Two focuses of blog are Financial Literacy/Money and Business/Entrepreneurship. When you’re running a business not matter the size, navigating taxes is a huge consideration. Understanding taxes can thus make a huge difference. The following contributed post is entitled, Genius Tax Hacks for Individuals and Small Business.
You know what’s essential for success? Understanding your tax situation. In this guide we’re diving into five strategies that can help you keep more of your hard-earned cash in your pocket whether you’re an individual or a small business owner.
Know Your Tax Bracket Inside Out
When you’re navigating the tax world it’s not just about what you earn. it’s about what you get to keep. Tax brackets determine how much of your income goes to taxes so having a handle on your specific bracket is key to managing your tax responsibilities effectively.
The Art of Deduction Discovery
Tax deductions are like hidden gems in the tax code and they work by reducing your income which in turn reduces your tax bill. While you might know about common deductions like mortgage and charitable contributions there are plenty more tailored to your unique circumstances. Consider seeking advice from tax experts like Marlow Accounting to make the most of them.
Dance with Tax Credits
Believe it or not, tax credits are your secret weapon for improving your financial situation. They do more than just trim your taxable income – they work like magic, directly slashing your tax bill dollar for dollar, leaving you with more green in your wallet. Check out the Child Tax Credit and the Earned Income Tax Credit (EITC) – they’re like MVPs in this field, offering benefits for parents and hardworking individuals. So, dive into these options, claim what you’re eligible for, and watch your tax bills shrink as your savings grow. It’s like having the power to hold onto more of your hard-earned money.
Tax-Savvy Investments
Investing isn’t just about growing your wealth; it’s about protecting it from the taxman. Take capital gains tax, for example – it kicks in when you sell assets like stocks or real estate for a profit. Opting for long-term investments can lead to lower capital gains tax rates over time. Plus, saving for retirement through tax accounts like IRAs and 401(k)s comes with tax advantages. By making informed investment choices and effectively managing your assets, you can set yourself up for a brighter financial future while lightening the tax load along the way.
Tax Law Mastery
Staying up to date is key because tax laws, famous for their complexity and constant changes, can impact your financial interests. These laws evolve over time due to various factors, like economic conditions, political decisions and public policies. Recent updates might have shaken things up, affecting elements like tax brackets, deductions and credits. Staying well-informed could mean consulting tax experts, subscribing to tax-focused newsletters or regularly checking government websites. The better you grasp the ins and outs of tax laws, the better equipped you’ll be to navigate them and make the most of the benefits they offer.
Mastering the Art of Tax Savings
These pillars of tax-saving know-how can truly work wonders for your financial health. By understanding your tax bracket, making the most of deductions, using tax credits wisely, engaging in smart investment practices and staying updated on changes in tax laws, you’re taking charge of your financial well-being. You’re holding onto a bigger piece of your earnings and you’re paving the way for a secure and prosperous future.
This personal money story for Father’s Day 2022 discusses the subject of taxes and once again is inspired by my father. Here on the Big Words Blog Site, I’ve crafted several stories discussing how Dad’s sage wisdom has impacted my life, whether through a direct lesson, or from my observations of him. Some of his most poignant lessons have involved money and arguably created my love for financial literacy, though he and I don’t see eye to eye on everything money related today. One of Dad’s most important lessons involves an area that is the bane of some people’s existence, while being a pillar to the wealth-building strategy of others, taxes.
We’re All Playing One Big Financial Game
Recently it occurred to me that we’re all playing one big financial game, now a video game in our modern technological age. Certainly, money isn’t the sole key to happiness, but life is certainly better when you have an abundance of it versus a scarcity. I would thus define winning this game as having an abundance of it versus just scraping by and financially struggling. Among the factors that go into winning the game include: the family you come from, personal (and family) life choices, your financial IQ, personal grit or ambition, delaying gratification and your current environment.
Your financial IQ may be the most important of all the factors I listed, and it can be impacted by the other factors. This concept is covered in numerous books. Your financial IQ includes your ability to earn money, your ability to save money, your ability to invest money, your understanding of credit, your understanding of insurance and understanding taxes. If you’re born into a high financial IQ family, you will likely learn all these principles starting from the crib. If not, you must learn them along the way, if at all. Furthermore, learning them is going to be impacted by your own personal drive and curiosity. For now, let’s focus on many people’s least favorite topic, taxes.
Taxes: What They’re For And Paying Your Fair Share
First, I want to admit that I don’t know everything about taxes. I would highly encourage readers to subscribe to economist, Antony Davies’, YouTube channel entitled Words & Numbers. It’s one of my new favorite channels because it’s not politics driven, but instead economics and facts driven. I’m currently reading his and James Harrigan’s book, Cooperation and Coercion. Upon listening to his content, one of the things that you immediately start to understand is that our politicians are not always honest with us about who pays what and how much in terms of taxes. Furthermore, they’re not always clear about the ramifications for the tax changes they promote. Often, in the pursuit of a political office, they incite class warfare.
In any case, while some taxes are necessary for our municipal, state and federal governments to perform their tasks, there can be too many taxes and they can have harmful effects on everyone. Furthermore, a part of one’s financial health is managing your taxes. The more you read, learn and start understanding about money, the more you start learning that in our ‘progressive’ tax system, not everyone is taxed the same and there are a number of reasons why.
