Ann M. Hartz, CPA Sheds Light on Some of the Highest State Sales Tax Rates

Ann M. Hartz, CPA Sheds Light on Some of the Highest State Sales Tax Rates

No, the IRS is not shutting down their operations — there is still (and probably ever will be) a federal income tax.

But states are a different story…

This being travel season, and the season during which some of our clients turn their eyes towards making a move, I thought I’d give you some info on how state and local Des Moines taxes might affect your decisions.

Oh, but back to federal taxes (and state) — consider this your quick reminder that estimated taxes for the second quarter are due June 15th.

This one always feels as if it came a little quick (two months since last payment instead of the normal three), so if this applies to you, you’ll want to make sure you have that all set up in time.

Secondly (and relatedly), I think I’m still in denial that we’re already into June. Our busiest season is behind us, and I always seem to expect that everything will slow down in a massive way afterwards … but this year has seen so much energy and growth around our practice that I still find myself in the midst of some very full days.

This, of course, is a very good thing. We are so grateful to be able to play such a meaningful role in the lives of our clients in Des Moines and beyond. We continue to work with some clients who are on extension and we’re helping clients who are (wisely) already making changes to their financial lives in order to proactively save on taxes. It’s all fun, because we really do love what we do around here.

So, speaking of proactive planning, if you’re considering travel or a move, keep this stuff in mind…

Ann M. Hartz, CPA Sheds Light on Some of the Highest State Sales Tax Rates

“Individual commitment to a group effort – that is what makes a team work, a company work, a society work, a civilization work.” -Vince Lombardi

WARNING: What I’m about to share might make you salty.

The topic is state and local taxes (SALT … ba dum, ching), and if there’s any condolence … it’s that nobody is exempt from paying their part.

But where exactly do your SALT dollars go?

With the Tax Cuts and Jobs Act (TCJA), answering that question got a little trickier this year. In short, SALT includes income taxes from taxing jurisdictions as well as real estate and personal property taxes. Where the TCJA altered things was its limiting of the amount which is potentially deductible from federal tax returns.

Let’s take a look at some more SALT ramifications. (Other than high blood pressure, that is. ๐Ÿ™‚ Okay, I’ll quit the salt puns now. Maybe.)

Higher Price to Purchase

Paying sales tax has become so woven into our economic fabric that we hardly recognize it on a day-to-day basis.

But states depend heavily on sales tax to make it through the year (see list below of which states truly rely on sales tax). The revenue generated plays a foundational role in the maintenance of cities, counties, schools and other initiatives within our state.

Do you like the state you live in? I hope so. Most every purchase you make goes toward its cause(s).

The Few and the Proud

HOWEVER, if you live in one of the five states that doesn’t apply a statewide sales tax — Alaska, New Hampshire, Montana, Delaware, Oregon — there are some other laws that apply to you.

In Montana, tourist-heavy populations can add up to 3% in state sales tax on their goods sold. Delaware (yes Delaware) is often called a “tax shelter” because of its individual tax laws, but businesses do pay more via gross receipts tax. New Hampshire will add a 9% state sales tax to hotel rooms, rental cars and restaurant meals, but is otherwise (mostly) sales tax-free so that you can “Live Free or Die”. Neither Alaska nor Oregon collect state sales tax either, but all is subject to change through the vote.

Top Ten Taxed for Sales

The list below is the percentage, in state revenue, comprised of total sales tax collections by state. Although Washington doesn’t collect corporate or individual income tax, they lead this sales tax charge with 46.4% of state revenue coming from sales tax.

Also, note the more “touristy” locations — Vegas, Mardi Gras, Nashville, Maui — embedded into this list. Going on vacation to any of these locations soon? Be on the lookout for extra pennies (and dollars) to pay.

  1. Washington 46.4 percent
  2. Tennessee 41.5 percent
  3. Louisiana 41 percent
  4. South Dakota 39.6 percent
  5. Nevada 39.4 percent
  6. Arizona 38.7 percent
  7. New Mexico 37.8 percent
  8. Arkansas 37.5 percent
  9. Hawaii 37.2 percent
  10. Texas 35.4 percent

It’s a Catch 22, right? Do you want to pay extra for a better place to live, or pay less for the things only you need?

