This is the third installment of Tax Deductions & You: What You Need to Know which can also be downloaded from our free eBook library.

A student loan is designed to help students pay for university or college. It is a calculated amount that should assist with the cost of tuition, books, and living expenses. This loan may differ from other types of loans in that the interest rate may be substantially lower. In addition, the repayment schedule may be deferred while the student is still in education.

Student loan interest is another form of interest that is deductible, but with limitations. These limitations are as follows:

1. Only the first $2,500 on interest paid is deductible per taxpayer, not per person (family member) on the return.
2. The interest is non-deductible on a married-filing-separate return. For 2010, the deduction is phased out when your modified adjusted gross income is between $60,000 and $75,000 for singles and $120,000 and $150,000 for married filing joint taxpayers.

With low interest rates on student loans and your perceived lack of cash or equity availability, a loan would not be there if cash was available to pay for college. This may be one to leave as-is but should not be overlooked when doing a review of interest that is being paid.

These phaseouts for the deduction will be the same for 2010 and for 2011. The limitations are described in more detail in IRS Publication 970. Your tax adviser will calculate the deductible portion of your student loan interest, or you can use the worksheet found in Publication 970.

Planning Ahead
The deduction for student loan interest will continue to be available to every person who is legally obligated to repay a student loan through the year 2012. However, beginning in the year 2013, the deduction will revert to an older law. According to this law, student loan interest will be deductible only for the first 60 months of repayment.

If you would like to more about student loan interest or if you are in need of a Fort Myers CPA, we are here to help. Makara and Associates are committed to education and cutting edge technologies to offer superior services to you. To learn more check out our list of frequently asked questions, you might find the answer to your question. If you would like to learn more about us or if you are in need of further assistance please contact us online, call (239)384-9688, or follow us on Twitter.

- Mark

This is the second installment of Tax Deductions & You: What You Need to Know which can also be downloaded from our free eBook library.

Any loans that fall under the nondeductible category need to be reviewed along with your cash or equity availability. If possible, they also need to be re-characterized to a deductible form of interest.

An example of this would be having availability on a home equity loan (balance after transfer must be below $100,000) and paying off an auto loan or credit card. This will increase cash flow two fold:

1. The interest rate charged on a home equity loan will, in most cases, be lower than the rate charged on an auto loan or a credit card balance.
2. The interest that is paid will be deductible on your personal tax return, saving you money each year when filing your return.

When considering this method of converting non-deductible interest into deductible home equity interest, you should consider the length of time you plan on staying in your current home.

If the home will be sold within the next 12 to 24 months, this may not be in your best interest. This is because you will be forgoing the down payment on your next home purchase. Job changes and other unforeseen circumstances happen without warning, something to consider before pulling the trigger on extending the home equity loan.

A second example of equity availability would be if you are the owner of a business with the availability to extend a shareholder loan.

To discuss these strategies in more detail, please come see us at Makara & Associates, a Naples CPA firm. We would be happy to review your situation. We offer many accounting services to meet your needs including; cash flow planning, benefits of a controllership, social security planning, and so much more. If you have more questions or would like more information contact us online, call (239) 384-9688 in Naples, (239) 768-5008 in Fort Myers, or connect with Makara & Associates on Facebook.

- Mark

This is a Bonus Tip to the “3 Tips To Help You Sit Pretty In Retirement” eBook.

…make your retirement planning more stable!

You can get:

• Long Term Care Insurance
• Life Insurance
• Disability Insurance

So what exactly will these 3 things do for you?

Well, they will make your 3 legged stool more stable, making it a 4 legged stool!

Cash flow in retirement is always the number 1 topic.

Just when you think you’re home free enjoying retirement with your spouse…BANG!…a life changing event occurs.

The average stay in a nursing home is 2 ½ years with an average cost of $219 per day.

Assisting living facilities carry an average cost of $3,131 per month and a health-care aid will average about $21 per hour.

Keep in mind these are averages and they will vary by state but it will not take long to use retirement assets in the event of a long illness.

Also don’t count on Medicaid; it will not kick in until a majority of your assets have been expended.

So what do you do if you have assets but not enough to cover the cost outlined above? Talk to a financial professional about Long-Term care insurance. It may be the only answer to passing on assets to a surviving spouse and/or your family.

Death of a spouse with a pension generating the majority of the monthly income can also cause problems with cash flow.

Some plans stop paying completely and others reduce benefits to the surviving spouse.

If not planned for, this event can create a major hole in a surviving spouse’s monthly cash flow.

Reviewing all life insurance options is one way to solve this unforeseen crack in your retirement plan.

Disability insurance, which may be difficult to obtain in retirement, should be reviewed at a minimum to see if is it available and at what cost.

If you have any questions, comments or concerns about  retirement planning, or think I can help you in any other ways, contact me, or give me a call at (239) 384-9688.

- Mark

This information is based on facts, assumptions and representations as stated and authorities that are subject to change. We will not update this information for subsequent legislative or administrative changes of future judicial interpretations.