As extensively covered in the Rich Dad Poor Dad books, employees are taxed differently than businesses (small and large). As an employee, your tax burden changes the more earned income you generate, and you start to lose deductions the more your salary increases. In the above-mentioned Rich Dad books, there is a clear distinction between high income professionals and business owners, and each has different rules in our current tax code. As employees, one of your tools for diminishing taxes is tax deductible gifts or donations.
Tax Deductible Giving
Around the time I moved in with Dad for my postdoctoral fellowship, a couple of things coalesced in my mind in this area. First, I got a copy of the Cashflow 101 e-game which I played regularly on my personal computer. Just briefly, the game is designed to teach you financial literacy and the goal is to get out of the ‘rat race‘ (the realm of working 9-5), and onto the ‘fast track‘, or the realm of the wealthy, where you can live on your investments and pursue your dreams. One of the things I realized when playing the game was that the rat race contained yellow ’donation’ squares. When you landed on those squares, you had the option of donating money.
If you chose this option, you received extra rolls of the dice with multiple dice. I refused the option initially and then realized that there was an advantage to making donations. You also received greater opportunities to earn and invest. Finally you increased your likelihood of passing over ‘downsized’ squares which meant you lost money and turns. The underlying lesson was that you ultimately received rewards for giving. I’m not saying that you should give strictly to get, but in our financial system the government does allow you to write off gifts to certain entities and thus lowering your tax.
“Did you get your taxes done yet? Did you get your taxes done yet? Did you get your taxes done yet?” That’s all I heard the first tax season I moved in with Dad just after finishing graduate school. He literally walked through the house asking me if I had done my taxes. I didn’t know why he cared so much, but it started to scare me. Just finishing my doctoral training, a period in which I didn’t have much money, I owed the IRS tax money that year. For those unfamiliar with the process, we had to pay estimated taxes on our $17,000 to $22,000 graduate stipends every year. So yes, the poor do pay taxes too.
Reducing Your Taxes
“I like to make gifts to things that are tax deductible!” One day we were at Dad’s desk, and he had a pile of solicitations from his alma mater and other charities. He made his poignant declaration as he pondered them. He prepared his tax returns himself at that time and it was quite the ritual every year as I observed him.
In hindsight, Dad was probably also feeling some anxiety himself. He lived in one of the highest taxed states in the country – New York. He also owned his home outright and probably wasn’t going to get much in way of homeowner related deductions. In other words, he was likely going to have to make payments to the federal and state governments.
This explains his preoccupation at that time with tax deductible gifts. Unfortunately, I don’t remember the exact verbiage, but we did have a talk about making charitable gifts to certain entities and lowering your tax payment. It was my first time learning these lessons and I was in my late 20s. I know that my mother put money into church in my younger years, but we never talked about the gifts being tax deductible.
Where Can You Make Tax Deductible Gifts?
Well, I just named a big one which will make a lot of people bristle in our increasingly secular society, church. Whether you want to admit it or not, churches are businesses, some bigger than others. Some also do more good than others. Not all pastors, for example, take the tithes and offerings to the church to buy expensive suits, fleets of fancy cars and private jets. Some churches actually use the money raised for missionary activities and helping the poor.
That said, if you belong to a church and give regularly, you will have the opportunity to deduct at least a portion of that money from your tax liability, regardless of what the pastor and the church do with it once you drop it in the plate or donate online. This also explained why Dad kept giving tithes and offerings to his church even when he stopped physically attending. Each week he dutifully wrote his check and put in the church’s envelope with the same smiley face on it. That smiley face always made me laugh. I or my then stepmother, would take it to the church on his behalf.
If you don’t attend church, what about making donations your alma mater? My alma maters are Johnson C. Smith University and the University of Michigan. Many people make generous donations to their alma maters every year. It’s the consistent donations from alumni that ensure that their alma maters maintain solid futures.
Other institutions experience anemic alumni giving and are not so fortunate, causing them to face a loss of accreditation and/or closure. The Historically Black Colleges and Universities are a good example of this. There are also scholarship funds like the United Negro College Fund. Furthermore, throughout the year and around the major holidays, there are regularly solicitations to feed the hungry, especially around the Thanksgiving and Christmas holidays. When watching TV and now online, there are opportunities to give for pretty much any cause around the world whether it be feeding hungry people, or relief from wars.
Again, giving is a wealth-building and maintenance strategy for certain demographics. Come election time, the wealthy regularly get demonized for not paying their ‘fair share’ of taxes relative to the middle and lower classes. I would once again point readers back to the above-mentioned book Cooperation and Coercion for a more substantive discussion of the validity of these claims. I’ll end this point by stating that the charitable giving and philanthropy these high net worth demographics make isn’t highlighted as much (or enough).
Giving Is A Personal Choice
There are several contexts for giving and generosity. It’s something I’ve had to conceptually piece together over my lifetime. My parents helped. The Rich Dad Poor Dad books helped. Dave Ramsey and his Financial Peace University curriculum helped. Life experiences have contributed as well. It’s been a process.
