You have a laptop, class schedule and course syllabus. You’re ready to start school, right? Well, almost.
The beginning of school is a good time to learn about the tax benefits that can help you offset qualifying education costs. If you’re paying education costs for yourself, a spouse or a dependent, you may be eligible to save some money with education tax credits.
The American Opportunity Tax Credit (AOTC) is:
• Worth a maximum benefit up to $2,500 per eligible student.
• Only for the first four years at an eligible educational or vocational school.
• For students pursuing a degree or other recognized education credential.
• Partially refundable. People can potentially get up to $1,000 back.
The Lifetime Learning Credit (LLC) is:
• Worth up to $2,000 per tax return, per year, no matter how many students qualify.
• Available for all years of postsecondary education and for courses to acquire or improve job skills.
• Available for an unlimited number of tax years.
To claim the AOTC or LLC, use Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits). Additionally, if you claim the AOTC, the law requires you to include the school’s Employer Identification Number on this form. Here are a few more facts to add to your notes:
• You’re required to have Form 1098-T, Tuition Statement, to be eligible for an education benefit. You receive this form from the school you attended. There are exceptions for some students.
• You may use only qualified expenses paid to figure a tax credit. These include tuition and fees and other related expenses for an eligible student.
• Eligible educational schools are those that offer education beyond high school. This includes most colleges and universities.
• You may only claim qualifying expenses in the year paid.
• You can’t claim either credit if someone else claims you as a dependent.
• You may need to reduce the amount of your credit based on the amount of income you receive.
• You can’t claim both the AOTC and LLC for the same student or for the same expense in the same year.
• The Interactive Tax Assistant tool on IRS.gov can help you check for eligibility.
• See IRS Publication 970, Tax Benefits for Education, for details, rules, examples and a complete explanation of all the benefits.
When it comes to owning a business, how well it is running does not always depend on a year-end profit and loss statement. For even if you finish the year making a profit (and even assuming that you paid yourself what you wanted to be paid), there could have been many difficult times throughout the year, and those are very likely attached to cash flow.
Trust me, I do tax returns, so I fully understand the ebb and flow of how much cash is coming into a business.
I wanted to take this week to go over some issues concerning this subject. Over last tax season, I saw many businesses who were just breaking even, but with some adjustments or a change in mindset, improvements could start to be made.
First, if you are in a business like mine with unavoidable seasonal swings, be aware of this. In that situation, you cannot run your business as if every month is going to be like the best month, and you cannot run your business as if every month is going to be like the worst month. Instead, you must have control enough over your financial numbers to know when and how much you can spend – and in a way that will help your business grow.
A small corollary to this is that cash reserves are necessary. Sure, as a business you probably have access to some sort of credit, but the more you can access your own money that doesn’t require being paid back with interest, the sooner you get back to your starting position.
Although these may feel like smaller moves, being mindful of your receivables and payables can help ease cash flow issues. For the payables, putting off paying a bill can give you a slight cushion. Now I am not saying you should push anything past the due date, for this is likely to lead to other charges and only hurt the totals we are trying to improve. But it is possible that waiting two weeks until the bill’s due date could be beneficial.
On the other side, efforts must be made to see that your customers pay you in a timely manner. You may want to think about instituting some sort of reminder system if you don’t have one, or possibly even attach your own late fees to their bills if payment is not coming in on time. It is also possible to offer incentives for paying early.
Overall, it is likely that no one action is going to be enough to solve serious cash flow issues. And it is impossible to get a firm grasp on it as a whole without looking deeper into the actual numbers of your business. By being proactive, though, I am certain there are things you can be doing to improve the situation. If this is something you would be interested in delving into, please let us know. Putting in the time now to make positive changes will make much of your future time feel more positive.
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As I write this on Monday, it appears that President Trump’s and the Senates Republicans’ attempts to repeal (and potentially replace) Obamacare have failed. By the time you read this, though, that may certainly change. For if there is one thing this story has taught us, it is that there is little one can count on during contentious political times.
Heck, it’s not like passing the Affordable Care Act was an easy thing even when the Democrats were in power during (slightly) less contentious times.
Getting into the political debate over the issue is not necessary or proper for this spot. If you want blogs that do that, you can find enough of them to keep you occupied until … well forever most likely as it is not likely this battle is end sanytime soon. From the moment Trump was elected, though, questions abounded as to how one’s tax picture would change if our country’s current health care plan went away.
Those questions were plentiful, and possible answers to those questions were probably more plentiful. Note though that they were only possible answers at the time and seem ever less likely to be possible the longer it takes for this saga to play out. It is impossible to say that prognostication plays no part in the financial world (the stock market is run by it in some way, after all), but it really should only go so far.
After all, if anyone made any significant changes because they were certain changes were coming in their company’s obligations concerning health insurance, they are hurting now as they roll back some numbers to what they were before any of this predicting began.
In here are many lessons …
First, work only from the numbers that are definite in your reporting. I have warned against fudging such things in an optimistic way before, for no matter how glass half-full you want to be, dealing with real numbers is what will allow you to get to the point where you can feel great because things are actually great.
Second, just as you have to work with real numbers, you have to work with real situations. If things happen in the political realm that suddenly improve your situation, celebrate that bonus when it happens. Counting on serendipity, however, is not sound financial advice.
Third, understand the timing of the political world. Things felt like they were going to completely change when Trump was elected, as it symbolized a great new world for some and a feared new world for others. Both sides, however, would now have to admit that whatever hopes or horrors they saw coming did not come to pass as quickly as felt possible at the moment. One must look to the future to be successful, but dealing with the present takes precedence.
Finally, try to keep your political views separate from your financial ones. You may wish that things were different than they are, but those wishes will not change your legal obligations. Be active in the political world if there is change you want to help enact, but concede that you must operate in the world as it now is.
There are so many twists and turns along the way in life that we can never really know how things are going to turn out, so let’s start by owning today.
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