LEGAL NOTICE AND DISCLAIMER: The information within this blog is for informational and educational purposes only and is not tax advice and should not be used as such. The facts of each individual situation can have significantly different outcomes when applying tax law. The hiring of a CPA is an important decision not to be based solely on advertisements.

This is the 7th tip in our series entitled “The Nuts & Bolts of Social Security in 7 Easy Tips.”

…for social security benefits on your earnings.

To qualify, your ex-spouse must meet the following guidelines:

• Have been married to you for 10 years
• Have been divorced for 2 years
• Have reached age 62
• Be unmarried and not be eligible for an equal or higher benefit on their own work or another spouse’s work

Disability, survivor, and total family benefits are beyond the scope of this post but are benefits to consider when talking about or planning your eligible benefits.

As with any financial decision,  benefits should be considered as one leg of your complex web of retirement planning.

“The Nuts & Bolts of Social Security in 7 Easy Tips” is also available as a FREE eBook at my website: www.Makara-Assoc.com/ebooks/.

Call me at (239) 384-9688 with any questions about Social Security Planning or simply contact me online .

- Mark

This information is based on facts, assumptions and representations as stated and authorities that are subject to change. We will not update this information for subsequent legislative or administrative changes of future judicial interpretations.

LEGAL NOTICE AND DISCLAIMER: The information within this blog is for informational and educational purposes only and is not tax advice and should not be used as such. The facts of each individual situation can have significantly different outcomes when applying tax law. The hiring of a CPA is an important decision not to be based solely on advertisements.

This is the 6th tip in our series entitled “The Nuts & Bolts of Social Security in 7 Easy Tips.”

…what exactly the social security death benefits are.

This may be a touchy subject because who really wants to talk about death?

But it is a necessary part of your social security benefits that you must understand.

If an individual is fully insured at death, a lump sum payment of $255 is payable to their window(er) or minor children that were living with the individual at the time of death.

So you need to make sure that you take this into account if things start looking grim for a loved one.

Planning ahead is the smartest thing you can do…it is your future.

“The Nuts & Bolts of Social Security in 7 Easy Tips” is also available as a FREE eBook at my website: www.Makara-Assoc.com/ebooks/.

Contact me if you’d like to know more about social security death benefits or give me a call at (239) 384-9688.

- Mark

This information is based on facts, assumptions and representations as stated and authorities that are subject to change. We will not update this information for subsequent legislative or administrative changes of future judicial interpretations.

LEGAL NOTICE AND DISCLAIMER: The information within this blog is for informational and educational purposes only and is not tax advice and should not be used as such. The facts of each individual situation can have significantly different outcomes when applying tax law. The hiring of a CPA is an important decision not to be based solely on advertisements.

This is the 5th tip in our series entitled “The Nuts & Bolts of Social Security in 7 Easy Tips.”

…your social security planning?

It’s okay, because it can be complicated.

So here are 2 ideas that might help you get a better idea of things.

If both spouses are covered under social security, one of the spouses can elect to receive 50% of his or her spouse’s benefit when the other is not at normal retirement age.

This strategy will result in increased benefits later and increased survivor-ship benefit calculations when the first spouse passes away.

Repay all benefits received and restart benefits at a higher benefit amount.

There is a one-time election that can be made and under the right circumstances can pay off with increased benefits to the electing individual and increased survivor-ship benefits.

“The Nuts & Bolts of Social Security in 7 Easy Tips” is also available as a FREE eBook at my website: www.Makara-Assoc.com/ebooks/.

If you have any questions about a Social Security Planning, contact me, or give me a call at (239) 384-9688.

- Mark

This information is based on facts, assumptions and representations as stated and authorities that are subject to change. We will not update this information for subsequent legislative or administrative changes of future judicial interpretations.

LEGAL NOTICE AND DISCLAIMER: The information within this blog is for informational and educational purposes only and is not tax advice and should not be used as such. The facts of each individual situation can have significantly different outcomes when applying tax law. The hiring of a CPA is an important decision not to be based solely on advertisements.

Social security benefits may be taxable…

This is the 4th tip in our series entitled: “The Nuts & Bolts of Social Security in 7 Easy Tips.”

…based on your modified adjusted gross income.

Modified adjusted gross income includes

• Reportable income plus ½ of social security benefits received
• Tax-exempt interest
• Exclusions for qualified US savings bond interest
• Adoption benefits
• Foreign earned income
• Allowable IRA deductions

One notable exclusion from modified adjusted gross income is ROTH IRA distributions. Watch this in the future… as ROTH IRA’s become more popular, planning around distributions from ROTH IRA’s can save tax dollars.

If modified adjusted gross income (MAGI) exceeds the base amount, benefits become taxable.

Single and Head of Household taxpayers base amount is $25,000, up to 50% of benefits will be taxable if MAGI is between $25,000 and $34,000, and up to 85% of benefits will be taxable if MAGI is above $34,000.

Married filing joint taxpayers base amount is $32,000, up to 50% of benefits will be taxable if MAGI is between $32,000 and $44,000, and up to 85% of benefits will be taxable if MAGI is above $44,000.

