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Biden’s Tax Policies: It’s Happening! (Probably)
TL;DR: Before Georgia went blue in the senate, we had an article about potential Biden tax policy changes. Now with democrats in charge of the house/senate/presidency, these changes seem much more likely. The new tax policies have the full intention of having no nominal change to most of Americans, but the wealthiest can expect to pay more. The main changes are: People who make over 400k might expect their marginal tax rate to increase from 37% to 39.6% Social security taxes, which right now is a 12.4% tax split between employee and employer that phases out at an income of $142,800, might now be re-introduced for those earning over 400k…
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529 Plans: How to Save Tax-Free for Your Child’s Future
TL;DR: 529s are a way to invest and have your money grow tax-free, as long as you spend it on qualified education expenses. Most posts on the internet are INFURIATING because they’re so long and just don’t get to the point. You need to read multiple blogs to get all the info you need. Here, I will have a very short point-by-point summary of the basics, for the maximal useful material/words ratio. What is a 529? An investment account run by states where you can grow funds tax-free, as long as you withdraw and eventually spend the money for qualified education expenses. Each state will have their own program, but…
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The Tax Advantage to Being Married
TL;DR: Most people, most of the time, will save on taxes when they get married. You can save over 7% of combined income in federal taxes by getting married. In general, you save more if there’s more income disparity within the couple. You save less (or potentially lose) if you’re very high income and the income is more evenly split between the partners. If you ever look at the general federal tax brackets, you’ll notice that for most brackets, the “married” bracket is just twice as high as a “single” bracket, i.e. a single person making $15000 is in the same tax bracket as a couple making $30000. This means…
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What Biden Means to You(r Wallet)
TL;DR: Biden’s proposed tax plan includes higher taxes for top earners/investors. Higher corporate taxes may be indirectly passed on to the labor force. A Republican senate means passing all this will be hard for Biden. With Biden declared as the president-elect in this recent election, let’s look at what his plans are tax-wise. Income Tax: The top tax bracket would be raised from 37% to 39.6%. A payroll tax of 12.4% would be applied to all income over $400k. 99% of Americans would not be affected by these tax changes directly. It is noteworthy Biden doesn’t mention any wealth tax that other Democrats have called for. Capital Gains: Long-term capital…
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Understanding the IRS Underpayment Penalty
TL;DR: Have 90% of your income withheld or pay 100% of last year’s tax liability to avoid underpayment penalties (under most circumstances). The US tax system is pay-as-you-go, so if you’re not withholding enough you could be in for a surprise come tax season. Specifically, a 0.5% penalty per month on the amounts under-withheld. That can get hefty. To avoid this, you need at least 100% your previous year’s tax liability or 90% of your current year’s tax liability withheld from your paychecks. If you had an AGI of $150k or more (or $75k if married filing separately), you need to withhold least 110% of your previous tax year’s liability…
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Master Guide Step 3: Taxes
TL;DR: Contact a lawyer. Ok, I tried my best to give some general advice/direction on where to look when it comes to taxes. Check it out here š Happy(-ish) Tax’ing! TheJKW (Note that I am not a lawyer. Please contact a tax lawyer for definitive, up-to-date tax advice). P.S. New posts every Sunday at 5pm CST! P.P.S. Check out the TL;DR of TL;DRs here
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Municipal Bonds
TL;DR: Municipal Bonds are tax-exempt Municipal bonds are ways cities can fund projects like bridges and schools. The main advantage here is that these are federally tax-exempt, which boosts their earning potential higher than federal bonds. They are similarly safe investments, although occasionally they still default (e.g. Detroit). Directly investing in municipal bonds takes some research, capital, and time dedicated to the endeavor. However, you can also invest in ETFs to reap the tax-exemption benefits. If interested, I’d recommend Googling and reading more about it. Happy Muni-bonding! TheJKW
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Investing: Tax Tips
TL;DR: Of your investments, put dividend yielding investments in tax-efficient vehicles, and stocks where you expect long-term capital gains in your other accounts. When it comes to taxes on most investments, if you’re like most people, you’ll get taxed whenever you close a position, or whenever you get paid a dividend. Unless the dividend is a qualified dividend, it’s likely going to be taxed just like short-term gains. And unless you are actively trading in and out of positions (which I don’t usually recommend), you’ll probably be holding stocks long-term and be getting favored tax treatment there in comparison. So, of course, invest in what you believe you should invest…
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Investing and Taxes: Continued
TL;DR: Follow the steps at the end to change your Schwab account to automatically help you with optimal taxation Last time we talked about short-term vs. long-term capital gains. However, imagine this scenario. You bought 10 shares of AAPL stock in 2014 at a price of $75. You buy another 10 shares in 2018 at $222. It is now trading at around $160, and you decide to sell 10 shares. When it comes to taxation, is this a short-term or long-term gain or loss? The answer is it depends. The default most accounts give you is FIFO (first-in-first-out), which would mean that you are selling the shares you bought in…
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Investing and Taxes
TL;DR:Ā UseĀ RetirementĀ accounts,Ā andĀ inĀ generalĀ takeĀ long-termĀ gainsĀ andĀ short-termĀ losses. When it comes to taxes, nothing’s ever simple*. However, when I started I wished someone explained this all to me. How your investments are taxed matters a lot! We’re going to start with the very basics and work on more in the following weeks. There are two main ways investments are taxed: Short-term capital gains/losses: For most investments, when you hold your position (say you buy 1 share of AAPL) for less than a year (i.e. you sell that share of AAPL back out), it becomes a short-term capital gain/loss. Whatever you make or lose is taxed at your ordinary income rate. Long-term capital gains/losses: When you hold your…