After finishing school and launching off into the adult world of work, one quickly learns that at any given time there can be multiple financial concerns and considerations pulling at you depending on your lifestyle. Perhaps you don’t earn that much money. Perhaps you’re just starting your career and live in an expensive metropolis. Perhaps you have a large student loan payment or are encumbered with some other massive debt. Perhaps your family is dependent on you as the breadwinner, and not just in the context of a nuclear family. In any case, sometimes you might have your hands full just getting your own financial house in order, and you don’t have money available to give.
It may not make sense to willingly give money away. I think the underlying principle in this world, though, is that when you bless others, you get blessed. As my mother often says, “It’s in the Bible,” and there are numerous scriptures which discuss this such as Proverbs 11:24-26 (Give freely and become more wealthy; be stingy and lose everything. The generous will prosper; those who refresh others will themselves refreshed. People curse those who hoard their grain, but they bless the one who sells in time of need.) If you’re not into biblical scripture, just know that under our current progressive tax code as described above, the Internal Revenue Service (IRS) allows you to deduct monetary gifts to nonprofit entities from your tax liability. And finally, there are advantages to paying fewer taxes or none at all.
Closing Thoughts On Tax Deductible Gifts
Thank you for reading this piece. I didn’t write this narrative to tell anyone how to give as everyone’s life is unique. Furthermore, I am not a financial professional, and I am not rendering advice. My intent is to present the information and let the reader decide. This story was rooted in one of many memorable experiences with my father, a retired educator, and it just so happens that I’m publishing it around Father’s Day 2022. Here on the Big Words Blog Site, most of the content published these days is from customers by way of shorter, informational pieces. As the owner of the site I like to publish something of my own from time to time. I started writing this piece months ago, and with the many other things I have to do, I was only able to finish it now.
Author’s Thoughts/Reflections
Tax deductible gifts are a really big deal, and many people give with their tax liabilities in mind. I’m recalling a couple of our Johnson C. Smith University Washington DC Alumni Chapter meetings where members wondered how their gifts to the school would be handled in terms of tax, if they were given through the chapter itself instead of independently.
We often learn a lot from our parents through observation. Many of the life lessons from my father have been money-related. Many of those lessons have involved being very careful with it which can be a strength in some contexts, while it can be a source of conflict and ire in others. As with most things in life, I’ve learned a balance is good and optimal.
The Big Words LLC Newsletter
For the next phase of my writing journey, I’ve started a monthly newsletter for my writing and video content creation company, the Big Words LLC. In it I plan to share inspirational words, pieces from this blog and my first blog, and select videos from my four YouTube channels. Finally, I will share updates for my book project The Engineers: A Western New York Basketball Story. Your personal information and privacy will be protected. Click this link and register using the sign-up button at the bottom of the announcement. Regards.
Two focuses of my blog are Financial Literacy/Money and Business/Entrepreneurship. If you’re running a business and it involves the use of a vehicle, you must consider what vehicle tax deductions you can take advantage of. The following sponsored post is entitled, Vehicle Tax Deductions For Business.
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Taking the maximum deduction from your business car payments is crucial for maximizing your return. This article will discuss Section 179 deduction, Bonus depreciation, Actual costs, and leasing options. To make the most of your deduction, it’s best to own the vehicle instead of leasing it. However, if you can’t afford to buy a new car outright, you may want to consider leased cars. To know more about that, you can visit different websites. A good example is MIle IQ.
Section 179 deduction
You may be eligible for Section 179 vehicle tax deductions if you are a business owner. The deductions are based on your net taxable income for the year and can be as much as $510,000. However, if you use a vehicle for work, you can only take advantage of this deduction if you purchased it for business purposes. In addition, the deduction cannot exceed your net income for the year.
The Section 179 deduction applies to vehicles purchased for business use. You can claim a percentage of the cost of the car on your tax return, as long as you are using the vehicle for business purposes. However, most employees cannot take this deduction. This deduction was suspended for most employees when the law was passed in 1997. Some exceptions to the rule include Armed Forces reservists, qualifying performing artists, state or local government officials, and people who have disabilities that limit their ability to work.
Bonus depreciation deduction
A vehicle must be used for at least 50% of its life to qualify for a bonus depreciation deduction. If use decreases to less than 50% within the five years, the deduction must be returned. To take advantage of this deduction, tracking mileage is necessary. Heavy vehicles are eligible for bonus depreciation deductions because they have a gross weight of more than 6,000 pounds. To calculate weight, check the manufacturer’s website.
Those who own a new business vehicle or plan to replace a used car can take advantage of a bonus depreciation deduction. This deduction is available to businesses, including small business fleets, delivery services, and specialty vehicles. The maximum deduction is $1,040,000 per year for a business, and you must have purchased the vehicle by December 31. In addition, it is essential to note that a company must show positive income for the year to qualify for a bonus depreciation deduction.
Actual costs
You may be eligible for a vehicle tax deduction if you’re running a business. In this case, you can deduct the business portion of your car-related expenses, including gas, oil, repairs, and tires. Your mileage and insurance costs can also be deductible. You can even claim depreciation expenses. As long as you keep careful records, you may qualify for a larger vehicle tax deduction than you otherwise would.