And if you’d like to schedule a meeting for us in Hawaii, go ahead and buy us some plane tickets. I’d be quite happy to cover the sales tax. ๐Ÿ™‚

Warmly,

 

Ann Hartz

(515) 259-7779

Ann M. Hartz, CPA

New Ideas For Des Moines Students To Pay For College

New Ideas For Des Moines Students To Pay For College

I recently wrote about the cost of raising children, but there was one glaring omission: college.

But imagine if you had sent your son to Morehouse College. Here’s what happened there this month…

On Sunday, May 19th, investor and philanthropist, Robert F. Smith, shocked 400 graduating students from all-male Morehouse College when, in his commencement speech, he announced he would cover the costs of all of the student debt each graduating student had accrued. How much, you ask? Just a cool $40 (or so) million.

All in a day’s work for Smith, who went on to encourage the graduates: “You great Morehouse men are bound only by the limits of your own conviction and creativity.”

Now, without student loans hanging over their heads, many of the graduates have started dreaming about how they can creatively bless others moving forward.

What have we learned here? The next time you graduate, and see Robert F. Smith walking up to the podium to deliver a speech … get excited.

But what if you don’t have a Robert F. Smith in your life? There are some new programs emerging that you may be interested in hearing about…

New Ideas For Des Moines Students To Pay For College

“Sometimes it takes more courage to ask for help than to act alone.” -Ken Petti

Smith’s gift comes at an interesting time in higher education. Although a four-year education is rightly seen as an investment for life, it also carries a price tag that increases year-over-year.

In fact, the average cost of a four-year university has risen 30% over the past 10 years.

But there are new models emerging for paying for college. As highlighted in a recent Freakonomics podcast episode, Purdue University (among others) is exploring “Income Share Agreements” (ISA’s) for newly-enrolled students, in lieu of traditional tuition agreements.

In these new agreements, students pay back the funding they received by percentage according to their income for the first ten years after graduation. “The less they make, the less they are required to pay.”

Similar programs allow students to pay nothing upfront for their education in exchange for repayment in the form of a percentage of their income for a set number of years after graduation. There is a minimum annual income graduates must attain in order to qualify.

And services like Scholly help students find scholarships so that they can make it into a university of their choice.

Regardless of how education is covered financially, it’s important to still encourage today’s Des Moines youth toward betterment through education.

So let’s get behind the Des Moines students in our world, whether or not they happen to be our offspring. Gifts like Robert F. Smith’s are incredibly rare, and astonishingly generous. Although students should never bank on that kind of lightning bolt, it’s immeasurably valuable when they can receive encouragement from older generations on a regular basis.

After all, they will have a big say in how things run eventually.

So how will you channel your inner “Robert F. Smith” today? It may not be coughing up $40 million, but if you’re serious about helping people, we’d love to help you come up with the most tax-advantageous way to do so. You can reach us right here: (515) 259-7779

It may not be a commencement-level surprise, but your encouragement goes farther than you think.

Warmly,

 

Ann Hartz

(515) 259-7779

Ann M. Hartz, CPA

Making Children Less Costly For Des Moines Families With Kids Through The Child Tax Credit

Making Children Less Costly For Des Moines 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 Des Moines 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. (515) 259-7779

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 Des Moines 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 Des Moines 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. ๐Ÿ™‚

Warmly,

 

Ann Hartz

(515) 259-7779

Ann M. Hartz, CPA

Ann Hartz’s Three Building Blocks To Healthy Personal Finances

Ann Hartz’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: (515) 259-7779. 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.

Ann Hartz’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 Des Moines 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 Des Moines 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,

 

Ann Hartz

(515) 259-7779

Ann M. Hartz, CPA

College Is Expensive But Des Moines Families Can Save Big Through These Tax Breaks

College Is Expensive But Des Moines 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 Des Moines 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 Des Moines 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 Des Moines 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. ๐Ÿ™‚

Warmly,

 

Ann Hartz

(515) 259-7779

Ann M. Hartz, CPA

« Previous Entries