Financial Planning
In 2012, Many Tax Benefits Increase Due to Inflation Adjustments
Oct 20th
IR-2011-104, Oct. 20, 2011, http://1.usa.gov/nPdoS7
WASHINGTON — For tax year 2012, personal exemptions and standard deductions will rise and tax brackets will widen due to inflation, the Internal Revenue Service announced today.
By law, the dollar amounts for a variety of tax provisions, affecting virtually every taxpayer, must be revised each year to keep pace with inflation. New dollar amounts affecting 2012 returns, filed by most taxpayers in early 2013, include the following:
- The value of each personal and dependent exemption, available to most taxpayers, is $3,800, up $100 from 2011.
- The new standard deduction is $11,900 for married couples filing a joint return, up $300, $5,950 for singles and married individuals filing separately, up $150, and $8,700 for heads of household, up $200. Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.
- Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $70,700, up from $69,000 in 2011.
Credits, deductions, and related phase outs.
- For tax year 2012, the maximum earned income tax credit (EITC) for low- and moderate- income workers and working families rises to $5,891, up from $5,751 in 2011. The maximum income limit for the EITC rises to $50,270, up from $49,078 in 2011.The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children.
- The foreign earned income deduction rises to $95,100, an increase of $2,200 from the maximum deduction for tax year 2011.
- The modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is $104,000 for joint filers, up from $102,000, and $52,000 for singles and heads of household, up from $51,000.
- For 2012, annual deductible amounts for Medical Savings Accounts (MSAs) increased from the tax year 2011 amounts; please see the table below.
| Medical Savings Accounts (MSAs) | Self-only coverage | Family coverage |
| Minimum annual deductible | $2,100 | $4,200 |
| Maximum annual deductible | $3,150 | $6,300 |
| Maximum annual out-of-pocket expenses | $4,200 | $7,650 |
The $2,500 maximum deduction for interest paid on student loans begins to phase out for a married taxpayers filing a joint returns at $125,000 and phases out completely at $155,000, an increase of $5,000 from the phase out limits for tax year 2011. For single taxpayers, the phase out ranges remain at the 2011 levels.
Estate and GiftFor an estate of any decedent dying during calendar year 2012, the basic exclusion from estate tax amount is $5,120,000, up from $5,000,000 for calendar year 2011. Also, if the executor chooses to use the special use valuation method for qualified real property, the aggregate decrease in the value of the property resulting from the choice cannot exceed $1,040,000, up from $1,020,000 for 2011.
The annual exclusion for gifts remains at $13,000.
Other Items
- The monthly limit on the value of qualified transportation benefits exclusion for qualified parking provided by an employer to its employees for 2012 rises to $240, up $10 from the limit in 2011. However, the temporary increase in the monthly limit on the value of the qualified transportation benefits exclusion for transportation in a commuter highway vehicle and transit pass provided by an employer to its employees expires and reverts to $125 for 2012.
- Several tax benefits are unchanged in 2012. For example, the additional standard deduction for blind people and senior citizens remains $1,150 for married individuals and $1,450 for singles and heads of household.
Details on these inflation adjustments can be found in Revenue Procedure 2011-52, which will be published in Internal Revenue Bulletin 2011-45 on November 7, 2011.
Death and Finances: Eight Things to Do After a Loved One Passes Away
Feb 25th
by Lynnette Khalfani-Cox
Dealing with the death of a loved one is stressful enough. But not knowing what to do with someone’s finances after the person has passed away poses an additional burden on a grieving family.
To make the process a bit easier, here’s a checklist of the top eight money matters you must deal with — and mistakes to avoid — after someone you care about dies.
This checklist isn’t all-inclusive. But what follows is critical information that can save you precious time, money and energy, as well as help you avoid squabbles over assets or financial exploitation.
To read the rest of Ms. Khalfani-Cox’s article, please go http://aol.it/ePIeO2.
No Increase in 2011 Social Security Benefits
Oct 18th
2011 will be the second consecutive year that Social Security recipients won’t get any cost-of-living increase in their monthly checks.
They might, however, get a bit of relief in the form of a $250 payment.
First, the bad news about continuing flat Social Security benefits.
January 2010 marked the first time since automatic cost-of-living adjustment, or COLA, calculations began in 1975 that recipients of Social Security, Supplemental Security Income, Veterans Administration Pension and Disability Compensation and Railroad Retirement benefits did not receive a hike in their government checks.
Continued stagnation of these benefits will continue in 2011. There won’t be an increase when January 2011 rolls around.
To read the rest of this article by Kay Bell, please go to http://bit.ly/bltr17.
The Four Rules of the Family CFO
Sep 27th
The following excerpt is from Chapter 3 of Scott Feher‘s new book, Your Life & Money: Putting Your Financial House in Order. Click here to read Chapter 2, and don’t miss Mr. Feher’s tips for getting your family interested in saving money.
- Raise a money-smart kid
- Things kids can definitely do without
- Parents getting smarter about back-to-school shopping
Do what you can, with what you have, where you are.