To calculate your vehicle tax deduction, you need first to determine your mileage. The standard mileage rate deduction is designed for the average vehicle. A heavier driver may qualify for a higher deduction. But an economical vehicle will typically cost you less. For example, if you drive twenty-two thousand miles per year for business purposes, you can claim a deduction of $12,320. According to AAA, a typical vehicle costs $11,278 per year.
Leasing options
Were you considering vehicle leasing? Here are a few advantages to consider. First, you can write off the lease payment. If you use the vehicle for business purposes, you can claim a larger deduction for the lease payment. Second, leasing is much cheaper than purchasing a vehicle. Third, the monthly payments are much more affordable. And, you’ll never have to worry about mileage limitations. If you need a luxury vehicle, leasing might be the way to go.
Leasing options for vehicle tax deductions allow you to take advantage of a broader range of vehicle expenses than purchasing a car outright. For example, you can deduct your fuel, insurance, and tire costs as business expenses. Additionally, you can deduct maintenance and repair costs as well as depreciation. However, you must make sure you lease a vehicle for at least 30 days to qualify for this deduction.
Two focuses of my blog are Financial Literacy/Money and General Education. While it’s typically covered in many K-12 education core curricula, some adults still don’t understand the purpose of taxes, how they’re raised and how they’re abused by government officials. It’s a topic that every adult should have knowledge of. The following contributed post is entitled, Why Should Every Adult Learn About Tax Returns.
In my eyes, every adult should learn about tax returns. Ideally, this should begin when you’re a child – or at least when you’re in high school. It sounds like a boring topic, but tax is one of the most important parts of your adult life. Whether you own a business or not, you will pay tax. It is basically how the government gets the money to fund different projects in various communities. As much as people despise paying taxes, it’s a necessity for a successful country.
If you know nothing about tax returns, it’s well worth learning something new. To convince you that this is worthwhile, here’s why every adult should know something about tax returns:
Understand where your money goes
Learning about taxes helps you understand where your money goes. In essence, it teaches you why you have to pay a tax return. For small business owners and the self-employed, tax season is always a bummer. It can feel like you’re parting with hard-earned wages for no reason at all. By learning the ins and outs of taxes, it provides more context to the situation. You may still be irritated by paying your taxes, but at least you understand where the money goes and how it might benefit you in the future.
Pay the right amount
Similarly, gaining knowledge of tax returns allows you to pay the right amount. You will often fall on either side of the spectrum if you don’t know anything about tax returns. Some people pay far too much; others pay too little. If you pay too much, you basically do yourself an injustice as you could’ve held onto some money. Again, suppose you’re self-employed or running a business. In that case, this can be the difference between making a profit and breaking even. Obviously, paying too little is wrong as you can be hit with fines and criminal charges. By understanding tax returns, you will always pay as much as required.
Forge out a new career
Tax returns are an essential part of the world, and loads of people file them. As this entire article suggests, hardly anyone actually understands tax returns. Therefore, your knowledge could help you forge a new career. Take an online course to earn a tax preparer certification, and you can suddenly carry out tax returns for different people and businesses. This service is in demand, meaning you can earn a lot of money. It’s something you can do alongside your current job or as a career in its own right. Don’t just assume that learning about something is good from a personal development standpoint. It can also give you a leg up in life that leads you to more success.
In conclusion, learning about tax returns can be highly beneficial. It’s something all adults should do, and it should form part of an educational program geared towards money management. If I were in charge of education in this country, that would certainly be something I’d push forward. People grow up with pointless knowledge of things they never need in life. Instead, let’s teach people about crucial things like taxes, savings, and so on.
A key focus of my blog is Financial Literacy/Money. A key aspect of your financial health is managing and navigating taxes. The tax code is ‘mammoth’ in terms of size and is continuously evolving. It’s thus difficult for the lay person to keep up with it depending on your personal financial circumstances. When appropriate, it’s thus wise to hire a professional. The following sponsored post is entitled, Organize Your Taxes with a Professional.
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No one in their right mind looks forward to the tax-preparation season. If you are like many people, you probably put it off as long as possible, often well past New Years Day in any given tax-preparation cycle. And as time goes on, the number of complexities seem to ever increase. It can be difficult to plan and be organized.
One way to stay ahead of the process is to take a look at your financial and tax situation well ahead of time. By doing this, you can systematically unveil some opportunities to save on your tax bill. Heck, you may even get money back that you didn’t think you have coming.
Just a Few of the Tax Items to Keep Track of
The US Congress and the Internal Revenue Service are the proud creators of a gigantic, labyrinth-like tax code. Embedded in this monumental set of laws are numerous potential tax-saving possibilities. The key is that you need to know about them in order to take advantage of them.
Here are a few of the things you may need to understand and keep abreast of:
• Tax-loss harvesting • Charitable giving • Deferring income • Deferring capital gains • Medical expenses • Extra mortgage payments
These are but a few of so many to be aware of.
