The great recession and ongoing recovery hasn't been very good to retirees living on a fixed income and savers who put money in a savings account. Bank yields have been pretty low and supposedly that is going to change with the improving economy and rising interest rates. People have had to go invest to other investments to maintain a decent standard of living. Other alternatives options include buying real estate, investing in the stock market, investing in your business, art, precious metals, and other items that can appreciate. California Tax Free bonds are a good investment to put a portion of your nest egg if you live in this high tax state to reduce your tax liability. It's a good balance against the high stock market (currently the Dow's at 19,780) on 1/18/2017. For example, as a single individual in 2017, Additionally, living in the state of California, means that any income from $51,531 to $262,222 is taxed at 9.3%.
Anyone who is making above $191,650 should definitely look into CA Tax Free Funds. Any income you make over that is effectively taxed at 42.3%. CA Tax Free Bond Funds allow you to not pay any federal or state tax on the income generated by these financial instruments. Currently, many top rated CA mutual funds are returning over 4% and one would need to find an taxable equivalent investment yielding over 6.9% at this income level to be comparable. There's an expense fee associated with these funds that could be as high as .9 or as low as .2. Vanguard is usually the lowest and you could get fees down to 0.12% with their Admiral Shares.
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It's the end of the year, so there's many things that you can do to lower your tax contributions for 2016.
Here's one that i just did recently that didn't take too much of my time as I cruised in the Californian sunny warm winter on my way to the public library. Step 1. If you have old college textbooks, books, or clothes that you no longer wear or use and would like to decluter as well, here's a win-win situation. Step 2. Just find any library or local goodwill store. Step 3. Drive over and drop off the goods at the library or charity. Books, clothing, and other goods only need an appraisal if you claim a deduction over $500. If you don't want to deal with the hassle with an appraisal and other record keeping, just donate stuff $500 or less. Otherwise, you'll have to deal with the hassle of attaching Form 8283 with your tax return. You (if you do your own taxes) or your accountant won't be too pleased. You can also deduct 14 cents per mile you drive per charity as of 2016. Just be sure to save your receipts for donations. Taken from Trump's website. If he's a man of his word, it looks like the tax rates are in for a change. Everybody should have an easier time filing their taxes and saving some dough. The one per-centers should be pretty happy as well with saving some extra dollars for a rainy day! Looks like big government is going small now with a potential repeal of Obamacare! (my guess is that it'll only be a change). Looks like the private economy will grow at the expense of big government. Individual Income Tax Tax rates The Trump Plan will collapse the current seven tax brackets to three brackets. The rates and breakpoints are as shown below. Low-income Americans will have an effective income tax rate of 0. The tax brackets are similar to those in the House GOP tax blueprint. Brackets & Rates for Married-Joint filers: Less than $75,000: 12% More than $75,000 but less than $225,000: 25% More than $225,000: 33% *Brackets for single filers are ½ of these amounts The Trump Plan will retain the existing capital gains rate structure (maximum rate of 20 percent) with tax brackets shown above. Carried interest will be taxed as ordinary income. The 3.8 percent Obamacare tax on investment income will be repealed, as will the alternative minimum tax. Deductions The Trump Plan will increase the standard deduction for joint filers to $30,000, from $12,600, and the standard deduction for single filers will be $15,000. The personal exemptions will be eliminated as will the head-of-household filing status. In addition, the Trump Plan will cap itemized deductions at $200,000 for Married-Joint filers or $100,000 for Single filers. Looks like a party for businesses as well! Business Tax The Trump Plan will lower the business tax rate from 35 percent to 15 percent, and eliminate the corporate alternative minimum tax. This rate is available to all businesses, both small and large, that want to retain the profits within the business. It will provide a deemed repatriation of corporate profits held offshore at a one-time tax rate of 10 percent. It eliminates most corporate tax expenditures except for the Research and Development credit. Firms engaged in manufacturing in the US may elect to expense capital investment and lose the deductibility of corporate interest expense. An election once made can only be revoked within the first 3 years of election; if revoked, returns for prior years would need to be amended to show revised status. After 3 years, election is irrevocable. The annual cap for the business tax credit for on-site childcare authorized by Sec. 205 of the Economic Growth and Tax Relief Reconciliation Act of 2001 would be increased to $500,000 per year (up from $150,000) and recapture period would be reduced to 5 years (down from 10 years). Businesses that pay a portion of an employee’s childcare expenses can exclude those contributions from income. Employees who are recipients of direct employer subsidies would not be able to exclude those costs from the individual income tax and the costs of direct subsidies to employees could not be used as a cost eligible for the credit. Looks like Apple and other companies with huge off-shore bank accounts might be bringing some of those dollars back instead of hoarding them abroad! Time to make it rain.
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