Search Results for: college

Saving for College 101

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Saving for college could be an investment that pays for itself. But for many families, it can also be a huge strain on your budget.

If you’re looking into ways to help fund your child’s educational future, read on for our handy guide.

Building a college savings

There’s no single “best” way to manage higher education costs. It all comes down to your family, your goals and your finances.

529 plan. A 529 plan allows money to grow in a tax-deferred account. It can be withdrawn tax-free for qualified, education-related expenses at colleges, vocational programs and apprenticeships. The funds from a 529 plan may even be applied toward up to $10,000 in student loan debt.

Education Savings Account (ESA) or Education IRA. An ESA allows investments of up to $2,000 (after tax) per child, per year for tax-free growth. The rate at which it grows varies based on the investments you choose, but it generally offers a higher rate of return compared to a regular savings account.

Uniform Transfer to Minors Act (UTMA) or Uniform Gift to Minors Act (UGMA). While savers can use a UTMA and a UGMA to put away money for college with reduced taxes, they can also be used for non-educational costs. Similar to mutual funds, they give parents control of the funds until the child reaches age 18 or 21 (varies by state), at which point they may choose how to allocate the funds.

Remember, the sooner a plan is opened, the more time investments will have to grow.

Tax savings for current students

Once your child is enrolled in higher education, he or she may also want to take advantage of these tax-savings opportunities. Remember, it’s always best to speak with a tax professional regarding your family’s personal situation.

  • American Opportunity Credit. For qualifying students, this credit pays for up to the first $2,000 spent on tuition, fees, books and more. Plus, it’s applicable for all four years of undergraduate studies.
  • Lifetime Learning Credit. The Lifetime Learning Credit gives students a tax credit equal to 20% of their tuition and related expenses up to $10,000. The credit maximum is $2,000.
  • Tuition and fees deduction. Independent students may qualify for a tax deduction of as much as $4,000.

A plan to save

Let’s face it. Higher education costs are just that — high. The average student attending an in-state, public four-year institution spends about $25,707 in a single academic year. The average student attending a private, nonprofit university spends a whopping $54,501 per academic year. While there are student loans, scholarships and financial aid opportunities, any amount saved will help chip away at the steep costs.

Just like retirement and tax planning, figuring out how to pay for college is an important discussion to have with your trusted financial advisor. Need assistance? Count on Magone & Company as a knowledgeable financial resource. Reach out today at (973) 301-2300.

Paying Off Student Loan Debt: What They Didn’t Teach You in College

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Once college ends, graduates prepare for life in the real world. Their focus shifts from writing papers and studying for exams to finding a place to live and beginning a new career. But just like the memories of college and the many lessons learned, there’s one more thing that will stay with them for years to come: student debt.

If you’re feeling the stress of student loan debt, here are some tips to help you deal with this often overwhelming financial obligation:

  • Make additional payments. Sure, it might not be an easy thing to pull off, especially when you’re just starting out in the job world. But if you can swing it, extra payments here and there can have a huge impact on the time it takes to settle your debt, as well as the money you’ll save in the long term. Make sure your lender applies the additional amount to the principal balance to reduce the amount of interest you’re paying.
  • Set up automatic payments. Many lenders will offer discounted interest rates for using autopay. It may not make a substantial difference — perhaps a few hundred dollars — but it’s something.
  • Start a dedicated account for student loan payments. Creating a fund reserved for paying off student debt ties into another tip: budgeting. When you get paid, have a portion automatically deposited into this account, and don’t touch it. If you keep this account as a “walled garden”, you’re more likely to resist the temptation to use it for other interests. Shop around for high-interest savings accounts to give your money a boost.
  • Seek out companies or careers that offer student loan forgiveness incentives. Some government and nonprofit agencies, for example, may offer student loan forgiveness programs for employees. And after working for a certain amount of time, you may qualify to have your student loan balance canceled.
  • Refinance — with care. Refinancing your debt can be a good option if your loan carries a high interest rate, or if you have multiple loans that you want to consolidate. Bear in mind, if you refinance a federal student loan, you give up eligibility for government student loan forgiveness or other potential money-saving options.

