Finances

Love and Money: Must-have Financial Conversations for Engaged Couples

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Spring weddings are in full bloom, and May is one of the most popular months to tie the knot. For engaged couples, the to-do list seems endless. But between choosing flowers and finalizing a menu, there’s one critical conversation that many future grooms and brides-to-be avoid: Money.

Talking about finances early on can set the foundation for a strong financial partnership — or tear relationships apart down the road. Nobody wants to discover their partner’s child support obligations while doing their first joint tax return.

Now’s your chance to put it all on the table. Here are essential money questions every couple should be asking before walking down the aisle:

Are you a spender or a saver?

Maybe you grew up clipping coupons while your partner’s family never thought twice about splurging. How do you expect to handle this as a couple? Talk openly about your spending philosophies, budgeting styles and what financial security means to each of you, so can understand and respect each other’s point of view.

How will you tackle debt?

Recent data reveals that 54% of people believe a partner with debt may be a reason for divorce.

Whether it’s car payments, outstanding credit cards or medical bills, share what you each owe and create a realistic repayment strategy. Will you pay down debt before buying a house? Balance debt repayment with saving? Also think about how you can avoid accumulating more debt as a couple.

How will you split the bills?

Every couple needs a clear path for covering shared expenses. Some couples split everything 50/50 while others contribute based on their income. One partner may shoulder the mortgage while the other pays all the miscellaneous household expenses. The key is finding an arrangement that feels fair to both of you.

Who will handle which financial responsibilities?

Even if you merge finances completely, someone has to pay the bills, manage investments and file taxes. Decide together who handles which tasks, and how you’ll both stay informed about your overall financial picture.

Will you choose joint accounts, separate accounts or somewhere in between?

Some couples prefer fully merged finances. Others like separate accounts to retain financial independence. And many choose a hybrid. A Bankrate survey found that 62% of couples keep at least some money separate from each other. Consider your comfort levels and what makes the most sense for your marriage.

What are your retirement goals?

Do you both want to retire at the same age? How much are you saving, and is it enough? If you’re still in your 20s and 30s, the power of compound interest is on your side. But every year you delay saving could cost you tens of thousands of dollars by age 65. Review employer 401(k) matches and IRAs, and make sure you’re both contributing to a shared future.

Have you addressed wills, beneficiaries and powers of attorney?

Marriage changes your legal status, and your estate planning documents need to reflect that. These documents ensure that if something happens to one of you, the other isn’t left fighting legal battles during a difficult time. Create or update your wills, beneficiary designations and life insurance policies, and establish powers of attorney so you can make medical and financial decisions for each other if needed.

Start your marriage on solid financial ground

As you plan a future together, make room for these financial discussions. The experts at Magone & Company can help. Call us today at (973) 301-2300 to help address your financial concerns with confidence before saying “I do.”

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 business situation.

 

More Money, Same Problems: Understanding Lifestyle Inflation

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It’s the beginning of a new year, and maybe you landed a promotion with a generous raise. But before you start browsing new house listings or book a dream vacation for your entire family, here’s an uncomfortable truth we see at Magone & Company every day: Most people who get big pay bumps end up no better off financially a year later.

And this has a lot to do with lifestyle inflation.

Lifestyle inflation is when spending habits rise right along with your income, preventing you from building the wealth you thought that raise would bring.

With discussions around the One Big Beautiful Bill impacting tax policy and take-home pay, responding strategically to changes in your income has never been more critical. What you do with that extra money determines your financial future.

Here’s what we recommend:

First, cover the essentials. Before considering any big upgrades, make sure your priorities are handled. For example, build a fully funded emergency cash reserve to cover three to six months of expenses.

Maximize your retirement contributions to take advantage of compound growth, and take steps to eliminate high-interest debt that’s costing you every month.

Lock in savings. Treat raises like they don’t exist! As your paychecks grow, redirect a portion of each one to a savings account, retirement contributions or debt payoff.

So even as you spend some of your new income, you’re still protecting your building and protecting your financial future.

Set percentage-based goals. Commit to saving a consistent percentage rather than a fixed dollar amount.

For example, if you saved 15% when earning $80,000, keep saving 15% when you earn $100,000. This ensures your wealth building scales with your income.

Maintain visibility. Track your spending using apps or spreadsheets. Small expenses like extra subscriptions that you don’t use, or frequent coffee runs can accumulate quickly. But monthly reviews can help identify these patterns.

