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hillary vs. clinton tax planAre you for Trump, or do you prefer Clinton? For many Americans it appears to be a choice between bad or worse. No matter who you choose, one thing is clear, most people will be ecstatic when this election finally over. It has been an all-out war since the candidates put on their gloves and entered the ring, with each taking jabs one after the other in hopes of delivering a knockout blow. From serious accusations against Donald Trump regarding sexual improprieties to leaked emails from Hillary Clinton’s private server account, this has been a non-stop battle that appears to have our country more divided than ever. The good news is it will soon be over, with the election now just days away.

Taxes Are a Hot Topic

One of the biggest issues at the heart of this election – not unlike almost any other election – are taxes. Of course, it comes as no surprise to anyone that both candidates have tax plans that are essentially polar opposites. While each candidate claims his or her plan will be in the best interest of the country and will bring about the most favorable results for everyone (except for big business and the wealthy in Clinton’s case), they have almost nothing in common. In fact, the two candidates agree on almost nothing, when it comes to taxes. So, if you are one of those undecided voters that is still waiting for one of the candidates to reach you – or if you think you have decided but could still be persuaded in the other direction – then perhaps having a better understanding of how these two tax plans will affect you could be the deciding factor.

Trump’s Stated Tax Plan

These are the key findings of the Trump Tax Plan:

  • It would greatly reduce individual income taxes and the corporate income tax and simplify the current tax code.
  • It would reduce taxes across the board by $11.98 trillion over the next 10 years. It would also reduce tax revenues by $10.14 trillion over the same time period.
  • Based on the Tax Foundation’s Taxes and Growth Model, the plan would greatly lower marginal tax rates and the cost of capital. This would cause the GDP to increase by 11 percent over the long term.
  • Trump’s plan would see a 29 percent larger capital stock, 6.5 percent higher wages, and up to 5.3 million more full-time equivalent jobs.
  • His plan would also cut taxes for all income levels, which would lead to more after-tax income for all taxpayers.

Simplicity Is the Key

Under Trump’s plan the tax code would be simplified, starting with just three income brackets:

  • Joint filers making less than $75,000 would pay 12 percent.
  • Joint filers making $75,000 to $225,000 would pay 25 percent.
  • Joint filers making more than $225,000 would pay 33 percent.

Tax brackets for single filers would be half as much as the rates for joint filers. He wants to increase the standard deduction to $30,000 and $15,000 and cap it at $200,000 and $100,000. He wants to completely do away with the estate tax, and he would allow parents to deduct the full cost of childcare. He also wants to reduce the corporate tax rate from 35 percent to 15 percent, and at the same close loopholes that allow companies to avoid much of their tax bill.

Clinton’s Stated Tax Plan

Here are some of the major points of the Clinton Tax Plan:

  • Clinton has promised to change several policies aimed at raising taxes on individual income, increasing tax credits, and reforming business taxation.
  • Based on the Tax Foundation’s Taxes and Growth Model, her plan would boost federal tax revenue by $1.4 trillion throughout the next 10 years on a static basis.
  • Clinton’s plan would also increase marginal tax rates on both businesses and individuals, leading to a 2.6 percent lower level of GDP. This plan would also affect the smaller long-run economy, leading to lower wage levels and full-time equivalent jobs.
  • Taking into account the smaller economy and narrower tax base, her plan would end up increasing revenue by $663 billion.
  • This plan would also make the tax code more progressive and would reduce the top 1 percent’s after-tax income by 6.6 percent. On the other hand the after-tax income of all other income levels would increase by at least 0.1 percent.

The Wealthy Pay a High Price

Under Clinton’s plan, the nation’s top earners will pay a more in taxes. For starters she is proposing a “Fair Tax Surcharge” of 4 percent for anyone who makes more than $5 million a year. She also wants to eliminate several loopholes that allow the wealthiest individuals and corporations to greatly reduce their effective tax rate. That would mean wealthy Americans would pay no less than 30 percent. Clinton wants to increase the estate tax rate and raise it as the value of the estate increases, topping out at 65 percent for estates worth $500 million or more. She also favors limiting retirement accounts and increasing the amount of time an investor has to hold onto a stock before they qualify for the lower capital gains tax rate.

