Making Children Less Costly For Kansas City Families With Kids Through The Child Tax Credit

Making Children Less Costly For Kansas City Families With Kids Through The Child Tax Credit

To be clear, children are costly in the best way possible.

Once the dust settles from changing diapers, sweeping floors, slapping bandaids on booboos, driving to sports practice, attending back-to-school meetings, saving for college, and buying countless goldfish crackers … you realize children are a lot of work.

They’re also monetarily costly. Depending on your income, you could be spending over $300K on each child, not including college.

But they’re worth it.

How are they worth it? Because they are your children, and in many ways they are the closest expression of eternal legacy that we can find on this side of our mortal coil.

Now, without a doubt, it takes money to raise a child. Amidst the aforementioned tasks, there’s gas money, sign-up fees, insurance premiums, and maybe most of all: grocery costs.

But there are a few crucial tax breaks I hope you’re aware of — a couple of these might serve as a refresher, and a couple might be new to you.

Regardless, the government apparently wants to help you chip away at child costs (at least for now). But first you need to know which tax levers to pull.

Making Children Less Costly For Kansas City Families With Kids Through The Child Tax Credit

“Having a child is like getting a tattoo … on your face. You better be committed.” -Elizabeth Gilbert

Because raising children truly does “take a village”, know that I’d love to help walk you through some of these steps in greater detail. Everybody’s childcare costs look different, and together we can plan for child-based tax breaks. Don’t hesitate to give me a call today. (816) 272-8151

Child Tax Credit (CTC)

Over the last few months, we’ve spent some time discussing the Tax Cuts and Jobs Act (TCJA), and although some of its outcomes have altered Kansas City taxpayers’ refunds in a negative way, there are indeed some perks. In this case, the signed law meant a CTC increase from $1,000 to $2,000.

Not bad, huh?

Just a few rules apply for the parent’s eligibility:

  1. Child less than 17 years old at the end of the tax year.
  2. You, as the taxpayer, claim the child as a dependent.
  3. Child lives with you, as the taxpayer, for at least six months of the year.

In addition, the dependent’s family must earn at least $2,500 a year.

The CTC is something you should definitely take advantage of if you have children.

Child and Dependent Care Credit (CDCC)

Do you, or someone you know, pay for childcare? This is arguably the largest amount of money Kansas City parents will spend on their children (once education is said and done).

The CDCC is crucial in giving you a break from childcare costs. In fact, the break will cover up to $3,000 in childcare costs for one child; $6,000 for two or more children.

Such a tax break might be crucial if you’re a single parent. In that case, filing as Head of Household (HoH) is imperative. This law applies to parents who are not married while raising children on their own.

The HoH offers a larger standard deduction than a single filing status. You would also receive more favorable tax brackets and applicable tax rates. If, during the tax year, you pay more than half the costs of keeping a home for yourself and a dependent, you will qualify as HoH.

Adoption Help

If you’ve adopted a child, or know someone who has, it’s important to note there are specific tax breaks you can claim.

In 2019, it’s possible to claim a tax credit up to $14,080 in an effort to cover adoption costs (which, if you don’t know, get expensive quick). Side note: Employers can offer a similar tax break if one of their employees chooses to adopt.

Having children, biologically or through adoption, is one of the greatest gifts a human will experience. But, like we stated before, it’s important to lean on others for help. In this case, it just so happens to be the government.

According to a 2016 report from the United States Department of Agriculture, raising a child, from birth to age 18, averages out to around $233,610. That’s around $14,000 a year … sheesh.

If you need some help purchasing all those goldfish crackers, you might need to pick up a side hustle. But as far as your taxes go? It’s vital to have a proven strategy.

Call me today and let’s get one in place. Right after you go clean that stain up off the couch. 🙂

Warmly,

 

Kyle Nagy

(816) 272-8151

Kyle P Nagy, CPA

Kyle Nagy’s Three Building Blocks To Healthy Personal Finances

Kyle Nagy’s Three Building Blocks To Healthy Personal Finances

It’s understandable if things might feel a little bit … shaky right now for you. If you pay attention to the media, you are seeing trade wars with China, uncertain stock markets, apocalyptic elections rumbling in the future, even the Apple juggernaut is seeing its empire show signs of trouble.

All of these, by the way, are good reasons to fight for your own personal clarity in the midst of trouble all around.

So, we press into what we CAN control, and that’s your personal financial foundation.

The tax return is filed, so it’s the perfect time to assess what went well, what didn’t, and if you’re content with the outcome. There are a number of things you can start doing today so that next year is your best, most tax-efficient (and saving) year to date.