When it comes to student loans, pitfalls can arise when you don’t know all the rules for managing long-term debt. Advice from a knowledgeable financial resource can save you headaches, complications and most importantly, money as you begin your post-college journey.

 

Tax Preparer or Financial Advisor: What Does Your Family Really Need?

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Most families assume they just need someone to prepare their taxes each year.

But if you’re only working with a tax preparer, you may be missing the financial guidance that could transform your family’s future and build lasting security.

What’s the difference between a tax preparer and a financial advisor?
A tax preparer focuses on one task: filing your annual tax return based on what already happened last year. They gather documents, complete forms and submit them to the IRS. It’s transactional work that happens once a year.

A financial advisor takes a broader view of your entire financial picture. They can help you plan for college expenses, structure retirement savings, coordinate estate planning and make strategic decisions throughout the year.

Does my family really need more than tax preparation?
If you only care about filing on time, a basic preparer might suffice. But if you want to build stability, save for education, plan for retirement or make smarter money decisions, you need ongoing guidance.

Family advisory services at Magone & Company deliver both — comprehensive tax prep plus strategic planning for every life stage. From budgeting and bill payment to investment strategy and estate planning, you get everything in one trusted relationship.

What does family financial advisory work include?
It varies based on your needs and life stage. For young families, it might mean college savings plans and realistic budgets. For established families, it may consist of retirement planning and wealth preservation. But for all families, family financial advisory work is having someone to call when making major financial decisions.

Services can range from paying household employees and managing bills to coordinating estate planning and charitable giving strategies. The goal is to give you confidence in your financial decisions and help building long-term security.

What if it’s just me, not a family?
The same overall advisory services apply to help reduce your tax burden and preserve wealth. There are also considerations like career financials — like how to handle stock options, a signing or relocation bonus, or deferring compensation to minimize your tax exposure.

A good CPA is looking at your situation proactively, so you’re not stuck with a surprise tax bill after the fact.

How do I know if my current tax preparer is advising me?
Ask yourself: Does my CPA reach out during the year with questions or ideas? Do they know my financial goals and family situation? Am I comfortable calling them when considering a major purchase or career change?

If your accountant only contacts you during tax season, you’re not getting advisory services. A true advisor maintains an ongoing dialogue with your family, understands your goals and provides guidance when you need it, not just when the IRS requires paperwork.

Is financial advisory service only for wealthy families?
Absolutely not. While ultra-wealthy families often have full-time “family offices,” that support should be accessible to all families building financial security.

At Magone & Company, we structure our family advisory services to match your specific needs and life stage. Whether you’re starting out or approaching retirement, ongoing guidance helps you make smarter decisions and avoid costly mistakes.

Are Magone & Company’s family advisory services right for you?
Every family needs tax preparation. But if you want to build wealth, plan for life events and make confident financial decisions, you need an advisor. Reach out for a complimentary assessment at (973) 301-2300.

This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance specific to your unique circumstances.

Maximizing Financial Aid: Strategies Every Family Should Know

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Navigating the complex world of college financial aid can be overwhelming for parents and students alike. But with a holistic, proactive approach, you can significantly improve your aid potential and reduce college costs.

Here are some tips and strategies to help transform the college dream of an affordable education into your family’s reality.

Plan early. Financial aid preparation is a multi-year process. Ideally, begin strategic planning as early as freshman or sophomore year of high school. This includes:

  • Carefully managing family assets and income
  • Understanding how different financial moves can impact aid eligibility
  • Exploring available scholarship opportunities and eligibility

Understand the Free Application for Federal Student Aid (FAFSA) calculation. The FAFSA is the form you complete, but the Expected Family Contribution (EFC) is the output that results from the information you provide on that form. The EFC is critical in determining aid eligibility. The formula heavily weights income, but there are several factors that influence this calculation:

  • Parent’s income and assets
  • Student’s income and assets
  • Number of children in college
  • Family size and household income

Remember, not all assets are treated equally. Retirement accounts, primary home equity and life insurance are typically excluded from aid calculations, while investment accounts and cash savings tend to carry more weight.