Perhaps it’s Time to Work with a Professional
The federal government is the proud creator of an immense, labyrinth-like tax code. It can drive you bonkers. Perhaps its time to partner with a professional tax organizer Glen Burnie MD. Here are just a few of the benefits of hiring a competent and knowledgeable professional:
• Pay the least amount of taxes • Professional, up-to-date monitoring of the tax code • Recommendations of tax-savings you never thought about • Representation if ever needed
So, consider making tax preparation season less of a hassle and claim every deduction you are entitled to!
Two of the key focuses of my blog are Financial Literacy and Money, and Business and Entrepreneurship. No matter what your business idea is, navigating the tax laws is critical to give your enterprise every chance to thrive. Likewise not understanding this component of your business plan can make things harder. The following contributed post is thus entitled; Everything a Small Business Owner Needs to Know About Tax.
Chances are that when you first set up your small business, you’ve never had to deal with taxes yourself before. The majority of people spend most of their lives in employed positions and their employer automatically deducts taxes from their pay and pays them to the government on their behalf. But when you are running a business and become self-employed, working for yourself, you gain a whole lot more responsibility. Now, as long as your business is making money, you’re going to have to pay a whole host of taxes – there’s’ no choice in the matter, as it is a legal requirement of you. So, it’s something that you’re going to have to get to grips with relatively quickly. Here are just a few sage pieces of advice to help you along the way!
What Are Your Taxes Used For?
Seeing as you’re paying taxes, you’re going to want to know exactly where they are going. Generally speaking, governments take taxes as a percentage out of all of their citizens’ pay. Most countries use a graded scale, so the more money you earn, the larger the percentage of tax that you pay. The money taken is then put towards improving the country, its services (such as healthcare systems, emergency services, and educational systems), its transport, its infrastructure, and its defence.
What Happens If You Don’t Pay?
As we have mentioned, paying taxes is a legal requirement. If you do not declare how much you are earning, and / or do not pay the percentage of tax required of you, you could be in for a whole lot of trouble. If you file your return late, you may be charged an extra five percent of your overall owed amount for every month that your return remains unsubmitted. If you fail to pay your taxes, you can face a failure to pay penalty, which amounts to an extra 0.5 percent of the money that you owe being added to your bill on a monthly basis until you have forked out the full figure.
In terms of corporation tax, you may also find yourself incurring:
Perhaps the easiest way to file your taxes correctly is to work hand in hand with professional accountants like Brown Smith & Wallace. Accountants have received extended educations and have trained for years specialising in all things related to tax. They know the system inside out, so will be certain of what you need to pay, what you don’t need to pay, and when you need to pay. This helps to minimise chances of errors and mistakes on your yearly fiscal report and prevents problems from developing down the line. This is generally recommended for any small business owner, as not only does filing the wrong sum of money, filing the wrong return, or filing the wrong receipts and other papers pose the potential of lumping you with fines or even jail time, but tax scandal can have an extremely detrimental effect on your business’ image to the public.
Doing It Yourself
While you will generally find yourself having a much easier time using professional services such as accountancy, you don’t necessarily have to engage with accountants and can complete and file your tax return yourself. If you have only just started out in business and are looking for an area to save money, cutting accountancy fees can be a good area to save. However, you do need to ensure that you know what you’re doing and that you follow the process properly.
● Take a short course – there are many short courses out there surrounding accountancy for small business owners. They are not as thorough as degree programmes which qualify you to become a fully chartered accountant, but they are extremely effective in endowing you with an understanding of the basics. They are also a lot cheaper and less time consuming than a full time degree. Consider enrolling on a course in your local area to get to grips with everything that you have to do in order to correctly file a tax return.
● Research deadlines – information regarding the deadlines for returns that you need to file are generally available through government help websites. Make sure to put these dates in your calendar and make sure to start filling in your return well in advance of the deadline. There will probably be too much work to do to get away with leaving filling things in until the day before the deadline.
● Follow instructions – most tax return forms come with a full list of instructions. So make use of them. Follow each step through and complete the return in the order that it is presented to you. This will help to simplify the process for you. If possible, complete the return online. This tends to make things easier, as you can generally click for further information if you feel that the questions asked of you are unclear.
● Use helplines – most governments also provide helplines that you can contact to speak to someone about any issues you are having with filing your return. If you feel confused, do not hesitate to call and ask for a little help.
● Consider expenses – if you have forked out for any tax deductible expenses, seek out receipts and add them to your return. This can help to minimise the amount of money that you owe, saving you a little extra money as you go along.
As you can see, there’s a whole to learn and bear in mind when it comes to completing your taxes at the end of each fiscal year. Sure, it’s a little dull. It may well be complex. Chances are there are a thousand other things you’d rather spend your time doing. But, it is a legal requirement of you and your business, so you might as well make the inevitable process as simple as possible for yourself. Hopefully, the above pieces of advice will help you to achieve this!
Depending on your world view, this blog post may upset you, but it contains some ideas worth pondering. As they once told us at the Writer’s Center, if you’re not making someone uncomfortable, you’re not doing a good job of writing. This may also be my first blog post to incorporate all of the principles of my blog.