Implement a waiting period. Wait on the extravagant purchases. You may want to impose a three-to-six-month cooling-off period or even holding off an entire year. If you still need or want the upgrade after that allotted time, plan and set a budget rather than making an impulse decision.

Calculate the real cost of upgrades. So you’ve waited, and now you want to pull the trigger on financing a new car. But first, take the monthly cost and multiply it out.

A $300 monthly car payment increase costs $3,600 annually. Over five years, that’s $18,000. Seeing the true cost may help you figure out if the upgrade is really worth it.

Focus on experiences over possessions. A weekend trip with family or going back to school to learn a new skill may bring you more joy than another tech gadget or wardrobe makeover.

Experiences create lasting memories, connections and personal growth while the excitement of new purchases can fade quickly.

Make it count

Financial success requires balance. As your income grows, you can improve your quality of life, but not at the expense of your financial foundation.

Your next raise is an opportunity to make smarter financial decisions. Don’t hesitate to reach out to the Magone & Company team with any questions about your long-term financial health strategy.

 

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 business situation.

 

 

One Big Beautiful Bill: What Every Family Should Know About the New Tax Law

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The tax landscape just shifted — dramatically.

President Trump recently signed the “One Big Beautiful Bill” into law, bringing the most significant tax changes in years. From employees and families to entrepreneurs and charitable donors, this new legislation may impact your 2025 tax return and beyond.

Let’s break down the key changes: 

Your tax rates just got locked in. Remember those lower tax rates from 2017 that were set to expire? They’re now permanent. The top tax rate stays at 37%, and all the existing brackets will continue to adjust for inflation each year. So what you’re paying now is what you’ll keep paying.

More of your income is protected from taxes. Starting with your 2025 tax return, the standard deduction increases to:

  • $15,750 for single filers
  • $31,500 for married couples filing jointly

This means more of your income is shielded from federal taxes, and fewer people will need to itemize deductions to get the highest tax benefits.

There are new ways to save on charitable giving. Even if you don’t itemize deductions, you can now deduct charitable contributions. In fact, you can deduct up to $1,000 ($2,000 for married couples) for cash donations to qualified public charities, right off the top.

Plus, the Educational Choice for Children Act creates a tax credit (not just a deduction) of up to $1,700 for donations to scholarship organizations that help families pay for private K-12 education.

There’s an increase in state tax relief (temporarily). If you live in a high-tax state and itemize deductions, you’ll want to pay attention to this one. The cap on state and local tax (SALT) deductions has been temporarily raised to $40,000 through 2029 — a huge jump from the previous $10,000 limit. Note that this benefit phases out for higher earners with income starting at $500,000, so not everyone will qualify for the full amount.

Other changes to be aware of:

Service workers may deduct up to $25,000 in tip income while overtime workers may deduct up to $12,500 in overtime pay

  • Car buyers can deduct up to $10,000 in interest on loans for U.S.-made vehicles
  • Effective for 2025 through 2028, individuals who are age 65 and older may claim an additional deduction of $6,000
  • Parents of children born between 2025 and 2028 can open special savings accounts that come with a $1,000 government-funded starting deposit
  • Child tax credit increases to $2,200 per child
  • The estate and gift tax exemption jumps to $15 million per person

Guiding you through change

If you have questions about how these changes affect your family or your long-term financial plans, we’re here to help. Contact the experts at Magone & Co to ensure you’re taking advantage of every benefit available to you under the new law. Reach out  or give us a call today 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 that is specific to your business situation.

The Tax Implications of International Investments

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There are numerous benefits to investing overseas — from diversification to the potential for more growth opportunities. But as a U.S. taxpayer, if you’re making foreign investments, Uncle Sam still wants his share of the profits.

Keep in mind, different types of investments may require different tax treatments. Get up to speed with the taxation consequences (and potential penalties) of your foreign investments.

Foreign bank accounts. If the total value of all your foreign financial accounts exceeds $10,000 at any time during the calendar year, you’re required to report your balances to the U.S. Treasury Department.

This is done through a process known as Foreign Bank and Financial Accounts Reporting (FBAR). Failure to disclose these accounts can lead to hefty penalties — up to $100,000 or 50% of the balance in the account.

Foreign gifts and bequests. If you received a generous gift or an inheritance from a foreign relative or friend, the IRS wants to know about it.

