Most Important Year-End Tips To Increase Your Tax Refunds

Most Important Year-End Tips To Increase Your Tax Refunds

Most Important Year-End Tips To Increase Your Tax Refunds

A quick look at the calendar and you will realize, this year has come to an end. And even before you realize, the tax season will be close. Instead of rushing during that time, you can take a few simple steps this holiday season to reduce your tax liabilities and increase your tax refunds. Most Important Year-End Tips To Increase Your Tax Refunds.

1.Retirement Planning

Planning for your retirement is a great way to add funds for your retirement and make handsome savings in the form of taxes for the current financial year. You can take the help of either traditional IRA or 401(k) to contribute to your retirement planning. Self-employed individuals can save up to 25% of their income under SEP IRA up to a maximum of $56,000 for the current year.


If you have been planning to take some classes to improve your skillset, this might be the best time to enroll. You can start with enrollment and make the payments for the next quarter by the 31st of December. This will help you get some valuable tax credits of up to $2,000 with the help of Lifetime Learning Credit.


Taxpayers who have FSA or Flexible Spending Account, it might be the right time to give your doctor a visit. While there is no hard and fast rule to use the FSA amount but there might not be a lot of benefits in keeping the amount as well. You can only carry forward $500 to the next year. The FSA plans usually allow subscribers to use these funds for up to 2 and a half months in the next year.

4.Charitable Donations

You can make this holiday season a little bit better for the people who are in need. If there are any unused household items or clothes, you can donate them to the less fortunate. Such donations can help you reduce your tax liability, provided you donate to qualified charitable organizations and if you itemize the items. Alternatively, if you volunteer for charitable organizations, you can claim the miles that you drove at 14 cents for each mile driven.

5.Shuffle your Investments

Some investments in your portfolio might not have performed as you expected them to. Investments that have gone down in their value can help you reduce your tax liabilities. You can use the loss to offset the gains that you have received from other investments. However, you must sell the loss-making investments to offset them with the profit-making ones. Should your losses exceed the profits, you can use up to $3,000 against your income.

6.Defer Any bonuses

Taxpayers expecting a year-end bonus for the hard work that they have put in, might find themselves in a spot. The bonus might push you to another tax bracket or increase your tax liability by a healthy margin. If you can, do speak with your boss to deter the bonus to January of next year. This way, you won’t have to taxes for the bonus in the current year.

7.Other Dependent Credit

Taxpayers supporting their grandparents or parents, or other loved ones can benefit from Other Dependent Credit. If they qualify to be non-child dependents, you can claim the Other Dependent Credit. You can claim up to $500 under this category and receive dollar by dollar reduction in your taxes.This tax credit is relatively new and not many taxpayers use it.

Each dollar that you save is a dollar that you earn. Using the above methods, you can save takes on your income and boost your tax returns as well.

Top #5 Tax Tips For NRI’s Working As Personal Trainers In The US

Top #5 Tax Tips For NRI’s Working As Personal Trainers In The US

Top #5 Tax Tips For NRI’s Working As Personal Trainers In The US

Being self-employed brings a lot to the table. From having the freedom to choose your work timings to create a business on your own. Though there are a few challenges, the positives far outweigh the negatives. And it gets even better if you happen to be a personal trainer as you get a chance to help people stay fit. However, being self-employed also means that you have to handle your taxes on your own. Here are top 5 tax tips for NRIs working as Personal Trainers.

  • Setting Up Costs

If you just started as a personal trainer in the country, the chances are high you would have spent a considerable amount of money on creating a website, advertisements, marketing, figuring out business location, etc. You can deduct these expenses from your taxes.

  • Cost of Procuring Equipment

The IRS allows deductions for work related equipment. For any fitness equipment that you have purchased or any training related tools, you can get a healthy tax break on the same. For instance, if you buy any equipment that your clients will be using, you can claim the expenses for a tax break. And the location of the equipment used doesn’t matter much. Meaning, clients can use the equipment or tools in your place, their place, your studio, etc. The only verifying parameter is that the equipment must be used for business.

  • Educational and Training Materials

Educational and training materials offer dual benefits. For starters, you can claim for any educational or training expenses for your clients as well as for yourself. One of the prime examples is that if you undergo any training or educational courses to enhance your skillset, you can claim the amount as deductions. Similarly, if you have any apps or training videos that your clients use, you can claim those as deductions as well.