Middle Class Relief

Meantime, under Clinton’s plan the middle and lower class could seem some changes, but in reality she is proposing that the tax code for these individuals remain largely the same. She has said she would double the child tax credit to $2,000 for each child and she wants to make the tax process for small businesses much less complex. Overall, Clinton’s plan would hit wealthy earners and big businesses the hardest, and would account for a tax revenue increase of about $1.1 trillion. She has proposed using this additional revenue to pay for domestic agenda.

What About You?

There are many factors to consider when it comes to choosing a president, not the least of which is his or her tax policy. While no one can be certain if any candidate will stick to his or her stated plans after being elected, this gives you a better idea of where each candidate stands on taxes and how those proposals might affect you. So get out and vote on November 8 and then celebrate that it’s finally over.

tax loss harvestingIn the world of investing, you win some and you lose some. But taxpayers who take advantage of tax loss harvesting strategies can identify opportunities to transform investment losses into tax benefits, as the market moves.  Though tax-loss harvesting has a reputation for applying only to high-income earners and wealthy investors, the fact is, any investor who has capital gains from investment activity (and will be on the hook for the taxes that come with them), can benefit from tax-loss harvesting.

Here are some simple steps you can use to review your portfolio, and identify possible tax loss harvesting opportunities that could reduce your 2016 tax bill.

Which investments have lost gained, and lost value since you purchased them?

Tax loss harvesting is identifying which investments—including stocks, bonds or mutual funds—have decreased in value since you purchased them, and strategizing how to use the losses to offset the taxes you’ll owe on investments that increased in value.

When did you purchase the investments?

Short-term capital gains (or losses) apply to investments held for less than one year; long-term capital gains apply to those held for one year or more. Short-term capital gains tax rates are typically higher than long-term capital gains rates. (Your brokerage account will likely indicate the exact number of shares of any investment you purchased, and the date you bought or sold it on your statement or online account profile). As a result, the experts at WealthFront say that younger investors who have a long time horizon for their investment strategy, and who contribute consistently to their investment portfolios for many years are most likely to reap the long-term savings benefits tax loss harvesting offers.

What tax bracket will fall into in 2016?

When you have a sense of your 2016 tax bracket, you can better predict how much tax loss harvesting could impact your taxes owed—especially if offsetting gains keeps you in a lower tax bracket.

In 2016, single filer taxpayers with income between $37, 651 and $91,150 fall into the 25% tax bracket for ordinary income and short-term gains. But single filers who earn between $91,151 and $190,150 in income in 2016 are in the 28% tax rate for ordinary income, and short-term capital gains. Through tax loss harvesting, a taxpayer who is close to either bracket’s earning threshold could potentially offset short-term gains with losses, and remain in the lower tax bracket.

What gains and losses can you leverage?

Short-term gains are taxed at a higher rate than long-term gains. Taxpayers most benefit by applying them to losses first—but it’s not always legal to do so, based on the tax code.  Tax law specifies that taxpayers must apply like losses to offset like gains of the same type first. For example, short-term capital losses must apply to short term capital gains, and vice versa with long-term losses/gains. However, tax code does allow taxpayers to apply outstanding losses to outstanding gains that aren’t of the same type.

If a taxpayer has $5,000 remaining in long-term losses but no more long-term gains, for example, she could apply the amount of the loss to offset some of her short-term gains.  Taxpayers can also carryover losses and apply up to $3,000 a year in capital losses to reduce ordinary income, until all losses have been claimed.

Though tax-loss harvesting more than once a year could help investors take advantage of some losses that occur with market downturns, it’s important to be certain you’re ready to part with an investment if the goal is to leverage the loss. The wash-sale rule says that investors who sell a security—or a “substantially identical” security—cannot buy it back within 30 days. If they do, they’ll lose the tax-related benefits associated with the loss.  If you want to invest in the same type of security you sell for tax-loss harvesting purposes, look into an ETF that tracks a similar index as the sold security; it’s not considered an identical investment.

october 17th tax filing extension deadline 2016 Filed a 2015 tax extension last winter or spring using Form 4868 because you couldn’t complete your 2015 tax return filing by the April 18, 2016 deadline?  It’s time to stop procrastinating, and file your 2015 tax return. As of Monday, October 17, 2016—the extended tax filing deadline—the IRS expects that those who were approved for a tax filing extension submit completed returns, and pay any outstanding tax amounts owed for 2015.

