Financial Planning Tips for Families By Lisa Chiccehitto s a certified public accountant, I work with businesses, individuals, and families to create financial management solutions .tAs a wife and mother of four, I can assure you that financial planning is just as important at home. Here are some tips to help you manage your family’s money and stay on course for a successful financial future: Retirement and Savings with Roth IRAs. You work A hard for your money. Wouldn’t it be nice if your money worked hard for you? Making Roth IRA contributions over the years will, in most cases, allow you tax-free withdrawals after the age of 59 ½. Withdrawals prior to this age are tax and penalty free if they come from your contributions only. Consider a unique holiday gift this year. If your child or grandchild has a job, consider contributing to a Roth IRA in his or her name. You can contribute up to $5,500, but not more than what the child has earned. Your generosity can help provide a nice nest egg. Take for example a $5,500 contribution to a 16-year-old’s Roth that earns 7% each year. It will grow to $151,000 by the time that child reaches the age of 65, and $212,000 by the time her or she is 70! If the child works for a few summers and you make contributions are made each year, the future balance in the account will be significantly larger. The child can pull out contributions (but not the earnings) free of tax at any time. That can come in handy when it comes time to purchase a first home.! financially able to contribute to a 529 College Savings Plan, consider doing so. There are also other education tax benefits that can help offset college costs. The American Opportunity Tax Credit . Up to $2,500 per eligible student and is available for the first four years of post-secondary education. Forty percent of the credit is refundable. That means that you may be able to receive up to $1,000 of the credit as a refund, even if you do not owe any taxes. Qualified expenses include tuition and fees, course-related books, supplies and equipment. With a Lifetime Learning Credit, you may be able to claim up to $2,000 for qualified education expenses on your federal tax return. There is no limit on the number of years you can claim this credit for an eligible student. You can claim only one type of education credit per student on your federal tax return each year. If you pay college expenses for multiple students in the same year, you can claim credits on a per-student, per-year basis. For example, if you have two children you can claim the AOTC for one student and the LLC for the other student. Student loan interest deduction. Other than home Education planning and tax credits. If you are Are You Ready? Come to a free one-hour College Planning Relief workshop where Luanne Lee with Your College Planning Coach will help you and your student: Luanne Lee is a Certified College Planning Specialist and owner of Your College Planning Coach. YCPC is in the business of helping families through the major life transition of sending their children to college. For many, it will be the most expensive time of their lives, and if not handled properly, could cost them their retirement. If what you thought to be true about college planning turned out not to be when would you want to find out? Give us a call today! Attend one of our free educational workshops or come in for a free one hour consultation. That one hour could help Save Your Life…Savings! mortgage interest, you generally cannot deduct the interest you pay. However, you may be able to deduct the interest you pay on a qualified student loan. The deduction can reduce your taxable income by up to $2,500. You do not need to itemize deductions to claim it. These education benefits are subject to income limitations and may be reduced or eliminated depending on your income. Tax Planning. It is important to know that yearend planning can save taxes. High-income-earners have other factors to keep in mind when mapping out year-end plans. For the first time, they have to take into account the 3.8% tax surtax on unearned income and the additional 0.9% Medicare (hospital insurance, or HI) tax that applies to individuals receiving wages with respect to employment in excess of $200,000 ($250,000 for married couples filing). If you are a business owner, consider saving family income and payroll taxes by putting junior family members on the payroll. You may be able to turn high-taxed income into tax-free or low-taxed income, achieve social security tax savings (depending on how your business is organized), and even make retirement plan contributions for your child. As we enter the season of giving, consider this information a gift of financial wisdom and start the new year on the right financial foot. Lisa is a tax manager at Updegrove, Combs, & McDaniel, a CPA firm in Warrenton. (703) 928-9036 • To sign up for a workshop, meet one-on-one, or just ask questions, contact us today at: ease remember this proof must be returned to SouthComm by the date noted to ensure Piedmont Family Magazine 2013 • You! timely delivery of your Community magazine! Thank Issue 6 20