  • Travel Expenses

There is a very good possibility that you must travel to meet with your clients. As a self-employed individual, you can claim these expenses as well. You can claim a deduction of 58 cents per mile that you drive. If you drive to your client’s place for a training session, you can claim this amount. Though it might not seem a lot at first, if you keep driving to the client’s place regularly, it can add up to be a considerable expense. The IRS even allows deductions under the pretext of depreciation of the vehicle, if you use your vehicle to drive to client’s place.

If you must fly to any client’s place, you can claim the flight expenses along with any hotel accommodation. The IRS even allows you to deduct up to 50% of the meals that you consume on such trips.

  • Business Expenses

There are some generic business-related expenses that are common to everyone. If you have a dedicated phone line to interact with clients or take calls from potential clients, you can claim the bills. If you have to acquire a state license for your personal training classes, you can claim them as deductions as well. Similarly, you can utilize any expenses related to the bookkeeping of your business or tax preparation for a tax break.

If you are using your primary bank account for business, any changes that you pay to the bank for the account is also tax-deductible.

  • Health Insurance

Any contributions that you make towards health insurance plans or retirement plans for your future are also tax deductible. One of the benefits of being self-employed is that you can even deduct your premiums paid for health insurance.

Knowing everything about taxes and especially the ones pertaining to your occupation is important to be able to plan taxes and reduce liability.

How to Become a Financially Literate NRI in the US?

How to Become a Financially Literate NRI in the US?

How to Become a Financially Literate NRI in the US?

To become financially literate NRI  means to be able to manage your money efficiently. It is basically the ability to clearly understand the concept of how money is made, how it is managed and invested, how it is spent economically. Precisely, financial literacy is the skill which lets you utilize your money efficiently and utilization of your money in accomplishing your long term financial goals.

Financial literacy is not a subject that is included in your school or college syllabus; rather it is a clear understanding of your personal debit and credit. This will need constant attention to your expenses and an urge to always sideline your income and expenses together.

Major components of Financial Literacy

The major five components which you can associate with financial literacy are mentioned below.

  • Basics on Budgeting

Creating a budget and maintaining that budget is an important concept of financial literacy. Without a proper budget, you will never be able to understand the whereabouts of where your money is coming and where it is being spent and you will end up in a financial crisis.

  • Interest and its impact

 It is an important concept and needs to be understood as it affects your finances in an intensive manner. This will help you in saving and also better utilization of your money.

  • The habit of saving

For maintaining a healthy and stable financial life, saving is very important. This will inculcate the skill of looking towards accomplishing long-term goals in the future and planning present actions accordingly.

  • Debit and credit

 Proper knowledge about debit and credit is needed to be able to handle finances diligently.

  • Beware of financial frauds

With the widespread use of technology in financial spheres like internet banking, online shopping, electronic fund transfer; your financial data is more prone to risks and should be protected.

When you are residing in a different country, you should have the basic financial literacy related to the financial sphere of that particular country. This will be helpful for you in utilizing your money, saving money and also investing in some useful avenues.

Tips to be a financially literate NRI in the US

Reconciliation of bank accounts regularly

You should make it a habit of going through your bank statement every month when they are sent to you by the bank. By this, you will know in detail about your income, spending and any diversion in a saving plan if you have one.

Utilization of financial tools

There are a large number of financial tools and applications which can help you understand the confusion associated with dollars. You can get to know in details about the income, debit, credit, etc. Moreover, financial tools will give you tips and suggestions on financial planning for improving your financial literacy.

Take online courses

There are numerous professional courses and sessions available online. You can enroll in these sessions and increase your knowledge of finances, NRI taxation policies, NRI tax saving methods, etc.

Make friends

You can join your friends from the US so as to increase your exposure. This will help you in understanding the various financial implications in the country, ways how money is utilized or saved in the US, taxation rules in the US, etc. With the help of online tools, you can have educational gatherings among friends where you can discuss finances and financial goals.

Be vigilant and aware

Since you are in at a new and unknown place now, you should be vigilant about your finances and security related to financial information. You can read books, visit libraries, watch online videos on finances, financial security and financial goals.

Hence, initially, you would definitely find certain differences and difficulties in understanding about finances at a new place. But you can start understanding the methods, rules and, laws gradually.  As an NRI, it is quite necessary for you to understand the finances of the US so that you tend to save a good amount or invest in good avenues.


