What is the Capital Gains Tax?

As you continue the process of collecting your tax documents and filing your returns, you may start hearing terms you don’t fully know the meaning of — capital gains tax being one of them. You can’t possibly file your taxes correctly if you don’t know what certain terms mean, so here’s the low down on capital gains tax.

What Are Capital Gains?

The IRS considered capital gains any profits made from capital assets such stock sales, mutual fund sales, or home sales. The tax itself is only applied when the assets are sold, not while it is held by an investor.

The Two Kinds of Capital Gains:

Long-Term Gains

These are profits made from assets held longer than 12 months before they are sold by the investor. As per the American Taxpayers Relief Act of 2012, you can be taxed on these gains anywhere between 5% and 20% at capital gains tax rates.

Short-Term Gains

These are profits made when the assets are sold before the investor has owned it for a year and are taxed at ordinary income tax rates rather than at capital gains tax rates.

How to Calculate Your Capital Gains:

To figure out if you’ve made a capital gain (or loss), you just subtract the cost of the sold asset from its sale price. If the cost is less than the sales price, you made a capital gain. If it is more, you suffered a capital loss. The good news there is that you can deduct up to $3,000 in capital losses from your income. Any more than that will carry over to the following tax year.

Still unsure how to file your capital gains tax? Let the team at American Investment Planners LLC been your resource this tax season. We have experienced many of the same situations our clients have, so we know exactly what solutions to offer. For more information about our tax planning services, please visit us on our website or give us a call at (516) 932-5130.

*Cadaret, Grant and its representatives do not provide tax or legal advice. Tax advice provided solely by American Investment Planners LLC.

Newly Divorced? Your Tax Return May Not Change

Getting divorced is never easy. The emotional pain one typically goes through is hard enough, and that’s before you even bring the financial effects on separating into things. One of the most important changes you experience when getting divorced — at least from a financial standpoint — is how you now file your taxes. These are some things you’ll need to keep in mind.

Your Filing Status Doesn’t Always Change

If you are officially and legally divorced by midnight on December 31st of the filing year, you will file separately from your spouse. This can mean you may qualify as a “head of household” if you maintain custody of your children.  If your ex-spouse maintains custody of your children, you will then file as “single.” However, if you weren’t officially divorced until January or later of the following year, you’ll still file as “married.”

The Support You Receive or Pay Can Be Deductible

• Child Support: This is not considered income for the person who receives, and therefore doesn’t need to be claimed on your tax return.
• Alimony: This is deductible for the person paying it. The person who receives alimony must claim it on his or her tax return.
• If everything is rolled into “family support”, the child support is not deductible for the recipient, but alimony is deductible for the payer.

You Must Decide Who Is Claiming Your Child

If your divorce decree doesn’t specify who is claiming your children as deductions, the exemptions will go to the parent with whom the child lives. If you have joint custody, the exemption with go to the parent who had custody of the child for more days during the tax year.

You Can Change the Withholdings on Your W-4

If you’re employed, you can claim another exemption for every $3,600 of deductions, including alimony payments. If you’re the one receiving alimony, you could consider having more taxes withheld from your paychecks to make up for your new tax liability.

Let the team at American Investment Planners LLC been your resource this tax season. We have experienced many of the same situations our clients have, so we know exactly what solutions to offer. For more information about our tax planning services, please visit us on our website or give us a call at (516) 932-5130.

Cadaret, Grant and its representatives do not provide tax or legal advice. Tax advice provided solely by American Investment Planners LLC.

Who You Can and Can't Claim as a Dependent

When it comes to filing your taxes, one of the most effective ways to get the most back on your returns is by having exemption and deductions — and a major claim people make are their dependents. Thing is, not everyone qualifies as a dependent, leaving you wondering who exactly does. In order to get the file correctly, make sure you know who you can and who you can’t claim as a dependent.

When it comes to what qualifies a person as a dependent, everything comes down to the details of the person and how they’re connected to you. That being said, people fall into different categories with different qualifications.

Claiming a Qualified Child Involves His or Her:

• Residence: He or she must have lived with you for over six months during the year you’re filing for.
• Relationship: The child must be your biological child, adopted child, foster-child, sibling, or a descendant of one of those.
• Age: The child must be younger than 19 or under 24 (as long as they are a student for minimally five months). If they are totally or permanently disabled, the child can be any age.
• Support: The child cannot be a dependent if he or she provided more than half of their own support during the filing year.
• Joint Support: The child cannot file a joint return for the filing year.

Claiming a Qualifying Relative Involves:

• Qualifying Child Status: They cannot be your or another taxpayer’s qualified child.
• Gross Income: The relative must have made less than $4,050 of income during the year.
• Total Support: You must have provided more than half of the the total support during the filing year.
• Relationship: If they are not a blood-relative (boyfriend, friend, etc.) they must have lived with you for the entirety of the filing year to be able to be claimed as a dependent.

