The cost of a college education keeps increasing, so the prospect of paying for it is daunting both to the college student and to parents. So who should take on this responsibility? Weigh both sides of the argument before you make the decision.
Should you pay for your child’s college education? Or should your child find the financing? There are compelling arguments for both sides, but ultimately, your family needs to do what’s best for your financial situation. Most families find that a combination of both works the best.
Parents should pay.
Arguments in favor of shelling out your hard-earned cash for a son’s or daughter’s higher education can be compelling. For one thing, college is a very expensive proposition these days. A year of undergraduate study at a private university can easily top $30,000 and public in-state schools can run over $12,000. Of course, if your student decides to get an advanced degree or go to medical or law school, he or she can run up a bill exceeding the cost of your home mortgage. Advocates of this point of view ask, “Do you really want to saddle your kid with that kind of debt so early in life?”
They add that if your child ends up working to pay for college, that’s less time available for study and making friends. And, of course, friendships built in college can generate a wealth of opportunities for a future career. Also, by investing in tax-deferred 529 plans, parents can withdraw funds free from federal and some state income taxes when it’s time for college.
The child should take the responsibility.
Others argue that covering the cost of your child’s college education should not be your priority. After all, they reason, your kid has a lifetime to pay back student loans, and making loan payments can generate a positive credit history. Advocates of this position also argue that kids who have to pay for their own tuition, books, and living expenses learn responsibility and value the investment that college represents. They also point to available tuition reimbursement plans provided by some companies or the military service option as a way to get a college education without breaking the bank.
Those on this side of the debate often argue that 529 plans are overrated as a savings vehicle because investment options can be limited and tax rules are likely to change, undermining future tax benefits. Finally, they reason that a parent’s own retirement savings should take precedence over saving for a child’s education.
Making the decision.
Of course, your family’s dynamics, the importance you place on a college education, and your personal financial priorities will factor into this decision. If you’d like help looking at the pros and cons of this important issue, give us a call.
The IRS has just announced that the amount Taxpayers will be able to contribute to their HSA accounts in 2018 will be increased. The contribution limit for those with self-only coverage will increase from $3,400 to $3,450. Taxpayers with family coverage will see their contribution limit increase from $6,750 to $6,900.+
As an executor of an estate, it’s your responsibility to make sure all the necessary tax returns are filed. This overview will help you make sure you don’t miss any.
Your role as an executor or personal administrator of an estate involves a variety of tasks. Did you know that part of your responsibility involves making sure the necessary tax returns are filed? It’s true, and there might be more of those than you expect.
Here’s an overview:
Personal income tax. You may need to file a federal income tax return for the decedent for the prior year as well as the year of death. Both are due by April 15 of the following year, even if the amount of time covered is less than a full year. You can request a six-month extension if you need additional time to gather information.
Gift tax. If the individual whose estate you’re administering made gifts in excess of the annual exclusion ($14,000 per person for 2017), a gift tax payment may be required. Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, is due April 15 of the year following the gift. The filing date can be extended six months.
Estate income tax. Income earned after death, such as interest on estate assets, is reported on Form 1041, Income Tax Return for Estates and Trusts. You’ll generally need to file if the estate’s gross income is $600 or more, or if any beneficiary is a nonresident alien. For estates with a December 31 year-end, Form 1041 is due April 15 of the following year.
Estate tax. An estate tax return, Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, is required when the fair market value of all estate assets exceeds $5,490,000 (in 2017). One thing to watch for: Spouses can transfer unused portions of the $5,490,000 exemption to each other. This is called the “portability” election. To benefit, you will need to file Form 706 when the total value of the estate is lower than the exemption.
Form 706 is due nine months after the date of death. You can request a six-month extension of time to file.
Give us a call if you need more information about administering an estate. We’re here to help make your task less stressful.
Common errors have helped to make the Earned Income Tax Credit (EIC) a major source of what the IRS calls “improper payments.” The agency estimates that of the $66 billion in EIC funds paid in 2015, nearly a quarter were collected by filers who didn’t qualify to receive them. To help combat this problem, the IRS now requires additional confirmation of information regarding the EIC and three new credits beginning in 2016.
Now if you claim the EIC, the Child Tax Credit (CTC), the Additional Child Tax Credit (ACTC) or the American Opportunity Tax Credit (AOTC), additional information may be requested.
For the CTC and ACTC, you may be asked how long your children lived with you over the past year, or whether they lived with an ex-spouse, relatives, or other guardian.
If you are eligible for the AOTC, which is a credit to defray as much as $2,500 in higher education costs for you or your children, you will need to provide Form 1098-T from the college or university. You will also need receipts for related expenses.
You may also be asked to double-check the social security numbers and dates of birth for the dependents on your return, as these are two common sources of error.
If you get more questions than usual or are asked for additional documents, be aware that it’s just a new reporting requirement implemented by the IRS.
Tax return filing season has arrived, which means it’s time to mark your calendar for these 2017 tax deadlines.
January 17 – Due date for the fourth and final installment of 2016 estimated tax for individuals (unless you file your 2016 return and pay any balance due by January 31).
January 31 – Employers must furnish 2016 W-2 statements to employees, and send copies to the Social Security Administration (both paper and electronic).
January 31 – Payers must file all copies of 2016 Forms 1099-MISC with non-employee compensation in Box 7. For these forms, the January 31 due date applies to both paper and electronic filing.
January 31 – Employers must generally file 2016 federal unemployment tax returns and pay any tax due.
February 28 – Payers must file information returns (except certain Forms 1099-MISC) with the IRS. (Except for certain Forms 1099-MISC, March 31 is the deadline if filing electronically.)