—THEODORE ROOSEVELT
Once you have a mission statement, you can start acting as your family’s CFO. The job has many dimensions, of course, but there are four basic rules:
Rule #1: Know Your Expenses
Familiarity with expenses is the CFO’s most important job. Think about it. If you don’t know how much money is going out, how will you know how much money to spend—or not to spend? People, businesses and governments get into financial trouble when they don’t know exactly how much goes out each month. Unlike the government, however, you can’t print money when you’re in trouble or running a little short.
Can you imagine what would happen if a corporate CFO didn’t know how much his company was spending every month? He’d be fired. Well, if you’re the family CFO and you don’t know your monthly expenses, you’ll be fired too. (It’s called divorce.)
Here’s how to start getting a handle on expenses.
To read the rest of this article, please go to http://bit.ly/bFTPBL.
September Is National Preparedness Month – How to Survive a Layoff
Sep 22nd
The latest piece from the New York Times in the growing genre of “Older workers finding it hard to get new jobs after a layoff” has triggered the predictable musings about whether we should raise the Social Security retirement age, and how to combat age discrimination. These are interesting debates, about which I hope to write more later. But the article is also a useful reminder about a more immediate issue: how people react when economic disaster hits.
The woman highlighted in the article, after all, is not going to be saved by Social Security; she’s 57. Without massive changes in spending, she’s headed for bankruptcy long before she’s eligible to collect benefits. That’s not to say that she’s a profligate spendthrift who deserves the pain she’s suffering; rather, the errors she’s made are incredibly common. That’s why it’s worth running through some of the most common mistakes that land people in these kinds of messes.
To read the rest of this article by Megan McArlde, which includes six ways to make this situation less devastating, please go to http://bit.ly/aj70xZ.
September Is National Preparedness Month – Don’t Leave Home Without a Contingency Plan
Sep 15th
Do you have a plan for you or your family if a crisis occurs?
Imagine not being able to contact your friends or family members. How would you know if everyone was safe?
Does your family have a list of basic steps and information to follow?
A natural disaster or a family crisis could happen at any time. Because September is National Preparedness Month, the New Jersey Society of Certified Public Accountants (NJSCPA) suggests creating an emergency file, or a contingency plan, to lessen the anxiety of a crisis.
“Often, when an emergency happens, people can get stressed and make bad decisions just because they’re not thinking clearly,” says Carl Specht, CPA, a partner at the Costantino, Specht, Templeton & Co., LLC in Secaucus. “Wait. Try not to make any important financial decisions while you are still feeling the emotions of a major loss or tragedy.
“If you invest some time today in planning,” Specht says, “you will find that having a written strategy will help ease pressure and uncertainty in a time of stress.”
Develop a contingency plan binder.
When tragedy strikes, there is often no time to go through drawers, filing cabinets and shoe boxes looking for pertinent information. Those who bear responsibility for your affairs need the relevant material immediately. First, find a folder or binder with dividers and label each section.
Some ideas for sections in your notebook are:
- Action List
- Key Contacts
- Medical Notes
- Financial Accounts
- Insurance
- Business Interests
- Asset Inventory
- Funeral Instructions
- Estate Planning Documents
- Personal Items
- Miscellaneous
To read the rest of this article, please go to http://bit.ly/b4VD7b.
September Is National Preparedness Month – Be Informed
Sep 7th
From Ready.gov, http://bit.ly/cDZF6s;
Some of the things you can do to prepare for the unexpected, such as making an emergency supply kit and developing a family communications plan, are the same for both a natural or man-made emergency.
However, there are important differences among potential emergencies that will impact the decisions you make and the actions you take. Learn more about the potential emergencies that could happen where you live and the appropriate way to respond to them.
In addition, learn about the emergency plans that have been established in your area by your state and local government.
Emergency preparedness is no longer the sole concern of earthquake prone Californians and those who live in the part of the country known as “Tornado Alley.” For Americans, preparedness must now account for man-made disasters as well as natural ones. Knowing what to do during an emergency is an important part of being prepared and may make all the difference when seconds count.
Go to http://bit.ly/cDZF6s and click on the links on the left side of the page for more information about how to prepare for nineteen natural and man-made emergencies, ranging from biological threats to explosions to extreme heat as well as explosions, fires, floods, tornadoes, winter storms and extreme cold.
September Is National Preparedness Month – Make a Plan
Sep 3rd
From Ready.gov, http://bit.ly/dpg6tj:
Your family may not be together when disaster strikes, so it is important to plan in advance: how you will contact one another; how you will get back together; and what you will do in different situations.
Family Emergency Plan
- Identify an out-of town contact. It may be easier to make a long-distance phone call than to call across town, so an out-of-town contact may be in a better position to communicate among separated family members.
- Be sure every member of your family knows the phone number and has a cell phone, coins, or a prepaid phone card to call the emergency contact. If you have a cell phone, program that person(s) as “ICE” (In Case of Emergency) in your phone. If you are in an accident, emergency personnel will often check your ICE listings in order to get a hold of someone you know. Make sure to tell your family and friends that you’ve listed them as emergency contacts.