Manage assets and income strategically. Smart financial positioning in the years before college can dramatically improve aid outcomes. To maximize aid potential, consider these financial strategies:

  • Avoid large cash transfers to student accounts before filing FAFSA
  • File FAFSA using prior-prior year tax returns, allowing time to plan
  • Prioritize parent-owned 529 plans, which have minimal impact on aid calculations
  • Consider timing of bonuses, capital gains or other significant income when possible
  • If possible, defer income or accelerate deductions in the years preceding your FAFSA submission

Explore multiple aid sources. Federal aid is just one piece of the college funding puzzle. It’s important to diversify your approach.

  • Research institutional scholarships and merit-based scholarships
  • Investigate state-specific grant programs
  • Consider private scholarship opportunities
  • Explore work-study programs

Compare colleges. The right school choice can make a substantial difference in your overall financial commitment. Not all colleges distribute aid equally.

  • Review financial aid packages from multiple schools
  • Look beyond top-tier schools to institutions offering more generous aid packages
  • Consider schools where your student might be a top candidate for merit aid

Repeat the process every year. Financial aid isn’t a one-time event. To continue receiving aid and optimizing your aid amount, it’s recommended that you:

  • Appeal financial aid decisions if family circumstances change
  • Reapply for FAFSA each year
  • Explore additional funding sources annually

An action plan for college affordability

Remember, every dollar saved in financial aid is another dollar in your pocket. With careful planning, you can make college more affordable and accessible for your child.

 

Unwrap Savings This Holiday Season: 7 Tax To-dos

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‘Tis the season for twinkling lights, holiday cheer and…tax planning?

As the final days of the year rapidly approach, it’s time to start checking off your tax to-do list for a merrier 2025. Here are some tips to help optimize your tax situation and avoid a Scrooge-like surprise come April.

1. Estimate your taxes. It’s not too late to estimate your 2025 tax liability, ensuring you’re paying enough through withholding or estimated tax payments. Review your income, deductions and credits for the year, and make any necessary adjustments before the year-end.

 Accurate tax estimation and proper record organization not only helps with current year compliance; it also provides a foundation for future financial planning and potential audit defense if you need one.

2. Consolidate financial records. Gather and organize all financial documents such as W-2s, 1099s, receipts, investment statements and records of any additional income streams. Remember, taxable income extends beyond your salary. Investment gains, freelance work, rental income and even certain Social Security benefits all impact your tax obligation.

Act now to help streamline the filing process and avoid missing out on potential deductions or credits, as well as any potential issues with the IRS.

3. Review your retirement accounts. If you have a 401(k), IRA or other retirement savings plan, review your contributions for the year. Contributions are typically tax-deductible, so by contributing the maximum amount allowed, you can lower your tax bill and grow your retirement savings at the same time.

Additionally, if you’re over 50, you may be eligible to make catch-up contributions to your retirement accounts to save even more, while benefiting from additional tax savings.

4. Make charitable giving part of the giving season. The spirit of giving is alive and well, and the IRS loves it too. You can potentially reduce your tax bill by making charitable donations to qualified 501(c)(3) organizations.

 If you’re 70½ or older, you may consider making a Qualified Charitable Distribution (QCD), transferring up to $100,000 directly from your IRA to an eligible charity. If you have loved ones you’d like to gift, explore options like a 529 college savings plan or Roth IRA contributions for gifting them with your generosity — and saving on your taxes.

5. Capitalize on education-related tax breaks. If you or a family member are attending college, trade school or another higher-learning institution, take advantage of valuable tax credits and deductions related to tuition, fees and education-related expenses.

 The American Opportunity Tax Credit and Lifetime Learning Credit can boost your tax refund, while contributions to 529 college savings plans offer future tax-free growth. Review your eligibility for these education-focused tax benefits before the year ends.