I wouldn’t be doing my job if I didn’t suggest a good next step: give me a call: (816) 272-8151. We will help you set a game plan for the year ahead. Taxes are only getting trickier, and it helps to have someone with you in the trenches.

Leaving the tax component aside, it’s also a good time to examine where your money is going.

Are you frugal? Do you spend at will? No matter where you fall on the spectrum, there are a few ways you can direct your cash flow so that you can benefit in years to come.

After all, it’s never too late to begin money-friendly habits.

Kyle Nagy’s Three Building Blocks To Healthy Personal Finances

“There is a gigantic difference between earning a great deal of money and being rich.” -Marlene Dietrich

The first part of your personal finance foundation is actually the absence of two poisons: taxes and debt.

Both of those words might sound like nails on a chalkboard, and that’s exactly why you should pay off both as soon as you can. We’ve talked (and do talk, and will talk) about taxes a good deal, and it’s no secret that paying taxes is your duty as a citizen. In addition, we spent the last few weeks discussing ways you can pay and the penalties that come for those who don’t.

Pay your taxes. Do it.

The debt piece is obviously more nuanced from person-to-person. Undergrad, grad school, credit card, car, home, etc. The (odd yet accurate) analogy of eating an elephant comes to mind — one bite at a time.

Debt is another item I’d love to chat about with you, as we can assess after-tax interest rates and how they might affect potential investments. If you’ve ever ridden yourself of debt before, you know the ensuing freedom. I want that feeling for the entirety of your financial picture.

The second block: Hold Wisely

Once the word “debt-free” is within reach of your vocabulary, the real fun begins. What’s the real fun, you ask? It might sound nerdy … but saving and investing are two keys to financial wealth and freedom.

We’ve discussed ways you can save and invest before, but again — you are never too late for either.

Remember, post-tax season offers a fresh start. Let’s make it count!

The first question I’ll ask: Do you have an emergency fund established? This is key to your savings account. It should contain three to five months worth of savings, because life is full of unexpected costs — car accidents, medical bills, stolen items — it’s important to play safe. After that is established, then you can save for future costs like a new car, home, and so on.

Investing is another beast … one that can lead to meeting your financial goals way quicker. If you are not a professional, I strongly recommend sitting down with one to discuss investment opportunities for you and your family. The small cost of a meeting leads to big gains in the future. Ask around for some trusted referrals. A trusted Kansas City financial planner could be essential for your financial success moving forward.

The final block: Spend Generously

And I don’t exactly mean spend everything you have. Clearly, I led with two things you should do first with your money: pay off taxes/debt and save/invest after you do. But this third step is inevitable — we spend money (most) every day in some form or fashion.

Where are your dollars going?

What is the ratio of money you spend on yourself vs. money that is donated to Kansas City organizations or people you believe in? One of the most life-giving components to saving and earning money is so that you can help others in the process. What if someday you could invest in someone’s start-up business so that they could pursue their dream? What if you could bless your children and help them with college tuition? There are plenty of ways to spend, but one of the best is on others.

But truly, it is your hard-earned money after all. How you spend is entirely up to you. And it’s a good time when you can treat yourself every now and then. You are human after all. Just remember that when the aforementioned steps are done first, treating yourself to a new ____ will feel much more special.

This whole subject of personal finances boils down to prioritization. Reversing this order of operations isn’t illegal, but in the long run … it might be detrimental.

Give me a call today and let’s dream about your new, free financial future.

Warmly,

 

Kyle Nagy

(816) 272-8151

Kyle P Nagy, CPA

College Is Expensive But Kansas City Families Can Save Big Through These Tax Breaks

College Is Expensive But Kansas City Families Can Save Big Through These Tax Breaks

What, you think I’m on vacation?

Yes, the tax deadline has passed. But we’re still available, and handling post-deadline matters for Kansas City clients.

 

But moving along to today’s subject: figuring out how to pay for college tuition. Things are different from the days when I considered college…

I’m talking to Kansas City parents left and right who are scrambling to figure out ways to manage skyrocketing tuition costs. Well, I’m happy to tell you that the tax code is here to help.

College Is Expensive But Kansas City Families Can Save Big Through These Tax Breaks

“The University brings out all abilities, including incapability.” -Anton Chekhov

College is expensive.

Let’s put that fact out on the table because we all know it’s true, and most of us have been affected by this reality in some way, shape or form.

Side note: College is even more expensive if you’re trying to cheat the system so your kid gets into a prestigious school. We’re all seeing how that turns out … right before our eyes.

But did you know there are various tax breaks which can help chip away at the cost of your son’s or daughter’s (or your own!) college tuition?

Note these steps if you’re interested in saving on tuition costs with some help from Uncle Sam.