Our calendar year is marked by different seasons. Each year builds up to the excitement of the traditional ‘Holiday Season’ – Thanksgiving and Christmas. When the ball finally drops in Times Square, all of the excitement stops with the birth of new year. The holiday decorations and advertising goes away and ‘Tax’ season starts. It wasn’t until I became a working adult myself that I realized that Tax season was its own season, spanning through the Super Bowl, Black History Month, Valentine’s Day, March Madness; right up until Easter Sunday.
You start seeing advertisements on TV for franchises like ‘H&R Block’, and software like ‘Turbotax’. If you have one your tax preparer starts calling you for your annual appointment. You see people dressed up like the Statue of Liberty on street corners encouraging you to have your taxes done at franchises like Liberty Tax. If you’ve paid taxes, you start gathering your materials together to have your taxes done – your W-2 and other associated forms, your gift receipts, your mortgage interest deduction statement, etc.
Depending on your diligence, you either get them done early, or you procrastinate right up to the middle of April. It’s an exciting time, or a desperate one. Depending on how you’re living your life, the refund (if you get one) will propel you further ahead, or it will be gone as soon as you receive it.
The 2018 Tax Reform and Jobs Act
The 2018 tax season will be different than most in recent times in that many Americans will receive a tax cut, thanks to the recently passed ‘Tax Reform and Jobs Act’. Tremendous controversy surrounded the bill – specifically its beneficiaries. If you were 100% against the bill and are still convinced that it was written solely to help the wealthy, no discussion of the increased standard deductions or the adjusted tax brackets will sway how you feel. This is particularly true if you live in one of the high tax states like my native New York State, whose residents are losing the ability to write off some of their state taxes – taxes which are much higher than the other states.
I would highly encourage everyone to do their own research and not take what you hear on the major cable news networks as the gospel. For this post, I’ve done my own research and am citing projections from the Tax Policy Center of the Urban Institute and Brookings Institution which was last updated on December 22, 2017. The majority of the rancor and debate in the Main Stream Media (MSM) has centered around the wealthiest Americans being the biggest beneficiaries of the law. That discussion leads us down the road of ‘Identity Politics’, ‘Fairness’, and varying perceptions of what’s right and wrong. It brings up President Barrack Obama’s position that, “Some Americans can afford to pay more taxes,” versus the other point of view which is that it’s wrong to excessively take money from those who have created it, or inherited it for unsustainable government spending.
My focus is on the potential benefits for individuals living on ‘Main Street’ and what they can do with a little more money in their pockets. I would encourage everyone else to do the same – ask yourselves what you can do to make your life and the lives around you better, as opposed to focusing on what others are getting. It’s tricky because its gets us into discussions about doing for self, and personal responsibility – difficult discussions, but important ones nonetheless.
The new law seems to have already encouraged companies like Apple to reinvest in the United States, but what are the effects of the Tax Reform and Jobs Act personally for people living on Main Street? First, how it affects your life will in large part depend on how you’re living your life in the here and now. Are you living ‘paycheck to paycheck’ or ‘hand to mouth’ as some would say? Are you living outside of your means? Are you riding a high level of debt? Do you have any emergency money? These questions will determine if you’re able to take any extra money you get back and build with it, or if it will get gobbled up right away.
A Decreased Standard Deduction
According the Tax Policy Center’s report, one of the major changes in the bill is the increased Standard Deduction for single people and married couples – $6,500 to $13,000 for single people and $9,550 to $18,000 for married couples. For us on Main Street, this one change is going to either increase your refund, or decrease the amount of tax you owe – a win for most people. The tax brackets and associated percentages have also been adjusted. I was originally going to discuss the host of other changes and provisions, but I’ll just simply say that many of the other changes were made based upon the generous expansion of the Standard Deduction.
In addition to the changes in taxes at filing time which will be seen when filing in 2019 for the 2018 tax year, it appears there are going to be changes to Main Street’s paychecks in the near future. Kelly Phillips Erb of Forbes published an article on January 11, 2018 titled IRS Releases New 2018 Withholding Tables to Reflect Tax Law Changes. Based upon these changes which are to take effect in February, many Americans are going to get ‘raises’ due to changes in the amounts withheld. Many people are going to have extra money to spend.
This brings me back to the title of this blog post. What are your plans for your tax cut? As in my ‘Net Worth’ piece, this is a rhetorical question – one whose answers I wouldn’t recommend broadcasting. There are reasons for my asking this question. Do citizens on Main Street need some extra money at tax time and in their paychecks? The data in the next section suggest that they do.
Can You Afford a $400 Expense?
About a month or so ago when the tax cut debate reached its crescendo, someone on Twitter shared an article entitled The shocking number of Americans who can’t cover a $400 expense, written by Ylan Q. Mui of the Washington Post. The article was published on May 25, 2016, and was based on a 2015 Report by the Federal Reserve which I’ve linked to this piece.
The article cited Figure 12 from the Federal Reserve’s report. Of the three groups surveyed, the group making less than $40,000 said they’d have the hardest time covering a $400 expense – overall less than 50%. The group making $40,000 to $100,000 had the second hardest time covering a $400 expense – overall 62%. As expected, the group making greater than $100,000 fared the best – overall 81% could cover a $400 emergency expense. That said it surprised me that someone making above $100,000 would have a hard time covering a $400 expense. By the way, the groups were broken down by race. Interestingly, black/non-Hispanics were the least likely of this $100,000 or greater group to be able to cover a $400 expense – 63% and Hispanics were close by at 67%.