When the amount exceeds a certain threshold (currently $100,000 from a nonresident alien or foreign estate), you’re required to report it. While you don’t have to pay taxes on it, failure to report can result in a penalty of 5% of the gift’s value for each month the gift is not reported, up to a maximum penalty of 25%.

Foreign financial assets. If you have money in foreign stocks, bonds or mutual funds, you may need to report these assets to the IRS if they exceed a certain threshold. For unmarried taxpayers living in the U.S, it’s $50,000 on the last day of the tax year or $75,000 at any time during the tax year.

For married taxpayers filing jointly, these amounts jump to $100,000 and $150,000, respectively. Similar to foreign bank accounts and gifts, there are penalties for non-reporting, ranging from $10,000 to $50,000.

Controlled foreign corporations (CFC). If you own more than 50% of the total value of a foreign corporation, it becomes known as a Controlled Foreign Corporation (CFC).

As a shareholder, you may be required to report and pay taxes on your share of the CFC’s income, regardless of whether you receive any distributions. This can result in double taxation — when the income is earned by the CFC and when it is distributed.

Foreign partnerships. As a partner in a foreign partnership, you must report your interest in the partnership, contribution to the partnership or acquisition of the partnership.

Otherwise, you face expensive penalties, including $10,000 each tax year that you fail to report these numbers.

Foreign rental property. Rental income from foreign real estate is subject to taxes in the country where your property is located. But as a U.S. taxpayer, you’re also required to report this income on your U.S. tax return.

You may claim depreciation on your foreign rental property on your U.S. tax return, helping to reduce the taxes you owe.

Passive foreign investment companies (PFIC). A PFIC is a foreign corporation that meets either an income test or an asset test:

  1. At least 75% of the corporation’s gross income is “passive” — not related to regular business operations
  2. At least 50% of the company’s assets are investments, which produce income as earned interest, dividends or capital gains

As a U.S. shareholder of a PFIC, you may face high tax rates and interest charges on certain types of income, but taxation varies. For example, gains and distributions received from a PFIC are treated as ordinary income and must be reported. Failure to do so can lead to significant fines and offshore penalties.

Making sense of your tax obligations

Foreign investment taxation is a complex area, but with careful planning, you can navigate these international waters successfully. The experts at Magone & Company can help, working with you to develop a clear, personalized tax plan. Call us at (973) 301-2300 to learn more about our international tax services.

 

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.

Six Tax-planning Strategies for High-Income Earners

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Whether you’ve successfully started a business or paid your dues to climb the corporate ladder, you’ve put in the hours and made sacrifices to find yourself among the ranks of high-income earners.

But with great success comes great responsibility, particularly when it comes to managing your taxes. As a high-income earner, you have unique opportunities and challenges when it comes to tax planning — ensuring you settle up with Uncle Sam while continuing to grow your wealth.

Here are some tax-planning strategies that may be effective in helping a high-earning taxpayer save more cash:

Utilize retirement accounts. Contributions to retirement accounts such as a 401(k) or an Individual Retirement Account (IRA) can provide immediate tax benefits as you save for the future. By maxing out your contributions to these accounts, you can reduce your taxable income, potentially moving you into a lower tax bracket.

Additionally, any earnings within the account grow tax-deferred, meaning you don’t owe taxes on them until you withdraw the money in retirement — when you might find yourself in a lower tax bracket. Keep in mind, the SECURE Act lets high-income earners age 50 and over save $27,000 a year in a 401(k), so your earnings are sheltered from tax until you take a distribution from the account at age 59 ½ or later.

Take advantage of a Roth conversion. Some high-income earners may be eligible for a Roth IRA conversion — a strategy that converts a traditional IRA to a Roth IRA, allowing for tax-free withdrawals in retirement. While the conversion is taxable in the year it occurs, it can be a savvy move for high-income earners who expect to eventually be in a higher tax bracket.

Establish a family trust. Family trusts are common in estate planning, ensuring certain beneficiaries receive assets when the grantor dies. And when properly structured, a family trust, for example, can help reduce your state income tax liability by moving your investment earnings to a relative with lower marginal tax rates.

Make charitable donations. By donating to qualified charitable organizations, you can support causes you care about, while providing valuable tax benefits. However, it’s important to note that the tax benefits vary depending on the type of donation and your overall income level. You may consider establishing donor-advised funds (DAFs) to manage and distribute charitable donations over time. By contributing appreciated assets — like stocks or real estate — to a DAF, you can potentially avoid capital gains taxes, while still benefiting from the charitable donation.