“The Nuts & Bolts of Social Security in 7 Easy Tips” is also available as a FREE eBook at my website: www.Makara-Assoc.com/ebooks/.

Contact me or give me a call at (239) 384-9688 with any further questions about your social security benefits.

- Mark

This information is based on facts, assumptions and representations as stated and authorities that are subject to change. We will not update this information for subsequent legislative or administrative changes of future judicial interpretations.

LEGAL NOTICE AND DISCLAIMER: The information within this blog is for informational and educational purposes only and is not tax advice and should not be used as such. The facts of each individual situation can have significantly different outcomes when applying tax law. The hiring of a CPA is an important decision not to be based solely on advertisements.

This is the 3rd tip in our series entitled “The Nuts & Bolts of Social Security in 7 Easy Tips.”

…be aware that earnings above certain limits will reduce future benefits until you reach full retirement age.

You need to know if you will receive reduced benefits due to earnings in retirement.

In 2009, if you work and start receiving benefits before full retirement age, $1 in benefits will be deducted for each $2 in earnings over $14,160.

In the year you reach full retirement age, your benefits will be reduced $1 for every $3 in earnings, until the month you reach full retirement age, above $37,680.

Once you reach full retirement age your benefits will not be reduced no matter how much you earn.

So make sure that you know how much you’re making and if it will affect the amount of money that you will get before reaching full retirement age.

“The Nuts & Bolts of Social Security in 7 Easy Tips” is also available as a FREE eBook at my website: www.Makara-Assoc.com/ebooks/.

If you have any questions about reduced benefits or think I can help you in any other ways, contact me, or give me a call at (239) 384-9688.

- Mark

This information is based on facts, assumptions and representations as stated and authorities that are subject to change. We will not update this information for subsequent legislative or administrative changes of future judicial interpretations.

LEGAL NOTICE AND DISCLAIMER: The information within this blog is for informational and educational purposes only and is not tax advice and should not be used as such. The facts of each individual situation can have significantly different outcomes when applying tax law. The hiring of a CPA is an important decision not to be based solely on advertisements.

This is the 2nd tip in our series entitled “The Nuts & Bolts of Social Security in 7 Easy Tips.”

can be a complex decision that shouldn’t be taken lightly.

Knowing your full retirement age is the first step in the decision process.

Once full retirement age is determined, other parts of the decision process will include the following:

• Family longevity
• Your health
• Current earnings now and in the future
• Other income for support
• Will others qualify for benefits on your record

So once you’ve figured out all of these other parts you should be well on your way to figuring out when you should start taking your benefits.

Don’t forget that if you start taking your benefits at age 62, you will be reducing your total benefits.

“The Nuts & Bolts of Social Security in 7 Easy Tips” is also available as a FREE eBook at my website: www.Makara-Assoc.com/ebooks/.

If you have any questions about a when to claim your Social Security Benefits or think I can help you in any other ways, contact me, or give me a call at (239) 384-9688.

- Mark

This information is based on facts, assumptions and representations as stated and authorities that are subject to change. We will not update this information for subsequent legislative or administrative changes of future judicial interpretations.

LEGAL NOTICE AND DISCLAIMER: The information within this blog is for informational and educational purposes only and is not tax advice and should not be used as such. The facts of each individual situation can have significantly different outcomes when applying tax law. The hiring of a CPA is an important decision not to be based solely on advertisements.

This is the 1st tip in our series entitled “The Nuts & Bolts of Social Security in 7 Easy Tips.”

…in planning when to start receiving your social security benefits.

There are a few different ages at which you can start receiving your retirement benefits.

Click on the link to find your full retirement age based on your year of birth.

• Age 62: The first full month an individual is 62, is the earliest age an individual can commence receiving benefits. However, benefits will be reduced approximately one-half of one percent for each month you start receiving benefits before reaching full retirement age. Click on the following link to view a chart of reduced benefits.

• Age 65: Full retirement age for an individual born in 1937 or earlier.

• Age 67: Full retirement age for an individual born in 1960 or later.

• Age 70: Age at which delayed retirement credits stop accruing.

So now that you know what age you can claim social security benefits, you’ll probably want to know when you should actually start taking your benefits.

I’ll tackle that question in the next post .

“The Nuts & Bolts of Social Security in 7 Easy Tips” is also available as a FREE eBook at my website: www.Makara-Assoc.com/ebooks/.

If you have any questions about  Social Security Planning, or think I can help you in any other ways, contact me, or give me a call at (239) 384-9688.

- Mark

This information is based on facts, assumptions and representations as stated and authorities that are subject to change. We will not update this information for subsequent legislative or administrative changes of future judicial interpretations.

LEGAL NOTICE AND DISCLAIMER: The information within this blog is for informational and educational purposes only and is not tax advice and should not be used as such. The facts of each individual situation can have significantly different outcomes when applying tax law. The hiring of a CPA is an important decision not to be based solely on advertisements.