The argument could be made that individuals making less than $40,000 just don’t make enough money to live off of, but what about those making above $40,000? The same is true for individuals making $100,000 or greater. This data suggests that either the United States has become too expensive a place in which to live, or that some people are mismanaging their finances. In both cases, it seems quite a few people could use the extra money. One could suggest that it’s unwise to not carry enough for a $400 emergency, but that’s dangerous because it gets us into discussions about personal accountability/responsibility, and self-reliance.
Low Retirement Savings
Rodney Brooks also of the Washington Post wrote an article entitled 71 percent of Americans aren’t saving enough for retirement. In the article he cited data from a national survey by Experion in collaboration with Get Rich Slowly stating that 71% of people surveyed said they didn’t have enough money to retire. Why would Americans not have enough retirement money? Mr. Brooks further cited data from the Consumer Financial Protection Bureau stating that among other things, the percentage of homeowners 65 and older with mortgage debt increased from 22% in 2001 to 30% in 2011. Among homeowners 75 and older, the rate more than doubled to 21.2% from 8.4%.
Furthermore, 49% of the people polled had credit card debt, and 46% had less savings than they expected to have five years earlier. Katie Ryan O’Connor, an editor from Get Rich Slowly, was cited in Mr. Brooks’ article stating that 71% of the people in the survey said they were not invested in the stock market, and 41% said that they had no plans to invest due to lack of funds. The data cited in these two articles suggest that some Americans could benefit from having some more money in their pockets. If you’re wary of investing money, a wise alternative may be to simply shove it under your mattress for an unforeseen emergency. Over the holiday season, a relative shared that simply getting, “rear-ended on the expressway,” causing a $500-dollar emergency would put many Americans in financial distress, so this seems to be real. By the way, a really good course for learning about the importance of emergency funds and the dangers of debt is Dave Ramsey’s Financial Peace University.
HBCUs and Donations
I’ve discussed a lack of money for $400 emergencies and retirement savings, but what else can one do with an increased standard deduction and a heavier paycheck? One alternative is to put something into the collection plate of charities, causes and institutions of your own personal interest that also need money. That can be anything, but I’m going someplace in particular with this.
Early on in President Trump’s first year, some Historically Black College and University (HBCU) Presidents bravely visited the White House, upsetting many alumni, students, and African Americans in general. Why did they go? The answer is simple. Their institutions, many of which are close to folding, needed money. Higher Education is a business – one which relies on funding from the Federal Government via grants and loan programs, in addition to gifts from private industry, and donations from generous and loyal alumni.
Three out of the four years I wrote for the Examiner, I interviewed Allstate’s Cheryl Harris about her company’s ‘Quotes for Education’ program in collaboration with Tom Joyner. What consistently came out of those interviews were discussions about anemic rates of giving by HBCU alumni – something that continues today. For my alma mater, Johnson C. Smith University (JCSU), we’ve experienced the same thing. In 2014, as the treasurer for our DC Alumni Chapter, I unofficially got wind that my class of 1999 had an 11% alumni giving rate. That is only 11% of the alumni from my class gave anything to the university that calendar year. It’s a strange phenomenon in that in 2018, HBCUs – those still open, are still very necessary in terms offering higher educations for students who can’t get them anywhere else.
My HBCU on Academic Probation
Recently on December 6, 2017, Reginald Stuart of the online publication, Diverse Education, published an article entitled SACSCOC Places Johnson C. Smith University on Probation. The article discussed how the Southern Association of Colleges and Schools Commissions on Colleges (SACSCOC) placed my alma mater on a 12-month probation due to concerns about the long-term financial viability of the institution. The article stated that SACSCOC’s actions do not immediately impact the school’s accreditation, though a failure to correct the standards cited could lead to the university losing its accreditation and subsequently permanently shutting its doors. The article further stated that JCSU, in addition to Bennett College and St. Augustine’s University, are ‘tuition-dependent’, meaning that they enroll a high percentage of students who need federal financial aid to attend college.
Why would my alma mater and others like it have such low alumni giving rates? It’s a difficult discussion to have once again because it gets us back into personal responsibility. One explanation for the anemic HBCU alumni giving is indifference about the future crops of students. An alternative explanation is that perhaps many HBCU alumni simply don’t have enough money to give back to their alma maters. It thus again suggests that perhaps they could benefit from a tax cut like the one just passed. If you’re an HBCU alumni who will benefit from the Tax Reform and Jobs Act, regardless of how you feel about President Trump and the Republicans, a potential use for your new extra money in your paychecks could be a donation to your alma mater or an organization like the United Negro College Fund, which gives money to black students at both HBCUs and ‘Predominantly White Institutions’. But that’s up to you.
Closing Thoughts
Clearly, there are a lot of people who can use extra money. How it’s used will depend on the individual. Will it be spent frivolously on a new pair of shoes and other depreciating items? Or will it be used for something long lasting like a down payment towards a house, retirement savings or donation to a charity? If you want a great charity to donate to then the Dwoskin Family Foundation are a great option.