American Opportunity Tax Credit (AOTC)

This is the first of two educational tax credits I’d like to explore. The AOTC provides up to $2,500 for eligible students, and covers education expenses spent during the student’s first four years of college-level education.

In addition, the AOTC is refundable. In other words, if the credit reduces your tax liability to zero, you receive a refund for the amount left over. Pretty sweet, right? If you wonder what students are eligible, this page highlighting the AOTC will give you a better idea.

Lifetime Learning Credit (LLC)

The second tax credit I’d like to discuss offers a max annual amount of $2,000 per tax return. You might have guessed this, but the LLC is for students who complete more than four years of college, furthering their education in any given field.

But as opposed to the AOTC, the LLC is not refundable. If you’re left with excess credit after your tax liability lands at zero, you will not be refunded the extra cash. If you’d like more info on the LLC, there is a similar page on the IRS website.

Student Loan Interest Deduction (SLID)

Moving on to deductions, there are again two I’d like to cover. First, SLID offers an opportunity to claim up to $2,500 of interest paid on student loans during the year.

This should alleviate some student loan worry for the 69% of college students who relied on student loans in 2018. With an average debt of $28k after graduation, I hope any such student would take advantage of SLID in the future.

Tuition and Fees Deduction (TFD)

TFD provides up to $4,000 for … you guessed it, tuition and fees. But there is a caveat to where the deduction currently stands. Congress has yet to “re-approve” this tax deduction, known as an extender, and therefore has the TFD on hold for the time being. It’s important you know about the deduction of course, but something to look out for is when Congress actually approves it once more.

529 Plans

If you don’t have a 529 account, which lets you accrue funds toward your child’s college tuition tax-free, I strongly recommend you look into it (if you have children who might go to college in the future). Every little bit of savings will help, and anything you can contribute on a month-to-month basis is a true gift you’ll give your son or daughter someday.

Once your young scholar ships off to the university, 529 account funds can be spent (again, tax-free) on things like tuition, room and board, books, fees, etc.

Support Your Alma Mater

This is a fun one. If you have extra cash and want to support students attending your alma mater, you can start a scholarship fund to help students pay for school.

The donations you make to said (potential) scholarship fund will be tax deductible, and the university’s finance department should walk you through the IRS guidelines to set up the scholarship in the correct manner.

So there you have it. Although college costs may seem daunting, there are ways to earn a little money back on your important investment. If you have any other questions about how these codes and deductions work, please give me a call.

I’d love to cheer on your scholars, while helping you save dollars. 🙂

Warmly,

 

Kyle Nagy

(816) 272-8151

Kyle P Nagy, CPA

Where Do Our Tax Dollars Go? Kyle Nagy Breaks It Down

Where Do Our Tax Dollars Go? Kyle Nagy Breaks It Down

Before I get to your tax dollars, and where they went, I have a couple thoughts for you.

We’re still settling down from the flurry of last week and the passing of the April 15th deadline. There were MANY more procrastinators this year than in years past, in my opinion because of so much confusion in the marketplace.

In fact, it might be that YOU procrastinated, or that you (or your friends) slapped something together at the last minute, filed it, and … you (or they) might be feeling a little uncertain.

Well, I have a solution for that below.

Because of tax reform, I know for a fact (at least based on some Facebook and LinkedIn group messages that I’ve seen) that many of our Kansas City tax professional colleagues out there were scrambling to make sure things were filed properly. And some weren’t so certain about the tax positions they were taking for their Kansas City clients.

That’s why I have an offer for you (or for your friends).

Many tax businesses don’t provide this service, but even though we’ve completed most of our clients’ returns, we WILL review any of your friends’ returns — at no charge.

See the below special message, for more details:

+++++++++++++++++

“No Charge” Return Review
Special Gift Certificate

As a complimentary service this year, we will provide a Return Review to any non-client. 
We will also review prior year returns from clients who did NOT have us handle their taxes during the year under question. 
No charge will be made, unless we have to file an amended return.
Email our office (using the email at the top of the page)
or call (816) 272-8151 to set up this complimentary service.
Deadline: Friday, May 10th, 2019

+++++++++++++++++

Take advantage — in fact, this is a great blog to forward to any friends you might have that could use an extra set of eyes.

Also passing last week was the annual “Tax Freedom Day“, as tracked by the Tax Foundation. This is the date when the nation as a whole* has earned enough money to pay its total tax bill for the year.

(*It should be noted that this is only a collective average and does not accurately reflect the number for you or for your neighbors — it is the average tax burden for the overall economy, rather than for specific subgroups of taxpayers.)

And, as in years past, Americans will collectively spend more on taxes in 2019 than they will on food, clothing and housing combined.

