your trade or business. Using your office for managerial and
administrative tasks qualifies. You'll claim the home office either
against your self-employment income on the Schedule C or as a miscellaneous
itemized deduction on the Schedule A.
Save A Set Amount Of Money Each Month
Did you know that if you deposit $81.50 into your savings account each
month, the account would be worth $1,000 at the end of the year? To help
you reach your goal, make sure to transfer the money out of your checking
account into a separate savings or investment account. By doing so, it's
more difficult to spend the money that you have managed to save.
Download our (Microsoft Excel)
debt/savings calculator to calculate how much you need to set aside each
month to reach a certain savings goal.
Pay Down Those Credit Cards
If you owe money on your credit cards,
determine how much you can realistically afford to pay down during the year.
For best results, try not to charge additional purchases on those cards
while you're trying to pay down what you owe. Download our
(Microsoft Excel) debt/savings
calculator to calculate how much you need to pay each month to pay off a debt.
Maximize Your 401(k) & 403(b) Plan Contributions
At work, you probably have the opportunity to save for your retirement
through a 401(k) or 403(b) plan sponsored by your employer. The maximum
annual contribution for 2003 has increased to $12,000. And anyone who will
be 50 or older by December 31st can contribute an extra $2,000 this year.
Remember, amounts contributed to these plans reduce your taxable
compensation and grow tax deferred.
Unless you're already on track to contribute the maximum to your 401(k)
or 403(b) plan this year, now's the time to instruct your employer's benefit
department to increase the percentage of your salary going towards this
tax-advantaged retirement savings account.
And if you're self-employed, set up a solo 401(k) plan or a SEP IRA plan
as soon as possible, if you haven't already done so, and try to contribute to these plans systematically
over the year.
Contribute $3,000 to a Roth IRA
Roth IRAs are one of the few tax-free investments available to
individuals. This year, you can contribute up to $3,000 to your Roth IRA.
You won't get a tax deduction, but amounts contributed grow tax-free, as
long as certain conditions are met. Consider signing up with a mutual fund
company to have $250.00 automatically transferred from your checking account
into a Roth IRA each month.
Don't forget, if you're single and your adjusted gross income (AGI)
exceeds $110,000 or married and your AGI exceeds $160,000, you're not
eligible to contribute to a Roth IRA that year. If your income exceeds
the applicable threshold, you're still eligible to
contribute to a traditional IRA for that year. The amount contributed isn't
tax deductible if either you or your spouse is covered under a retirement
plan at work, but grows tax-deferred.
Take Advantage of the New and
Improved College Savings Opportunities
Money contributed to Education Savings Accounts (formerly Education
IRAs) and 529 Plans grow tax-free, as long as any money
withdrawn is used for tuition and certain other college expenses, or in the case of ESAs, for
private elementary school or high school as well. You can
contribute up to $2,000 per year per child into an ESA, and up to
$55,000 at one time into a 529 Plan, subject to certain
restrictions. Money can now be contributed into both
types of accounts on behalf of the same child during the same year.
Avoid Resolution Pollution
Did you set so many financial goals that you'll end up attaining
none of them? If so, take this opportunity to restate your
financial resolutions for 2003.
PLAN AHEAD AND CUT YOUR TAXES
The tax laws continue to get more complicated. Only by planning ahead
can you take advantage of the tax saving opportunities that apply to you.
Thanks to the recent tax law changes, you can:
Pay Less Taxes. That's because the tax rates are due to decrease
in 2004. The top four brackets are scheduled to decline by 1% each, from 27%,
30%, 35%, and
38.6% to 26%, 29%, 34%, and 37.6%. For that reason, it might make
sense to defer some income into 2004 or accelerate some deductions into
Let the Government Subsidize Your Education. Starting
this year, the Lifetime Learning Tax Credit has doubled. You can now
cut your tax bill by $2,000 by claiming a tax credit equal to 20% of the first
$10,000 in tuition, books, and required fees paid during the year on
behalf of you, your spouse, or your dependents.