Consider cash-value life insurance. Also referred to as whole life insurance, cash-value life insurance is one of the most popular tax deferral strategies for high-income earners, especially if you’ve maxed out other retirement accounts. Contributions are made with after-tax dollars, and you can borrow against or withdraw up to the amount of premiums paid without having to pay taxes on it.

Invest in opportunity zones. Created by the Tax Cut and Jobs Act of 2017, the Opportunity Zones tax incentive is an economic development tool, allowing people to invest in distressed areas to help the community and receive a tax benefit. You’ll be granted a tax deferral on the capital gain of the investment until December 31, 2025, or until it is sold prior to this date — whichever comes first.

Keep more of your hard-earned money

As a high-income earner, taking steps to optimize your tax situation is a critical aspect of your financial planning. The professionals at Magone & Company help, offering the guidance and expertise to plan your wealth-preserving tax strategy. 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.

The Different Types of Investment Income

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Investing wisely can be a great way to grow your wealth over time. However, much like any money-making venture, there are tax implications to consider.

The IRS taxes each investment income differently, and the tax rate depends on various factors, from your income level to the length of time you’ve held the investment. So before you dive into a new opportunity, find out how taxes work in relation to the income you’ll (hopefully) generate.

Interest income. Interest income is the money you earn from savings accounts, CDs and bonds. This type of investment income is generally taxed at your ordinary income tax rate. (The interest income you earn from municipal bonds is an exception and is typically tax-free.)

It’s important to note that you’ll receive a 1099-INT from your financial institution, reporting the interest income earned during the year. This income must be reported on your tax return and will be taxed accordingly.

Dividend income. Dividend income is the money you earn from owning stocks that pay dividends. It’s taxed at a different rate than interest income.

Qualified dividends — dividends paid by domestic corporations and certain foreign corporations — are taxed at the long-term capital gains tax rate, which is generally lower than the ordinary income tax rate and depends on your income level. Nonqualified dividends, which include dividends paid by real estate investment trusts (REITs) and some foreign corporations, are taxed at your ordinary income tax rate.

Capital gains. Capital gains are the profits earned from selling an asset for a higher price than you paid. The amount you’re taxed depends on whether they’re short-term or long-term gains. Short-term capital gains — gains on assets held for one year or less — are taxed at your ordinary income tax rate.

Long-term capital gains — gains on assets held for more than one year — are taxed at a lower rate than short-term gains, dependent on your income level. If your income is below a certain threshold, you may not have to pay any taxes on long-term capital gains.

Required minimum distributions (RMD). RMDs are the minimum amount you must withdraw from your retirement accounts each year. It’s important to factor in the tax implications of RMDs when planning for retirement.

If you have a traditional IRA or a 401(k), you will be required to take RMDs once you reach age 72. When you withdraw the funds, you’ll be taxed at your ordinary income tax rate.

Estate taxes. If you leave a large estate to your heirs, they may be subject to federal and possibly state estate taxes <Link to new blog post, CPA vs. Estate Attorney> The federal estate tax rate ranges from 18-40% and generally applies to estates valued at more than $12.92 million. However, this threshold is subject to change, so it’s essential to stay informed about any updates to the tax code.

Foreign investment income. If you earn investment income from foreign sources, you may be responsible for additional taxes and reporting requirements. The IRS requires taxpayers to report foreign investment income on their tax returns and may impose penalties for failure to disclose this income.

If you have foreign investments, it’s essential to consult with an experienced international tax professional to ensure compliance with all applicable tax laws.

Finding the tax planning approach that’s best for you

There are various strategies to legally reduce your tax liability on investment income, such as tax lost harvesting. This approach involves selling losing investments to offset gains in other investments to reduce your taxable income.

If your losses exceed your gains, you can offset up to $3,000 of your ordinary income each year. Any remaining losses can be carried forward to future years.

The above general information is provided for education only and should not be considered tax or legal advice.  There’s never a one-size-fits-all approach to treating investment income, so understanding how it’s taxed can help you make more informed decisions on minimizing your tax liability.

The knowledgeable CPAs at Magone & Co can answer your questions and help you make the most tax-efficient decisions. Give us a call today at (973) 301-2300.