Tag Archives: Taxes

5 Financially Savvy Ways to Use Your Tax Refund

Taxes

Getting your taxes done early not only takes one more thing off your to-do list but further allows you to start planning for the future. Working with your tax professional, determine how much your family may receive this year from a tax refund. No matter the amount, we recommend putting it towards your financial goals for the year. Here are some great strategies we’ve tried to get the best bang for our buck:

Max out your 401(k) or Traditional IRA contributions. If you aren’t taking advantage of one of these two accounts, we highly suggest opening one! These tax-beneficial accounts help holders accumulate and grow their funds without the burden of tax at the time of deposit. Each account, however, is limited by how much you can contribute. By allocating funds into these account types it may not only help you save for retirement, but also allow your money to mature throughout the years, with no additional effort.
Make an extra payment on your mortgage or student loan. Paying down your loan is always a great option when selecting financial goals. In the case of a mortgage, you earn more equity as you pay, while with student loans, you gain more momentum towards financial freedom. Instead of adding money to each monthly installment, we recommend creating one lump payment. By doing this you can create a single but large decrease in your principal amount owed, drastically reducing your associated interest as well.
Save for the 2017 holiday season. While holiday events, family gatherings, and memories are held dear, the burden of the season can pose potential problems for your personal finances. If you struggled saving last year, now is the perfect time to set aside funds for the holidays. Determine how much you need to pay for each aspect of your seasonal activities, and save as much as possible in a separate account from your tax refund. If additional funds are needed, automate your savings to transfer a specific dollar amount into this account each month.
Pay off outstanding credit card debt. With one of the highest interest rates, credit cards are notorious for taking years to pay off. If you want to make a dent in your debt, we recommend tackling one card at a time. Using your tax refund, see if you can eliminate smaller debts first, then with the remaining funds, begin paying down each additional credit card. By paying off the card with the least amount of debt first, you can begin to snowball your way to financial freedom!
Start saving for a vacation. Whether it’s a spring break, a summer adventure, or a fall festival, it’s never too early to start saving. Once you have determined a destination, you can then create a rough budget of the expected expenses. Depending on your refund you may be able to pay for the whole trip outright, or you may need to supplement the funds with some additional monthly savings. No matter how you choose to save, we recommend keeping your vacation funds in a separate deposit account so you’re not tempted to use them throughout the year.

If you still have questions on how to best use your tax refund, our personal bankers would love to help. At Iowa State Bank, we can assist you in coordinating all your accounts to help make the most of your money. Stop in and see us today!

4 Ways New Homeowners Can Save on Their Taxes

Mortgage

Becoming a homeowner is an exciting and trying time in your life. Once all the papers are signed, and the keys turned over, it all seems worth it. That is until a pipe bursts, lightning knocks out a tree, or your dog decides to burst through the screen door. Not all hope is lost however. In return for your endless work, and commitment to a never ending to-do list, the U.S. Government has provided four tax-based ways to reward you for your new home ownership. See how to take advantage of these four tax breaks, and make the most of your home purchase:

Early IRA Withdrawal: For many new homeowners, securing the initial down payment can be the first hurdle in their real estate journey. If you’re a first-time home buyer and have an IRA, or Roth IRA, the IRS will allow you to withdraw up to $10,000, penalty-free, to aide in the cost of your new dwelling!
Valuable Deductions: Between your mortgage interest, mortgage insurance, and real estate taxes, your home deductions could make a big dent in your taxable income. When preparing your taxes as a new homeowner, be sure to bring any mortgage documents, and escrow account information, to your tax professional to gain the full benefit of the deductions.
Renewable-Energy Tax Credit: Did you upgrade your home appliances to more efficient and environmentally-friendly options? Did you install a geothermal system in your home? If so, this helpful tax credit may be able to take a portion of that improvement cost out of your deductible income!
Tax-Free Profit on Sale: When you go to sell your home, the IRS allows you to avoid the capital gains tax on the profits you generate from the sale. This means that if your home’s value goes up $35,000 in the two or more years you live there, you are then able to retain the additional $35,000 your home is sold for without having to pay any taxes on those funds. One other major stipulation of this benefit is that in order to avoid the capital gains tax, you must purchase a new home as your primary residence within the next two years.

With these key homeowner tax breaks, the next thing to put on your to-do list is to make a plan for those tax refunds! If you have questions on how to best budget for your new home, don’t hesitate to stop in. We’d love to talk taxes, financing, or other improvement ideas you have for your home!