The Financial Impact of Late Tax Payments

Filing for an extension means the IRS is willing to give a taxpayer more time to get his or her financial house in order to prepare an accurate return—but it doesn’t mean they’re willing to wait for the money a completed tax return indicates is owed. (Technically, any taxes owed for 2015 should have been paid back in April—despite applying for the extension).

In fact, the Internal Revenue Service (IRS) now charges taxpayers a 5% late filing penalty for each month (or part of a month) on any unpaid 2015 taxes not received by the October tax extension deadline, up to a maximum of 25%. The IRS also charges interest and penalties for tax filers who didn’t pay at least 90% of their tax bill back in April—even if they do file by the October 17, 2016 extension deadline.

On top of that, remember that estimated tax payments for 2016 are still due according to the quarterly payment schedule—even for taxpayers who have yet to complete and file a 2015 tax return. On its website, the IRS explains that self employed taxpayers whose 2015 adjusted gross income was more than $150,000 (or $75,000 for those who are married but filing separately), for example, must pay either the smaller of 90% of expected tax for 2016– or 110% of the tax shown on the 2015 return to avoid an estimated tax penalty.

What Happens if You Don’t File by the Tax Extension Deadline

Taxpayers who need to file by the extension deadline must submit tax returns postmarked by October 17, 2016, in order for the return to be considered filed on time.

Those who can pay what is owed for 2015 in full should still file their 2015 tax return by the October 17, 2016 extension deadline.

Failure to do so could mean the IRS takes matters into its own hands, and prepares what is called a substitute for return (SFR) on your behalf.  While letting the IRS handle tax prep may seem like an appealing proposition to tax procrastinators, the return they prepare for you will probably result in a far greater tax liability than the one you’d prepare. Not only will it omit a host of credits and deductions for which you might legally qualify by handling your own tax filing, the SFR will include penalties for your failure to file and/or pay what you owe.

Can’t afford to pay your taxes by the October deadline? The IRS offers a variety of installment payment plans for which taxpayer can apply in order to make smaller tax payments over time. For taxpayers who cannot pay taxes owed due to financial hardship, the IRS also offers opportunities to apply for an offer in compromise, which could result in a reduction of the amount of tax owed. (It’s important to note that the IRS will not accept any offer in compromise applications from taxpayers who have not filed their tax returns).  The IRS also allows taxpayers to apply to delay tax payment collections if they can prove financial hardship.

fantasy sports and taxesYou can feel it in the air. The mornings are a little cooler and days are getting a little shorter. The leaves are even starting to change colors and weekends are full of opportunities to get reacquainted with your favorite armchair or couch and watch some football. For many sports fans, watching football is purely for enjoyment or for the opportunity to cheer on their favorite team, which depending on who you cheer for, may or may not be that enjoyable. However, as sports betting and fantasy sports continue to grow in popularity, watching football is now about a lot more than just relaxing and enjoying the game.

Multi-Billion Dollar Industry

In fact, fantasy football has become so huge it now has its own associations, TV and Internet shows and analysts and commentators dedicated solely to breaking down the fantasy side of the game. With the likes of DraftKings and FanDuel and other national daily fantasy sports outlets the number of fantasy sports players just keeps growing. According to The Fantasy Sports Trade Association (yes, that is actually a thing) almost 57 million people in the U.S. and Canada played fantasy sports in 2014, with those numbers expected to increase. The amount of players has been continually growing each of the last few years and there seems to be no slowdown in sight. Dollars-wise, those keeping track expected fantasy football players to spend an estimated $4.6 billion in 2015. So the bottom line is fantasy sports, especially fantasy football, are huge.

Fantasy Sports Is Usually a Hobby

The reasons people get into fantasy sports vary, but for many players, it’s all about making money. While very few players will actually work to make a living solely on fantasy sports, there are some who do. However, for the most part, fantasy sports players are really just considered hobbyist when it comes to taxation. That is unless you live in New York and Massachusetts, which recently voted to count fantasy sports outlets such as DraftKings, FanDuel and the like as gambling. Despite those rulings, in most cases, fantasy sports is not considered gambling, but that doesn’t mean you don’t have to report your winnings to the IRS. In fact, if you win at least $600 from a single venue then you, and the IRS, will receive a Form 1099 for those winnings. As a hobbyist, you are also allowed to deduct hobby expenses. For example, if you were to earn $6,000 playing fantasy football, but you had to pay $500 as an entry fee, then you could deduct that $500 entry fee as an expense and report just $5,500 as net winnings.

