New Tax Tip Video: the Tax Incentives to Adopt a Child

Earlier in the week my team put together another episode in our tax tips video series. In the new video embedded below, host James Owens discusses the tax incentives to adopt a child. For more helpful videos, be sure to visit my YouTube channel.

Sending your Child Back to School Without Breaking the Bank

According to a recent survey, nearly 60 percent of parents plan to change the way they shop for back to school items for their children because of the poor economy. The same survey also found that over a quarter of the parents in this country said their children needed more expensive items, such as computers, because of education related budget cuts.

Although not all U.S. taxpayers have children, the back to school season is second only to December holiday shopping when it comes to the amount of money American consumers spend in a month. To help the readers of my blog looking to send their children back to school without breaking the bank, I have put together the following list of money saving tips.

Read Reviews Online

Before you embark on a back to school shopping trip you should always do some online research, especially if you are going to buy expensive items like a computer or laptop. Read reviews from other customers, and run a few searches to make sure you are getting the best deal.

Shop Online

These days it is easy to buy supplies online, and a lot of retailers even offer free shipping on some purchases. Even if you have to pay for shipping, the money you save will often outweigh the added shipping expenses.

Start Early & Watch for Sales

It is already August, and some children will begin going back to school in a week or two. There is no need to wait until your child’s first day of class to purchase all of the supplies they need. Start shopping now, and be on the lookout for good sales. If you do not know what supplies your child will need, then you could try contacting either their teachers or parents of other students in the same grade.

Buy in Bulk

With basic supplies – such as pencils, paper, glue sticks, etc. – you might want to consider buying in bulk. Although your son or daughter obviously does not need a few dozen pencils on the first day of class, you can stock up now and use the supplies throughout the year. During back to school season many education essentials are discounted significantly, and by stocking up now you can save a decent amount of money throughout the year.

Take Advantage of Sales Tax Free Weekends

If you live in a state that has a sales tax free weekend you should try to plan your back to school shopping around the days when the tax breaks are in affect. Many stores also offer additional discounts on school supplies during sales tax free weekends. There are dozens of states offering some type of tax free holidays including Florida, Texas, New York, Iowa, and many others. To see if your state is offering a tax free holiday, check out this article on About.com.

Donate a Backpack

While you are purchasing supplies for your child, it is important to remember that there are thousands of children in this country without the supplies they need to succeed. During back to school season there are always charity drives asking for backpack donations, and if you can afford the extra expense I highly recommend making a contribution. In addition to helping out a child in need, you can also keep the receipt and claim the donation as a charitable contribution on your next tax return.

Financial Literacy for Kids a Big Worry for Parents, BofA Says

According to Bank of America, financial management is the most important lesson a parent can teach their child. Although there are obviously many other important lessons parents teach their children, I do agree that financial literacy can help children lead a more stable life, and should be instilled at a young age.

The Merrill Lynch Affluent Insights Quarterly, which surveyed 1,000 Americans in June with investable assets of at least $250,000, found that 51 percent cited “financial know- how” as the most important life lesson to share with their children. That compares with 54 percent who named maintaining ties to family, 26 percent who said choosing the right spouse and 11 percent who mentioned staying physically fit.

“Cash and debt management, along with their children’s financial literacy, have become increasingly important to our clients as they juggle often competing financial demands while hoping to teach the next generation how to effectively manage their own money,” Dean Athanasia, head of banking and the direct investment division for Bank of America Global Wealth and Investment Management, said in a statement.

As uncertainty over jobs and long-term economic recovery increases, affluent investors are worried about rising college and retirement costs, the survey said. About 40 percent of respondents said they are concerned about the rising cost of college education and 46 percent are worried about their ability to preserve an inheritance for their children.

Continue reading at Bloomberg.com…

Teach Your Teen Paycheck Savvy

Summer break is here for most teenagers, which is often a time when they enter the workforce for the first time. Although having cash of their own is an exciting time for any team, it can lead to frivolous spending habits. Earlier today CNN Money posted a helpful article on how parents can help their teens manage that first paycheck. If you are a parent of a teen with their first job then I highly recommend checking it out.

Have the tax talk

Better explain the harsh realities of gross vs. net before your teen gets any big ideas about what she'll spend her wages on. She may not yet understand that taxes will be withheld from every paycheck. So sit down with your child to go over that first pay stub, explaining how and why taxes are taken out, as well as the difference between income taxes (which most teens are likely to get back when they file tax returns) and FICA taxes (which they won't). "This will be a real shock to them," says Adam.

Take it to the bank

Help your kid open two bank accounts -- one savings, one checking. Spend time together comparing fees and rates online, looking specifically for a no-fee checking account meant for teenagers. You'll have to co-sign the accounts, but it's worth it so your kid can start learning to use an ATM card and keep his balance in the black. (Just don't forget to mention the exorbitant costs of using another bank's ATM.)

Your child may balk at an analog check register but might enjoy tracking expenses online via Mint.com. To motivate him, explain about the $30 overdraft fees the bank will rapidly bestow if he messes up budget calculations. And remind him that at minimum wage, it would take most of a day's work to recoup that expense.

Tax Bills Won’t Rise for Parents Who Keep Older Kids on Health Insurance

After millions of taxpayers expressed anger over concerns they might be hit with additional taxes for children under the age of 27 still receiving health benefits, both the IRS and Obama administration have spoken up regarding the issue. According to LA Times.com, the Federal government announced that tax bills will NOT increase for these families.

The president and his congressional allies have billed the new benefit for older children as one of the most immediate advantages of health legislation that in other respects remains highly controversial.

And last week, after prodding from Health and Human Services Secretary Kathleen Sebelius, several leading national insurance companies said they would offer the extended coverage immediately to parents who buy plans on their own.

But the healthcare bill did not make clear if employees would have to pay taxes on the additional benefit if they receive health insurance through work, as most Americans do.

Tuesday, the IRS issued a 12-page notice explaining that the added insurance for children under 27 would be tax-free, like other employer-provided health benefits, and that employers with some kinds of plans could begin offering the benefit immediately.

Continue reading at LA Times.com…

How To Become a Debt-Free Single Parent

Healthy finances are important for any family, especially those led by only one parent. Earlier today I came across this interesting article on Examiner.com explaining how single mother’s can work to become debt free, and I think that the tips are relevant to any one raising a child on their own. Checkout a snippet of the article below.

1. Save $1000 in an emergency fund: You should save this money as fast as possible by paying only minimum payments on all your debt, and putting every last penny into savings. The money should be kept in a liquid (easy to access) account such as a normal savings account. Additionally, the money should be used only in an emergency. That new purse or pair of shoes doesn't count, sorry!

2. Become debt-free using the debt snowball: Dave's debt snowball idea is a simple tool that means to list every single debt from smallest to largest, and attack the smallest one first. You don't have to include your house in this section. Again, you will pay minimum payments on every debt. Except this time, any extra money will go towards your smallest debt. Once that one is paid (Yay!), you move on to the next and so forth. This step requires that you create a written monthly budget ahead of time to track where your dollars will go.

3. Build your emergency fund to include 3-6 months of expenses: Now that you are debt free, where will all your money go? You need to return to your $1000 emergency fund and build it to cover you in case you lose your job or have another large emergency.

4. Invest 15% of your income into Roth IRA's & pre-tax retirement: Many financial planners advise you to save for retirement as soon as possible. Dave's view is that you'll only be able to invest a small amount if you're also paying off debt. In addition, he wants you to retire debt-free. Otherwise you'd have a big retirement account, and a lot of debt to pay off as well. By paying off your debt first, you are able to invest at least 15% of your income and build your retirement account faster.