6. Optimize your HSA and FSA accounts. Health Savings Accounts (HSA) offer unique triple tax advantages: tax-deductible contributions, tax-free growth and tax-free withdrawals for qualified medical expenses. While most HSAs roll over into the next year, it’s still important to gather all receipts for all HSA distributions, create digital copies of all forms and receipts, and sort qualified vs. non-qualified expenses to keep for your records come filing time. Assess whether to make additional contributions before year-end or wait until the New Year.

Flexible Spending Accounts (FSA) funds must be used within the plan year, though some employers offer a grace period (usually until March 15). Review your FSA balance carefully and create a plan to use any remaining funds before they’re forfeited. This might involve scheduling medical appointments, purchasing eligible supplies or ordering prescription refills. Submit any outstanding FSA claims before the December 31st deadline.

7. Consult a tax professional. Tax professionals, such as certified public accountants (CPAs) or enrolled agents, have specialized knowledge of the latest tax laws, regulations and filing requirements. They can help identify deductions and credits you may have overlooked, recommend tax-saving strategies tailored to your unique situation and ensure you’re in compliance with all applicable rules and deadlines.

Tax pros can also provide ongoing support throughout the year, assisting with quarterly estimated tax payments or advising on the tax implications of major life events like a job change, home purchase or retirement.

Looking for a trusted CPA? The professionals at Magone & Company will consider every deduction and incentive to help make the most of your tax situation for the 2024 tax year and beyond. Call us today at (973) 301-2300 to schedule a confidential consultation. Happy holidays!

This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance that is specific to your unique circumstances.

Perks for Parents: Tax Tips to Help Families Maximize Their Savings

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Tax season is officially upon us, and there’re no escaping it. The IRS has its hand out to collect a portion of your taxable income. The good news? If you have children, there are credits and strategies that can help you save more of your money this year and in years to come.

Parents, be sure to take advantage of the following opportunities that apply:

Open tax-advantaged accounts. Does your employer offer a Health Savings Account?

Specifically designed for medical expenses, you can enjoy several tax advantages by making tax-deductible contributions to your account, which reduces your taxable income. Plus, any interest or earnings on the account are tax-free, and withdrawals made for qualified medical expenses are also tax-free.

If you’re thinking ahead to paying for your children’s higher educations, a 529 plan allows money to grow in a tax-deferred account. It can be withdrawn tax-free for qualified, education-related expenses at colleges, vocational programs and apprenticeships. The funds from a 529 plan may even be applied toward up to $10,000 in student loan debt.

Claim credits exclusively for families. Eligible New Jersey residents can boost their refund by claiming a Child Tax Credit on their NJ-1040. For tax year 2023, you may receive up to $1,000 for each dependent child who’s five or under.

Have kids in daycare? If you pay for child care while working or looking for work, you might be able to claim the Child and Dependent Care Credit on your return. This gives you a tax break on qualified expenses like summer camp or before/after school care. Kids must be under the age of 13 to qualify, unless they’re incapable of caring for themselves due to physical or mental conditions. Keep in mind, you must have a New Jersey taxable income of $150,000 or less to qualify.

Another valuable tax credit for families is the Earned Income Tax Credit (EITC). The EITC assists low and moderate-income families with a refundable tax credit based on your income, filing status and the number of qualifying children you have. Depending on your circumstances, the EITC can result in a significant tax refund.

Maximize deductions. Families can take advantage of several deductions to lower their taxable income. One common deduction for families? Mortgage interest. If you own a home and have a mortgage, you can deduct the interest you pay on that loan. When you’re in the early years of your mortgage, your savings can be substantial as the majority of your payments go toward interest. Additionally, families can deduct state and local taxes, including property taxes, which can further reduce your tax liability.

Have dependents pursuing higher education? There’s also a deduction for qualified education expenses for eligible students. This deduction allows you to deduct up to $4,000 of qualified expenses, such as tuition and fees. Parents may also deduct interest payments on certain student loans from qualified lending institutions.

Planning to save can really pay off

With a little bit of planning and knowledge, you can help your family keep more of your hard-earned money. Taking steps to optimize your tax situation is an important aspect of your family’s overall financial planning. Not sure where to start? The professionals at Magone & Company can help. Reach out to learn more.

This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance that is specific to your unique circumstances.