Annual Gift Tax Limitations

Annual Gift Tax Limitations

Sec. 529 plan is tax-free accumulation, so the sooner the account is established and funded, the better. A special provision of Sec. 529 allows those who are concerned with the annual gift tax limitations, currently $15,000, to contribute five years’ worth of contributions ($75,000) up front. These limitations apply to each contributor, but if there are multiple contributors, such as parents, grandparents, aunts and uncles, huge amounts can be contributed up front and provide the greatest long-term growth. While it is no secret that resident Indians have to pay taxes for a fiscal year. However,  all NRI  investors must also pay taxes for a fiscal year if applicable. Irrespective of whether they earned the money directly or indirectly, if they are liable, they must pay taxes on the same. As long as the income is generated in India. Any income that is generated as a part of their investments or assets or business interests, is liable to taxes. The presence of tax laws means that there are different avenues to save money from tax liabilities as well. If you are an NRI and are looking for tax-related tips, here are some that you might find to be quite useful.
Self-Employment Tax

Self-Employment Tax

The most beneficial deductions are business deductions that offset both income tax and, depending upon the circumstances, self-employment tax. For 2018, the self-employment tax rate is 12.4% of the first $128,400 of net self-employment income plus 2.9% for the Medicare tax, with no cap. Some high-income taxpayers may pay an additional 0.9% Medicare tax. For self-employed businesses with less than $128,400 of net income, the self-employment tax rate is 15.3%. Thus, for small businesses with profits of less than $128,400, the benefit derived from deductions generally will include the taxpayer’s tax bracket plus 15.3%. For example, for a taxpayer in the 24% tax bracket, the benefit could be as much as 39.3% (24% + 15.3%) of the deduction. If the deduction were $2,000, the tax savings could be as much as $806 or more, when the taxpayer’s state income tax bracket is included. It might so happen that one fine day you decide to pack your bags and come back home. When you do, there are a few things that you must take special care of. For starters, your investments and tax implications. In general, the tax laws for NRIs returning to the country are fairly generous. However, you must not be complacent. A bit of careful planning will ensure that you do not run into any surprises when you come to India, as far as your overseas income and investment are concerned. Tax Resident Status Your tax liability on the income largely depends on your residential status. The FEMA (Foreign Exchange Management Act) and the Income Tax Act govern all these tax rules and regulations. The FEMA keeps a track of all the transactions taking place outside the country for Indian residents. These transactions include foreign bank accounts, money transfers, remittances, lending, gifting, etc. Any investment in real estate or mutual funds is also taken care of by the FEMA. The income tax act  on the other hand, looks after the tax liability arising out of such investments. As per the FEMA guidelines, an NRI is someone who currently stays out of India but either is a citizen of India or a person of Indian origin. They must meet either of the following conditions to become a PIO or a person of Indian origin.
Deductions of IRA and self-employed retirement plan contributions, alimony, and student loan interest

Deductions of IRA and self-employed retirement plan contributions, alimony, and student loan interest

deductions of  IRA and self-employed retirement plan contributions, alimony, and student loan interest, are adjustments to income or what we call above-the-line deductions. These deductions, to the extent permitted by law, provide a dollar deduction for every dollar claimed. Deductions IRA that fall into the itemized category must exceed the standard deduction for your filing status before any benefit can be derived. In addition, medical deductions are reduced by 7.5% of your adjusted gross income (AGI) in 2018, and most cash charitable deductions are limited to a maximum of 60% of your AGI. Under the tax reform, the deduction for state and local taxes has been capped at $10,000. As we all (hopefully) know, there are some basic steps investors can take to withdraw funds from a traditional IRA without incurring a 10% penalty. Let’s start with the obvious, like waiting until after 59 ½ years old to withdraw funds. Withdrawing annual allowed contributions before your taxes are due will also avoid the penalty, and the same goes for withdrawing excess contributions. If you discover that you’ve contributed more than allowed (due to income limits or error) you are free to remove the excess and any associated growth before the tax return is due for the year. Additionally, taking your required minimum distributions will keep the 10% penalty at bay. Technically this is covered by waiting to withdraw after age 59 ½ but sometimes required minimum distribution is required of a person who has inherited an IRA, regardless of age.