REVISIT INCOME TAXES
- Do you need to submit updated Forms W-4 to your employer(s)?
- Will you need to revise the amount of your quarterly tax payments?
- The child tax credit, dependent care credit and additional personal exemptions are common factors.
- Filing status will change for some taxpayers (e.g. possibly from single to head of household).
- Adoptive parents should explore eligibility for the adoption tax credit.
- You may be able to use a flexible spending plan for dependent care expenses.
- Be sure to update your coverage to include new dependents.
- Consider using a flexible spending arrangement if your employer offers this opportunity.
- Do you have sufficient coverage?
- You will likely need to update your designated beneficiaries, including for plans provided by your employer.
- You should update your existing will and/or trust (or stop procrastinating if you do not currently have an estate plan).
- Who will assume guardianship and custody of your children if you pass away?
- Revisit the beneficiary designations on your retirement plans and update them if necessary.
SAVING FOR HIGHER EDUCATION
- Section 529 college savings plans are a popular tool.
- Investment growth is tax-deferred.
- Distributions are not subject to federal income tax if used for qualified expenses.
- Funds in a 529 plan may be used at qualified institutions nationwide; they are not tied to a specific school or state.
- The State of Michigan offers a limited income tax deduction for Michigan Education Savings Program contributions.
- The Michigan Education Trust (MET) is a prepaid tuition plan that allows taxpayers to pre-purchase undergraduate tuition for a resident child at any Michigan public university or college, including 28 public community colleges.
- Students have 15 years to utilize tuition benefits.
- Contributions provide a current Michigan income tax deduction.
- Assets may be directed to any eligible public or private university in the nation.
- A Coverdell Education Savings Account (ESA) is a trust created exclusively for paying a designated beneficiary’s qualified education expenses.
- An ESA does not offer a current tax deduction, but does grow in a tax-deferred manner.
- Qualified educational expenses include eligible private and public elementary or secondary schools, not just post-secondary institutions.
- Contributions are limited to $2,000 per beneficiary per year.
- Contribution limitations are phased out for single taxpayers with modified adjusted gross income (MAGI) between $95,000 and $110,000 or married taxpayers with MAGI between $190,000 and $220,000.
Courtesy: Christopher Harper, CPA, MBA
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