Consider the best way to use your gift from the Grand Old Party. Whose lives and community will it stabilize and enrich? Will it be your own? Or will it be someone else’s? Whose job is it to take care of you and your people? Is it yours or someone else’s? I touched upon this briefly towards the end of my blog post titled Challenging misconceptions and stereotypes in household income, wealth building, and privilege. And in closing, what are your plans for your tax cut? Again it’s a rhetorical question – one I wouldn’t necessarily broadcast. Instead, it’s something to think about.
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Two of the principles of my blog are “Creating Ecosystems of Success” and “Long-Term Thought”. While my scientific background is in the biomedical sciences Pharmacology and Toxicology, it’s imperative for me to keep my eyes on what’s happening in the other Science, Technology, Engineering and Mathematics (STEM)-fields. This allows me to use my platform to help guide others career-wise, and also for investment purposes (see my Facebook and Bitcoin post). In this post I want to discuss both STEM and careers, and the impacts of the new tax bill on the ‘Tech’ sector, as well as others.
My goal is to keep this post short. I actually have another post in the works regarding the new controversial ‘Tax Reform and Jobs Act’, but a recent development involving the company Apple prompted me to craft of this piece. I’ll start with a recent purchase involving one of the other ‘Four Horseman of Technology Stocks’, Amazon. Shortly after the holiday season, I ordered a copy of economist Dr. Thomas Sowell’s“Trickle Down” Theory and “Tax Cuts For The Rich”. I didn’t buy the book strictly because the Tax Cuts and Jobs Act was recently signed into law, but because I had an Amazon gift card and thought it would be an educational read. I’m also admittedly one of Dr. Sowell’s biggest fans as he embodies most of the principles of my blog. He empowers his readers with the economic laws and theories, and historical facts to interpret current events, government policies and political discussions with a more complete perspective, independent of your political affiliation or background.
The very short book discusses the famous ‘Trickle Down Theory’ which is a hotly debated topic among economists, media pundits, and politicians. Coincidentally, according to Dr. Sowell, it isn’t a formal economic law and never has been. Instead it is a term used to demonize any cutting of taxes which have historically sparked economic growth in our country, as opposed being a means of making the rich richer and ignoring the needs of those on ‘Main Street’ – the way tax cuts are typically depicted by their opposition. As expected, leading up to its passing, the Tax Reform and Jobs Act was accused of solely being a tax break for the wealthy by its opposition. Recently however, numerous sources are now reporting that it’s actually going to benefit people on Main Street as well. But what will the new law do for the national economy itself on a macro level? On January 17, 2018, Yahoo published an article titled Apple says it will invest $350 billion and hire 20,000 workers in the U.S. over the next five years.
While this is an opportunity for some to boast to the opposition that they had the bill all wrong, my focus is on who will benefit from Apple’s repatriation of its earnings, and its $350 billion investment in the United States. It seems to me that those who are trained in the technologies Apple is working on, and currently has in its pipeline, stand to benefit significantly in terms of career, earning potential, and upward mobility. Those skills may involve things like writing applications for ‘Blockchain Technology’, and/or ‘Quantum’ computers among others. Those who are not trained in those areas will only benefit from the products Apple produces, for the most part, solely as consumers.
As a STEM professional and advocate myself, this is a very appropriate time to discuss some data I recently found published by US News & World Report in 2016 titled Report: Black Students Underrepresented in High-Paying STEM Majors. The article cited data from a Georgetown University Study titled African Americans: Colleges Majors and Earnings, which discussed how black students tend to cluster in fields like social work leading to lower paying careers. The data in the Georgetown study showed that 20% of degree holders in human services and community organizing were black, and earned a median salary of about $40,000 per year. By contrast, only 7% of degree holders who received STEM-related bachelor’s degrees, and earned a median annual salary of $84,000 or more, were black – a very low number considering that blacks are only 12% of the total population in the United States.
This low percentage of participation in STEM, in addition to Apple’s repatriation of earnings, and its investment back into the United States, underscores the importance of having the necessary skill sets at critical times to take advantage of environmental changes imposed by laws like the Tax Reform and Jobs Act. Malcolm Gladwell covered this phenomenon extensively in Outliers. Right now in the United States there is considerable debate about discrepancies in wages based upon race and sex. The question has to be asked though, do those discrepancies exist due to discrimination, or is it majors chosen leading to the acquisition of skill sets for which there is high or low demand from the economy at that particular time? Are we essentially running up against the ‘Law of Supply and Demand’ as we often do? After all, the economy typically dictates what’s needed at a given time, and how much individuals in the workforce should be compensated.
How many more companies will return to the U.S. to repatriate their earnings, invest in research and development here in the U.S., and subsequently hire U.S. workers? Right now it’s unknown. But if other technology giants like Apple return, clearly some groups of people will benefit more than others. The question is will the beneficiaries strictly be based upon to race, sex and class, or will the skill sets possessed by certain well positioned individuals have something do with it? And who will possess those necessary skills once there is an increased demand for them?
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Two of the 
While this is an opportunity for some to boast to the opposition that they had the bill all wrong, my focus is on who will benefit from 
This low percentage of participation in STEM, in addition to