Credit Union Tax Transparency

What is “House Study Bill HSB643” and why should everyone in Iowa support it? During this election year we’ve heard a lot about income tax, and paying one’s fair share. This concept is critical to the success of our state’s economy. Credit Unions pay very little tax on their income, unlike all other financial institutions which provide the same services. This Bill would require Iowa’s largest credit unions to disclose basic information about how they are using their substantial tax benefit. It will require the same disclosure of information that other “not-for-profit” entities must comply with.

The Bill would impact ten or fewer credit unions in Iowa. Those large, “complex credit unions” would then be required to disclose: total state income tax paid annually, information including executive compensation, and the basis for which they claim receiving a ‘low income’ designation.

The credit union industry does not currently report aggregate income tax paid as is required of other business industries. Moreover, while other not-for-profit entities report information such as executive compensation, only credit unions are allowed to keep this information secret from the public. Finally, the ‘low income designation’ greatly expands credit union powers (and their tax exemption) beyond their traditional charter but no one will clarify what the designation is based on.

The ten largest Iowa credit unions made in excess of $100 million in 2015, and paid a miniscule amount of income tax on those profits. Credit Unions were given non-profit status and chartered so that they could serve specific groups of people and to serve a social mission. They no longer serve only a select group of people and many now lack a specific social mission, to serve those that may not otherwise have access to financial services. Iowa taxpayers deserve to know just how much the credit unions’ tax benefit is worth and who is really benefiting from their subsidization.
The credit unions’ argument against this bill is that it “undermines Iowa credit union confidentiality laws”, however the language clearly states that the credit union regulator must use aggregate census data and not individual credit union member information. The credit unions’ real motivation in opposing this bill is they don’t want the Legislature, their members, or Iowa taxpayers to know anything about how they are using this very substantial tax benefit. All Iowans pay more when some don’t pay their fair share.

Please support HSB 643 and help shed some light on this issue for all Iowa taxpayers. I urge you to contact your State Representative, and ask for their support of HSB 643. Contacting your legislator is quick and easy, just click here – curt.hanson@legis.iowa.gov or dave.heaton@legis.iowa.gov
To search for other state elected officials, click here – https://www.legis.iowa.gov/legislators/find?address=&city=Fairfield

The Benefits to Filing Your Taxes Early

Spring is almost here and so is tax season! Get a head start on your filings this year with our quick and easy tips. Remember, the sooner you file your taxes the sooner you receive any potential deductibles!

File your taxes IF necessary.

After receiving your W-2’s from employers, determine if you need to file taxes, or if you are able to claim exemption. If you have had money withheld from your paycheck, you want to file taxes. As a general rule, if you’re single making over $9,750, or married and filing jointly making over $19,000, then yes you need to file your income taxes. There are however additional financial limits for head of household, widowers, and tax payers over 65. Once you’ve determined that you need to file the next step is choosing your manner of filing.

Choose the best medium of filing for you.

With so many options in filing your taxes it’s hard to decide which option is best for you and your family. If your household income is less than $58,000 the IRS provides free online filing software that can be used to file relatively simple returns. If you prefer to do the filing yourself and are well versed on potential deductions and other regulations, you can print out the tax forms mail your taxes straight to the IRS. If you’d like some added assurance in your filings, using a tax software or hiring a local tax consultant can be beneficial when you have a more complex tax filing, or want further education throughout the tax process.

Utilize your deductions.

Filing income taxes can at times feel like a run-around, however if done properly the outcome can benefit you greatly. Deductibles are an opportunity that many citizens take advantage of, allowing you to deduct various expenses from your taxable income, potentially bringing you to a lower tax bracket. Below are several simple ways you can utilize tax deductions.

Charitable donation deduction – keep receipts for any donation to a certified non-profit, even baked good donations may be deducted if the receipts are kept from the purchase of ingredients.
Relocation deduction – after moving 50 or miles away for a new career you are able to deduct the cost of moving expenses, storage, and travel expenses if you have worked there for 39 weeks or more. If you have not yet worked 39 weeks, but you will accomplish that number in the coming year, you may still file your deduction.
Mileage deduction – maintaining a rigorous travel log, may seem tedious, but it will pay off in the long run. If you’re driving for volunteer work, job-hunting, or doctor’s appointments you can deduct the mileage from your taxable income so long as you have your travel log and relative receipts.

Did you know nearly 20% of U.S. taxpayers wait until two week before the deadline to turn in their annual taxes? Don’t delay, stop by the bank today to see what options we have to secure your potential refund.