Now, it’s part of our job to keep your tax bill down, but we can’t do much about the nation’s tax burden, aside from casting ballots. But we can help your friends, family and neighbors. (Or maybe even YOU, if you for some reason didn’t use our services this year.)

But all of those tax dollars have to go somewhere…

Where Do Our Tax Dollars Go? Kyle Nagy Breaks It Down

“Life is what happens to us while we are making other plans.” -Allen Saunders

Unless you filed an extension, the 2019 tax season is a wrap.

I hope that you were able to file your taxes on time … what’s more is that I hope you were able to file ACCURATELY on time. Something easier said than done.

If your taxes brought unusual difficulty and frustration to you and your family this year, I get it. I would love an opportunity to sit down with you and figure out a new approach so that this time next year, you can walk a little taller. As taxes become more automated through online e-learning platforms, some folks favor convenience over accuracy. Although a sit down with each other takes a little time out of your schedule, it also helps you file with greater confidence.

Let me know if you’d like a professional in your corner. In addition, it’s important we act soon … “waiting til next year” will only bring more anxiety to your plate, and that’s the last thing I want.

Now, if you are one of the estimated 153 million individuals to file your taxes this year, I want to give you some insight into where those hard-earned dollars are going to help our nation grow.

Below are some numbers detailing allotted tax dollars for the 2018 fiscal year.

Total Outlays: $4,108 Billion

Note: “Outlays are generally accounted for on the basis of checks issued, electronic funds transferred, or cash payments made. Certain outlays do not require issuance of cash or checks.”

Defense: $665 Billion

Social Security: $988 Billion

Medicare: $589 Billion

Interest on Debt: $325 Billion

Other: $1,542 Billion

Total Receipts: $3,329 Billion

Note: “Receipts included in the report are classified into the following major categories: (1) budget receipts and (2) offsetting collections (also called applicable receipts).”

Individual Income Taxes: $1,684 Billion

Social Security and Other Payroll Taxes: $1,171 Billion

Corporate Income Taxes: $205 Billion

Other Taxes and Duties: $270 Billion

Federal Deficit: $779 Billion

Note: The federal deficit is when government expenses exceed the amount of tax dollars accrued.

If you have an extra five minutes on your hands, and really enjoy speed reading, this Treasury Statement (quoted above) from September 30, 2018 will give you an in-depth look at some of the numbers behind the numbers.

I’d like to hear what you think as well as some questions you might have … perhaps at our first meeting. 🙂

Warmly,

 

Kyle Nagy

(816) 272-8151

Kyle P Nagy, CPA

A Thank You To Our Kansas City Clients For A Successful 2019 Tax Season

A Thank You To Our Kansas City Clients For A Successful 2019 Tax Season

This has been one of the wildest tax seasons in recent memory. I saw a note from the IRS last Friday (the 12th) that as of that day, 50 million taxpayers had yet to file. LOTS of extensions happened out there, as all of the tax law changes caused a bunch of confusion.

It’s our hope that our Kansas City clients didn’t experience what so many software users and clients of other firms did — mass confusion and frustration. In fact, we heard from quite a few of our clients who were pleased by the process.

But we are, in fact, human. And we are, in fact, tired. But we are (in fact) not letting up.

You see, unlike some Kansas City tax and accounting professionals, we make it a point to do a bit more than simply “fill out forms” on your behalf. I’ll tell you more about that in a moment.

Because the loudest thing I want you to hear from this post is this: THANK YOU for your trust.

It is no small matter to place your family’s financials in front of another, and I know that for some it can bring with it some anxiety or discomfort. That’s why we work so hard to be people that you can trust to understand, to come alongside, to advise, and to help.

It’s why I make it a point to send you these strategy notes every week (even when we are slammed with work), and it’s why we work so hard to stay up-to-date on all of the latest tax code updates and regulatory changes that come like clockwork, every year. Especially this year.

We take your trust seriously. THANK YOU for it, and for your business.

But this work also brings with it a certain joy — because this past season, we got to see remarkable lives of generosity, love and integrity laid out before us with regularity. For some, this was reflected by their financial statements — and for others, this was displayed by the warmth, kindness and delight by which you communicated with us during this process.

So again, THANK YOU.

This much is clear to me: No matter the state of your financial life, nobody (not the IRS, not anyone) can take from you the strength derived from a life lived with gratitude and joy.

You’ve reminded us of that once again, this year. What a privilege it has been to serve you this 2019 tax season … and we look forward to years of service to come.

More thoughts to come soon, of course. As I said, we’re not letting up.

But for now, I’m taking a nap.

Warmly,

 

Kyle Nagy

(816) 272-8151

Kyle P Nagy, CPA

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