When is Fantasy Sports Gambling?

For those really serious players that don’t fall into the hobbyist category, fantasy football can be considered gambling, which means you are subject to reporting your gambling income and losses. However, in order for that to happen you have to show that you are essentially a professional fantasy sports player and use fantasy sports as your primary source of income. One way to differentiate between gambling and a hobby is whether or not you are betting on a real team. Since fantasy sports are not based on the outcome of an actual team it typically doesn’t count as gambling. On the other hand, if you are betting on the outcome of a particular game with the results determining your wins or losses, then that is considered gambling and is subject to gambling reporting laws. You can learn more about gambling and income losses by visiting IRS.org.

Keep Track and Report

So, if you’re into fantasy football, and you’re good enough to win anything, then make sure you’re keeping track of your earnings, because rest assured the IRS will be. On the other hand, if your fantasy draft didn’t go that well and your team is more of a nightmare than a fantasy, you can report any net losses you take as well. At least that way you can get a small tax break if your team doesn’t pan out.

irs-logoA lot of people have retirement accounts, which is always a smart thing to have. Most people also know that if they decide to withdraw funds early or take out a loan from 401k plans and IRA accounts they have to pay a penalty. However, in certain situations these can still be very tempting options, especially for someone who finds him or herself in very difficult circumstances. Such is the case for many of the victims of the latest round of Louisiana flooding. No doubt everyone affected by the serious floods, and all the damage that comes with them, is looking for ways to clean up, rebuild and start over. The problem for many is that they just don’t have the disposable income necessary to overcome the hardships they are facing.

Rebuild With a Retirement Account

That’s where retirement plans come in. The IRS announced on Tuesday that many of the victims of the Louisiana flooding, as well as their family members will now be allowed to take out hardship distributions and loans from their individual retirement plans, such as a 401k. However, at this point there is a catch, and it’s a big one. That’s because unless the IRS changes its course, those who take out a loan or a hardship distribution will still be subject to the regular taxes and early withdrawal penalties. While, U.S. senator Bill Cassidy has said he will push the IRS to wave those penalties, as of now, they still apply. That means for some of the flooding victims it’s a choice between cleaning up and giving up.

Consider All Your Options

Many of those who have lost everything don’t have any other money to try to cleanup and rebuild, which means using their retirement funds is the only option have. However, with the possibility of stiff penalties and hefty taxes, that makes the decision that much more difficult. According to some experts, people should strongly consider looking for funds from other sources like low-interest Small Business Administration loans and bank loans, and only use their retirement account as a last resort. Otherwise, they could be risking their long-term financial security. While victims must have enough money to take care of their immediate living expenses, they should be very careful about taking out large portions of their retirement savings to clean up and rebuild. One expert noted that many victims might be eligible for both insurance funds as well as federal recovery funds, which is another reason it’s best to wait before cashing out your 401k.

Family Members Can Help Too

Meanwhile, the IRS has stated that people who lived or worked in the affected areas are eligible for the program. The agency also announced that family members who live outside of the areas could also take out a loan or hardship distributions to help loved ones located in the affected areas. According to its official statement, the IRS stated that: “Participants in 401(k) plans, employees of public schools and tax-exempt organizations with 403(b) tax-sheltered annuities, as well as state and local government employees with 457(b) deferred-compensation plans may be eligible to take advantage of these streamlined loan procedures and liberalized hardship distribution rules. Retirement plans can provide this relief to employees and certain members of their families who live or work in the disaster area. To qualify for this relief, hardship withdrawals must be made by Jan. 17, 2017.”

Cutting Through the Red Tape

In addition, the IRS also announced that it would ease up on the many administrative and procedural rules typically associated with retirement plan loans and hardship distributions. That means eligible retirement plan participants will not have to worry about dealing with so much red tape and instead be able to gain access to their money with greater ease and in less time. The bottom line is these options offered by the IRS could be beneficial to many of the victims. However, anyone considering this route needs to look at all his or her options and weigh the pros and cons carefully.