You Can Also Claim a Non-Blood Relative as a Dependent If:

• They have lived in your household for the entire year.
• Your relationship with them is not illegal. For example, you can’t be legally married to someone else, and claim a significant other as a dependent.
• However, each state has different laws when it comes to claiming a significant other, so check your state’s rules to ensure they allow this.
• The person meets the other criteria for “qualifying relatives.”

Let the team at American Investment Planners LLC been your resource this tax season. We have experienced many of the same situations our clients have, so we know exactly what solutions to offer. For more information about our tax planning services, please visit us on our website or give us a call at (516) 932-5130.

*Cadaret, Grant and its representatives do not provide tax or legal advice. Tax advice provided solely by American Investment Planners LLC.

How to Wisely Spend Your Tax Return

The best part about filing your taxes (we know that seems like an oxymoron) is finally getting your refund check! Now you may want to treat yourself to a little shopping spree or vacation, but hold your horses! There are some ways to wisely spend your tax return that don’t involve splurging.

Increase (or Start) Your Emergency Fund

It’s so important to have an emergency fund to cover your needs in case you should find yourself in financial pickle. It’s best to have at least three months of expenses saved, so use your tax refund to hit or start that goal.

Spend It On Something You Actually Need

Has your water heater been failing but you haven’t had the funds to fix it? What about car trouble you couldn’t pay a mechanic for? Spend your tax return on major things that will improve your living situation.

Pay Off High Interest Debt

If you have a student loan with a 9% interest rate or a credit card bill that is accruing more interest than it should, pay off those debts with the money from your tax return.

Improve Your Home

Could you use a new bathroom or upgraded appliance, maybe just a new coat of paint in the living room? Put your tax return towards home improvements rather than putting them all on credit or taking out a loan.

Start a Tax-Sheltered Account

You could turn that couple hundred dollar tax return into thousands of dollars in a 529 or Roth IRA plan over a few years.

Contribute to Charity

Always wanted to make a charitable donation but were living on too tight a budget to use money from your regular income? Use your tax return to donate food to the local food pantry or buy some new beds for dogs at the animals shelter.

Treat Yourself

We know we said to spend your return on other things, but if you’ve been saving all year, you deserve a little reward. Treat yourself to a nice dinner or weekend trip. But watch yourself — a $600 return does not mean you should take a $4,000 vacation.

Let the team at American Investment Planners LLC been your resource this tax season. We have experienced many of the same situations our clients have, so we know exactly what solutions to offer. For more information about our tax planning services, please visit us on our website or give us a call at (516) 932-5130.

*Cadaret, Grant and its representatives do not provide tax or legal advice. Tax advice provided solely by American Investment Planners LLC.

How to Emotionally and Financially Care for Elderly Relatives

Your parents cared for you since the day you were born, so it’s not so surprising that you would do the same for them as they age. The thing is, it’s not always as easy as it seems. Since you’re not used to it, caregiving can take a big toll on you physically, emotionally, and financially. Luckily, there are a few ways to make it better!

Know What You’re Getting Into

According to the Pew Research Center, close to 60% of adults say they help their parents with errands, house work, and transportation, while close to 30% say they help their parents financially. Caregiving can also include helping your parents with daily activities such as getting dressed, using the bathroom, and bathing. Like many other adults, it could also be your job to communicate with healthcare providers and financial institutions.

Have an Honest Family Meeting

It’s not easy in the slightest, but you and your family have to have an open and honest discussion on how you will take care of your aging relatives. This can mean dividing up days in which you’ll each help them out, financially contributing to paying for a professional caregiver, and potentially even the possibility of moving your relatives into an assisted living facility.

Set Boundaries to Avoid Frustration

If you all are going to help care for your loved ones, make specific lists of tasks that need to be done for the relative as well as any costs that may be required. Keep track of how many hours and how much is spent completely those task and compare it to your regular weekly activities. More likely than not, you may be spending more time and money caring for your relative than you can emotionally and financially afford.

Realize When You Need Help

As much as you want to be the person who cares for your aging parent or other relative, sometimes, it just isn’t possible. Whether he or she needs more attention than you have the time or money for, or he or she has medical problems that require professional attention, realize when it’s time to call on other people to help out.

When it comes to meeting you and your family’s long-term care needs, let American Investment Planners LLC be your resource. We make it a priority to help you prepare for the best financial future possible. From preserving your wealth to determining health care coverage best suits you, we’re here to help with anything you may need. To schedule an appointment with one of our advisors, please call (516) 932-5130 or email info@americaninvestmentplanners.com.

How to Deal with Newfound Wealth

You could throw a ball into a crowd of people and easily hit a person who has dreamed of what it would be like to be wealthy. But what happens when it actually happens and you find yourself “rolling in dough”? If you’re smart, you’ll hire a financial advisor to make some smart financial decisions, but in case you’re still in shock, here’s how you should deal with newfound wealth.