- Teach family members how to use text messaging (also knows as SMS or Short Message Service). Text messages can often get around network disruptions when a phone call might not be able to get through.
- Subscribe to alert services. Many communities now have systems that will send instant text alerts or e-mails to let you know about bad weather, road closings, local emergencies, etc. Sign up by visiting your local Office of Emergency Management web site.
Planning to Stay or Go
Depending on your circumstances and the nature of the emergency, the first important decision is whether you stay where you are or evacuate. You should understand and plan for both possibilities. Use common sense and available information, including what you are learning here, to determine if there is an immediate danger. In any emergency, local authorities may or may not immediately be able to provide information on what is happening and what you should do. However, you should watch TV, listen to the radio or check the Internet often for information or official instruction as it becomes available. For information on staying put or sheltering in place, click here.
Emergency Information
Find out what kinds of disasters, both natural and man-made, are most likely to occur in your area and how you will be notified. Methods of getting your attention vary from community to community. One common method is to broadcast via emergency radio and TV broadcasts. You might hear a special siren, or get a telephone call, or emergency workers may go door-to-door.
Emergency Plans
Use the New Online Family Emergency Planning Tool created by the Ready Campaign in conjunction with the Ad Council to prepare a printable Comprehensive Family Emergency Plan:
http://ready.adcouncil.org/beprepared/fep/index.jsp
Use the New Quick Share application to help your family in assembling a quick reference list of contact information for your family, and a meeting place for emergency situations:
http://ready.adcouncil.org/beprepared/quickshare.html
You may also want to inquire about emergency plans at places where your family spends time: work, daycare and school. If no plans exist, consider volunteering to help create one. Talk to your neighbors about how you can work together in the event of an emergency. You will be better prepared to safely reunite your family and loved ones during an emergency if you think ahead and communicate with others in advance. Read more: School and Workplace.
September Is National Preparedness Month – Get a Kit
Sep 2nd
From Ready.gov, http://bit.ly/9WHvua:
You may need to survive on your own after an emergency. This means having your own food, water, and other supplies in sufficient quantity to last for at least three days. Local officials and relief workers will be on the scene after a disaster, but they cannot reach everyone immediately. You could get help in hours, or it might take days. In addition, basic services such as electricity, gas, water, sewage treatment, and telephones may be cut off for days, or even a week or longer.
Recommended Items to Include in a Basic Emergency Supply Kit:
- Water, one gallon of water per person per day for at least three days, for drinking and sanitation
- Food, at least a three-day supply of non-perishable food
- Battery-powered or hand crank radio and a NOAA Weather Radio with tone alert and extra batteries for both
- Flashlight and extra batteries
- First aid kit
- Whistle to signal for help
- Dust mask, to help filter contaminated air and plastic sheeting and duct tape to shelter-in-place
- Moist towelettes, garbage bags and plastic ties for personal sanitation
- Wrench or pliers to turn off utilities
- Can opener for food (if kit contains canned food)
- Local maps
- Cell phone with chargers, inverter or solar charger
Additional Items to Consider Adding to an Emergency Supply Kit:
- Prescription medications and glasses
- Infant formula and diapers
- Pet food and extra water for your pet
- Important family documents such as copies of insurance policies, identification and bank account records in a waterproof, portable container
- Cash or traveler’s checks and change
- Important family documents such as copies of insurance policies, identification and bank account records in a waterproof, portable container. You can use the EFFAK Emergency Financial First Aid Kit – PDF, 277Kb) developed by Operation Hope, FEMA and Citizen Corps to help you organize your information
- Emergency reference material such as a first aid book or information from www.ready.gov
- Sleeping bag or warm blanket for each person. Consider additional bedding if you live in a cold-weather climate.
- Complete change of clothing including a long sleeved shirt, long pants and sturdy shoes. Consider additional clothing if you live in a cold-weather climate.
- Household chlorine bleach and medicine dropper – When diluted nine parts water to one part bleach, bleach can be used as a disinfectant. Or in an emergency, you can use it to treat water by using 16 drops of regular household liquid bleach per gallon of water. Do not use scented, color safe or bleaches with added cleaners.
- Fire Extinguisher
- Matches in a waterproof container
- Feminine supplies and personal hygiene items
- Mess kits, paper cups, plates and plastic utensils, paper towels
- Paper and pencil
- Books, games, puzzles or other activities for children
Find out how to keep food safe during and after and emergency by visiting: http://www.foodsafety.gov/keep/
How to Replace Six Vital Documents
Aug 24th
Could you produce your birth certificate, car title, or an old tax return at a moment’s notice?
You’re supposed to store vital documents in a fireproof box or keep them in a safe-deposit box, but how many of us actually do that? We may not need these papers often, but when we do need them, we really need them. You need vital documents to sell your car, travel overseas, apply for a job, get through an audit, refinance your house, and more.
The good news is that if you’ve lost important pieces of paper, you can replace them — and it might be easier than you think. Here’s how to replace six of the most important documents in your life.
To read the rest of this article by April Dykman, staff writer for Get Rich Slowly, please go to http://bit.ly/bg8V6o.
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