Doing well tax-wise by doing good
Businesses can make charitable contributions and not only generate
goodwill but also get a tax break as long as they follow the rules. For
instance, C corporations may deduct contributions only up to 10% of
their taxable income. Meanwhile, partnerships, limited liability
companies (LLCs) and S corporations do not have this limit. Rather they
must pass through the deduction for the business’s charitable
contributions to the owners and partners, who will take the deduction on
their personal income tax returns.
The nuts and bolts of
deferred and reverse exchanges
It’s rare to find someone with whom you can
simply trade properties, so most like-kind exchanges are
deferred exchanges. In a deferred exchange, you sell your
property first and then identify and acquire a replacement
property. Once you sell the relinquished property, you must
identify a replacement property within 45 days and complete the
exchange within 180 days.
To qualify the transaction as an exchange, you can’t receive
cash or nonqualified property — otherwise, gain will be
recognized. And you must use a qualified intermediary, such as a
title company or bank. The intermediary sells the relinquished
property and uses the proceeds to buy the replacement property.
Another option is a reverse exchange, where you acquire the
replacement property first and then sell the relinquished
property. Reverse exchanges also involve a qualified
intermediary, and they’re subject to other requirements.
4 retirement savings
faux pas
Even if you think you have plenty of
retirement assets, some common mistakes can seriously disrupt
your plans. Here are four ways to zap the style out of your
retirement:
1. Borrowing against your retirement
plan. While sometimes justified, a loan against a pension, 401(k) or
403(b) plan may significantly stunt its long-term growth. And if you
fail to repay the loan, the IRS will consider the balance a “deemed
distribution” and tax it as additional income for the year. If you’re
under age 591/2, you’ll also incur a 10% early distribution penalty and,
depending on your state’s tax code, you may owe even more tax.
2. Failing to diversify investments.
Putting all your retirement eggs in one basket can really cost you if
the investment tanks. To balance the risk, diversify your portfolio with
a variety of stocks, bonds and cash investments, such as money market
funds and CDs.
3. Forgetting to apply for Social
Security. Apply for Social Security and Medicare three months before you
plan to retire. Otherwise, your benefits may be delayed.
4. Losing health insurance coverage.
If you plan to retire before becoming eligible for Medicare, find out
whether you can keep your company-sponsored health insurance or get
coverage through your spouse’s employer plan. Be aware that applying for
your own policy may be difficult and costly due to your age.The common
denominator of such mistakes: lack of planning. By starting now, you can
get a big-picture perspective of your retirement needs and keep your
goals in sight.
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7 ways to cut your
business’s tax bill
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Business owners
can streamline their company costs in many ways. And
taking advantage of strategies to trim their tax bills
is a great example. This article reviews some tips —
including taking advantage of the bonus depreciation
deduction and scheduling improvements — business owners
must implement by year end to enjoy 2004 tax savings.
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Why real estate
investors should rethink like-kind exchanges
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| Low capital gains tax
rates have many investors rethinking their investment
strategies, particularly if they own real estate.
Depending on their goals and circumstances, this may be
a good opportunity to exit the real estate market
gracefully — and relatively inexpensively. Although
like-kind exchanges are particularly advantageous
because of tax deferral, they’ve lost some of their
appeal because capital gains tax rates are lower than
they’ve been in years. This article discusses why you
should reconsider like-kind exchanges.
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Will you have the
money to retire in style?
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Assuring a comfortable and worry-free
retirement means adding up how much investments and
other assets will provide, figuring out how much income
will be necessary and dealing with any projected
shortfalls early on. This article tells how to do the
math, make any adjustments needed and avoid common
mistakes that can derail retirement security.
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When long-term
care insurance makes sense
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Long-term care insurance isn’t for
everyone — it’s expensive and can be difficult to
obtain. Essentially a form of disability insurance, it
picks up where Medicare and standard insurance leave
off, with policies covering medical as well as
nonmedical care. Whether an individual should get
coverage depends on their age, assets, estate planning
strategy, health conditions and more.
Read More |
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