Realize That How You Got the Money Can Affect How You Keep It

If you earned your money through a trust or inheritance, but start spending obscene amounts of it, another family member could file to have your funds frozen until you are more financially responsible — especially if you’re a young person. If you earned the money through endorsements, those deals could end as easily as they began, so don’t spend the money and potentially be left with nothing.

Keep It Quiet

Unfortunately, once people find out you have all this money, it’s not uncommon for “old friends” to pop out of the woodwork and ask for a loan or offer their own financial advice. The few people that know the better.

Don’t Rush on Decisions

Take time to get used to having all this wealth, and make the first few months a “no decision” time in which you don’t make any choices to spend or hastily invest the money.

Figure Out What You Actually Have

Before you go spending or investing this newfound wealth, figure out what is actually yours. Check all the legal documents associated with it — tax forms, wills, etc. — to determine what actually belongs to you.

Hire a Financial Advisor

You’re not used to having this much money, but a financial advisor who deals with high profile clients does. They’ll know how to safely manage your money, protect it from people who may suddenly ask for a loan (and yourself, if you don’t think you can control your spending habits), and help you set goals to build your wealth for generations to come.

Get Used to Being Wealthy

You have this money now, so don’t feel shy about it. You don’t have to be one of the rich people you see in movie who are obnoxious and greedy with their wealth. You can do some good with your money, take a little vacation, or just let it grow. Just don’t beat yourself up about having it.

Let American Investment Planners, LLC be your resource. Our financial advisors are ready to sit down and discuss your financial goals for your investments and beyond. To schedule an appointment with one of our consultants, please call (516) 932-5130 or email info@americaninvestmentplanners.com.

What To Consider When Saving for Retirement

When it comes to retirement, the more time you spend planning, the better off you’ll be. Thing is, we’re not talking about just saving money. While, yes, it’s important to physically save money to support yourself later on in life, it’s also important to take a few things into account to determine how much money you need to save.

Your Ideal Retirement Age

Simply put — the early you retire, the more money you’ll need to saved to support yourself. Typically, people tend to retire later than they originally plan; however, if you experience health problems or get laid off from your job, you may be forced into early retirement — so you should account for these things when saving.

Your Life Expectancy

Take a look at your family and personal health history. If your relatives tend to live well into their 90s, you’ll want to save more money since you could be around for much longer than the average life expectancy of around 85 years.

Your Future Health-Care Needs

You may experience health issues down the line and require more medications, extended hospital visits, or an in-home nurse. If you don’t account for these things and other long-term care costs, you could be strapped for cash in retirement.

Your Lifestyle

Are you someone who likes to take frequent and/or lavish vacations throughout the year? While that may be easy to do while you’re working and have a steady income, it may prove harder to do in retirement if you don’t plan for your ideal lifestyle.

Inflation

If you don’t account for inflation, your retirement savings may not be sufficient enough by the time you need them. It’s vital to consult your retirement planner and account for the rate inflation — and ideally, exceed it.

Anything is possible in retirement if you set yourself up the right way. At American Investment Planners LLC, we make it a priority to help you prepare for the best financial future possible. From preserving your wealth to estate planning, we’re here to help with anything you may need. To schedule an appointment with one of our advisors, please call (516) 932-5130 or email info@americaninvestmentplanners.com.

How to File Your Taxes as a Single Parent

As a single parent, you may already deal with issues that make life a bit tougher — but there’s no reason why your taxes have to add to any of your stress. Especially if you’re a newly single parent, you may be confused as to how your tax return should look, what it should include, etc. That’s why we’re here to help and give your some advice to make your tax season (and life) easier.

Consider Filing as a Head of Household

You may think you automatically count as a “single” filer, but applying as a “head of household” could award you more benefits. This filing status can apply to you as long as you:

• Weren’t married on the last day of the previous year
• Had children who lived with you for at least six months
• Were able to provide more than 50% of the household’s income

In the end, you may pay less in taxes and/or be able to claim more deductions.

Claim Your Dependents

If your child lived with you for at least six months, they are a dependent in the eyes of the IRS — so always claim them. If you share custody with another parent, you may be able to claim your child as a dependent every year or every other year depending on your custody agreement.

Claim Child Care Credits

If you earn an income by working or go to school full-time and need someone else or a program to watch your child, claim the child care credit. The only catch with this credit is your child has to be younger than 13 and the other person watching them has to be someone other than their other parent.

Like we said, we want to help make your life easier. The team at American Investment Planners LLC has experienced many of the same situations our clients have, so we know exactly what solutions to offer. For more information about our tax planning services, please visit us on our website or give us a call at (516) 932-5130.

*Cadaret, Grant and its representatives do not provide tax or legal advice. Tax advice provided solely by American Investment Planners LLC.