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CEE Fund
Introduction to Tax PlanningOr
“Keeping More of What You Earn”
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CEE Fund2014 Tax Rates
Ordinary Income Tax Rates & Applies to Salary
Income
$0 to $9,075 10%
$9,076 to $36,900 15%
$36,901 to $89,350 25%
$89,351 to $186,350 28%
$186,351 to $405,100 33%
$405,101 to $406,750 35%
$406,751 and over 39.6%
Income
$0 to $18,150 10%
$18,151 to $73,800 15%
$73,801 to $148,850 25%
$148,851 to $226,850 28%
$226,851 to $405,100 33%
$405,101 to $457,600 35%
$457,601 and over 39.6%
Married Filing JointSingle Filing Joint
Strategy: Get married & have children!
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CEE FundCapital Gains Rates
Applies to Investment Gains/Profits Must hold for 12 months and 1 day or Short Term
Capital Gains rates apply STCG rates equal Ordinary Income Tax Rates
Strategy: Market Time vs. Buy & Hold Ask your parents to transfer appreciated assets to you, who then sells
Income
0% to 15% Brackets 0%
> 15% but < 39.6% bracket 15%
Top Bracket 20%
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CEE Fund
Tax Deductions Medical, State Taxes, Property Taxes, Home Mortgage
Interest, Home Equity Interest, Investment Interest Expense, Charity, Professional Fees, Casualty Losses
A $100 expense that is deductible saves $30.00 in taxes and actually costs you $70.00 if you are in the 30% tax bracket
Strategy: Bunch your deductions in 1 year Deduct the fees of your advisor
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CEE Fund
Tax Credits
Includes:______________
A $100 expense that qualifies for a tax credit actually costs for “0” since your taxes are reduced by $100
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CEE FundItemized Deductions
You may not have sufficient Itemized Deductions If you don’t, claim the Standard Deduction
$ 6,200 for Single$ 12,400 for Married Filing Joint
Each person whom you provide > 50% of Financial Support can be claimed as a dependent
Each dependent is worth $_______
Deductions & Exemptions are “phased out” as your income exceeds $275,000 Single or $300,000 Married Filing Joint
Exemptions/Dependents
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CEE Fund
AMT: Alternative Minimum Tax
A parallel tax system designed to assure that everyone pays some level of tax
Impacts those with high income tax deductions
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CEE Fund
Year Estate Tax Exemption Top Estate and Gift Tax Rate
Gift Tax Exemption
2005 $1,000,000 49% $1,000,0002006 $1,000,000 49% $1,000,0002007 $2,000,000 45% $1,000,0002008 $2,000,000 45% $1,000,0002009 $3,500,000 45% $1,000,0002010 $5,000,000 35% $1,000,0002010 Unlimited 0% $1,000,0002011 $5,000,000 35% $5,000,0002012 $5,120,000 35% $5,120,0002013 $5,250,000 40% $5,250,0002014 $5,340,000 40% $5,340,000
Gift & Estate Tax Chart
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CEE Fund
Saving for RetirementWhy Should You Worry About it Now?
IRA Roth IRA 401k/403b SEP IRA Simple IRA Personal Savings
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IRACEE Fund
$5,500 Maximum Contribution per year
$6,500 Maximum Contribution per year (if over age 50)
May be tax deductible* today Single – MAGI less than $70,000Married – MAGI less than $116,000
Taxed upon withdrawal once age 59 ½ plus
*Even if covered by a qualified plan at work
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CEE FundRoth IRA
Not tax deductible today but tax free upon withdrawal at age 59 ½ plus
$5,500 Maximum contribution $6,500 Maximum contribution over age 50
Income Phase out for Contributions
Single < $129,000Married < $191,000
Which one is better?
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CEE FundEmployer Retirement Plans
401k/403b/TSP Includes:
Pretax 401kRoth 401k$17,500 Max Contribution$23,000 Max Contribution over age 50
* No income limits on Roth 401k Contributions
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CEE FundThe Miracle of Compound Interest
Strategy: Be sure your parents don’t run out of money!
$4,000/Year saved at 6% interest - Now Value in 20 years: $147,142 Value in 30 years: $316,232
$4,000/Year saved at 6% interest for only 10 years – Part time Value in 20 years: $94,419 Value in 30 years: $169,090
$4,000/Year saved at 6% starting 10 years from today – Later Value in 20th year: $52,723 Value in 30th year: $147,142
$1,000,000 in 40 years requires: $6,461 saved per year for 40 years at 6% $3,860 saved per year for 40 years at 8%
$1,000,000 in 20 years requires: A nice inheritance from Mom & Dad!