Make sure to time your tuition payments to take full advantage of this
annual $10,000 threshold. Keep in mind, however, that single individuals whose
AGI exceed $50,000 and married
couples whose AGI exceed $100,000 aren't eligible for this tax credit.
You should also be aware of a temporary
deduction allowed if you're paying qualified higher education expenses. In 2002 and 2003,
you can deduct up to $3,000 per year, even if you don't "itemize your
deductions". And then for 2004 and 2005, the
deduction increases to a maximum $4,000.
Unfortunately, you can only claim this deduction if your AGI is less than $65,000
(increased to $80,000 in 2004) if you're single or $130,000 (increased to
$160,000 in 2004) if you're married. After 2005, the
deduction for higher education expenses is scheduled to end.
Once again, timing your tuition payments will help you take full advantage
of this tax break.
Save Taxes When You Buy Equipment or
Business Automobiles. For 2003, the amount of property and
equipment that you can purchase and write off has increased to $25,000, up from $24,000 allowed in 2002. So if
you'll be purchasing more than $25,000 of equipment, try to spread those
purchases over two years if possible.
There is also a second tax break available to
September 11, 2004. If you purchase equipment in excess of the
$25,000 threshold, you're allowed to claim "bonus depreciation" of 30% on
the excess. Plus, if you purchase an automobile that is used in connection with your business, the depreciation allowed in the
first year has
more than doubled. Consider purchasing business equipment or
automobiles prior to September 11, 2004 to take advantage of this tax
Hold Onto Your Money Longer. If you're a high-income taxpayers
(those with adjusted gross income greater than $150,000), the "safe
harbor" requirement for your withholding and estimated tax payments has
been reduced to 110% of your prior year's tax liability, down from
112% as required in 2002. This means that if your income will be
substantially higher in 2003 than it was in 2002, you can hold onto more of your money
longer by planning ahead.
For example, let's say that your total tax
liability on your 2002 tax return was $40,000, and your income will jump
considerably during 2003. If that's the case, you only need to pay in $44,000 to the IRS
during the year through withholding and estimated tax payments (paid in
evenly over the year.) By paying in 110% of last year's tax, you
generally won't be subject to an underpayment penalty by the IRS, no
matter how much you owe. You might as well hold onto the additional taxes
that will be due next April in a savings account and earn some interest on
TAX AND FINANCIAL PLANNING CALENDAR FOR
Saving and Investing
4th quarter 2002 estimates due 1/15/03
Receive W-2s and 1099s by January 31, 2003
Review your withholding for 2003, and, if necessary, file a new W-4 Form with your employer to adjust your withholding.
Establish a savings and debt reduction goals for the year
Try to increase your monthly contributions to your 401(k)
or 403(b) plans. The maximum annual contribution for
2003 is $12,000, or
$1,000.00 per month
Automatically transfer $250 per month from your checking account into a Roth or Traditional
IRA, and $166.67 per month into an Education Savings Account for each
of your children
- For 2002, the standard deduction for a single individual is
$4,700 and for a married couple is $7,850. A person will benefit by
itemizing once allowable deductions exceed the applicable standard deduction.
Itemized deductions include state and local income taxes, real estate taxes,
mortgage interest, charitable contributions, and unreimbursed employee business
- For 2002, the personal exemption is $3,000. Individuals will claim a
personal deduction for themselves, their spouse, and their dependents.
- The maximum earnings subject to social security taxes has increased to $87,000 in 2003 from $84,900 in 2002.
- The standard mileage rate is $.365 per mile in 2002, and has
decreased to $.36 per mile for 2003.
- The maximum annual contribution to a 401(k) plan or a
403(b) plan has increased to $12,000 for 2003 from $11,000 in 2002.
And if you'll be 50 or older by December 31, 2002, you can contribute an extra
$2,000 into your 401(k) or 403(b) account this year.
- The maximum annual contribution to your IRA is $3,000 for
2003 and 2002.
And once you turn 50, you can contribute an extra
$500 into your IRA this year.
copyright - 2003 - The MDTAXES Network
Tax and financial planning calendar for January, 2002
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