Messages

1

Taxes / Re: Dependent care credit vs dependent flex

« on: May 25, 2021, 02:25:12 PM »

Thanks! I am also wondering if anyone has dug in enough to understand the flex account changes. I guess I'm assuming that we can still use both? For example....am I able to max out the $10,000 amount and then also get the $8000 credit?

I suppose for this to work the total daycare expenses would have to be roughly $26,000. We are considering switching to a full time nanny so I'm curious if there would be significant tax benefits and I have a small window to change/up my FSA benefits.

2

Taxes / Dependent care credit vs dependent flex

« on: April 28, 2021, 11:40:04 PM »

This year the dependent tax credit is seeing substantial enhancements. Now it’s up to 50 % of expenses up to 8000 in a refundable credit. Since it’s now 50% vs 20% ... I’m wondering if it makes more sense to to claim the credit vs the dependent flex care account which is now increased to 10,000 I think.

We have already used about 4000 of dependent flex money this year and that will be it. We will end up with about 14000 in childcare expenses. So we could still max out the dependent flex account with the new open season or... should we take the approximate 5000 credit instead?

Our AGI is about 107,000 mfj so we should qualify. Benefits are so great this year I’m considering getting a nanny for our twins instead of daycare since I’m leaving at least 3000 credit on the table.

Summary question: is it now more tax efficient to take the tax credit vs dependent flex account?

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Taxes / Re: Question on IVF medical bills

« on: March 07, 2021, 09:00:32 AM »

I think I answered my own question

Publication 502 states below:

What Expenses Can You Include This Year?
You can include only the medical and dental expenses you paid this year, but generally not payments for medical or dental care you will receive in a future year. (But see Decedent under Whose Medical Expenses Can You Include, later, for an exception.) This is not the rule for determining whether an expense can be reimbursed by a flexible spending arrangement (FSA). If you pay medical expenses by check, the day you mail or deliver the check is generally the date of payment. If you use a "pay-by-phone" or "online" account to pay your medical expenses, the date reported on the statement of the financial institution showing when payment was made is the date of payment. If you use a credit card, include medical expenses you charge to your credit card in the year the charge is made, not when you actually pay the amount charged

-----

The document doesn't reference when the expense incurred or treatment took place. It does specify the date of the payment is the only year in which it could be deducted. However I find the last sentence on credit card payments contradictory here. It seems to indicate the opposite...the date of charge is the year of deductibility. The previous sentence indicates it is the date of the payment when it comes to paying online or making payments. We weren't in a formal loan agreement...the business just let us pay monthly over 12 months.

I'm leaning towards deducting on the state side but I do feel it's ambiguous. If I were to amend it I don't know that I would feel comfortable deducting the WHOLE bill that year either because I didn't pay it all that year.

Thoughts?

Also...a PS my state rules basically refer to the IRS for guidance on that. So it's just following IRS rules and the difference is a lower exemption amount which makes itemizing more possible

4

Taxes / Re: Question on IVF medical bills

« on: March 07, 2021, 08:47:01 AM »

Hey Jeremy...I should have clarified that this is for state only. You are correct in assuming that I would see little/no benefit on the Fed side.

Are you thinking the deductibility is based on when the charge/bill occurred? I found this guidance from HRBlock but no source really:

https://www.hrblock.com/tax-center/filing/adjustments-and-deductions/deduct-medical-expenses-paid-with-loan/

I definitely would see some benefit on the state side. I've run the numbers...basically we would be doing MFS for spouse and I...and in that event even $4000 with our other itemized expenses makes a dent.

5

Taxes / Question on IVF medical bills

« on: March 06, 2021, 07:28:16 PM »

My wife and I did IVF in 2019. Babies were born in 2020. As of 2019, we paid about half and in 2020 we paid the rest on a payment plan.

Unfortunately I didn't think much about tax deductions otherwise I would have concentrated the payments.

My question is...since the medical event occurred in 2019, am I still allowed to deduct medical payments made on the payment plan in 2020? I can't seem to find details on this specific aspect. So example:

2019: IVF treatment. $12,000 cost. 6000 paid
2020: No IVF treatment as babies born $6000 paid this year through payment plan.

Before anyone asks the rest of medical expenses for birth, labor, appointments were covered by health insurance and/or my flexible spending account.

6

Taxes / Re: School, new parents, tax optimization

« on: December 24, 2019, 08:13:37 AM »

Thanks!!

7

Taxes / Re: School, new parents, tax optimization

« on: December 23, 2019, 09:54:18 PM »

Correct on wife and insurance.

My take on some of the credits(Child credit, dependent credit) was that both must have earned income. My interpretation is that being a full time student qualifies...

8

Taxes / School, new parents, tax optimization

« on: December 17, 2019, 09:55:01 PM »

So recently I learned my wife was pregnant (yay!!) and then I learned it was twins  (yikes!!!). Needless to say...my future is changing fast. Luckily, the FI journey has got off us to a nice start. Briefly our details:

Joint income: About 130k as of this year
NW: $465k (50k CD's, rest retirement account investments)
Family size: 4 as of July 2020. Just us two now.
Investment vehicles: As I said, very little in taxable except the 50k CD's. However a sizable amount is held in deferred compensation, and a bit in an inherited IRA(40k).
House: None. Renting at about a 40% discount so have not been too eager to leave.

I am considering going back to school. I know it's not a good time as having kids but I have wanted to for awhile and frankly not sure when it's going to be easier. Mostly the reason is a manager which no one tolerates, a rather isolated area, and just a general desire to pursue something I have always wanted to. Besides the merits of all that I am wondering the best way to manage tax consequences and any other ideas you might have. As I understand it there are a lot of different opportunities and tax vehicles to play with during these potential gap years. Can you help me out with any strategic ideas/pitfalls?

-Healthcare not an issue. Wife will be covered and have some parental leave to start us off
-American Opportunity Credit, Child tax credit, Savers credit should all be options
-Tax space to convert....due to me having little/no income and child credits, potential for a lot of tax space
-Plenty of vehicles: inherited IRA, deferred compensation from wife, traditional IRA's, 401k, etc.
-Around 50k cash
-No house...but a bit intrigued by low income housing opportunities(options to buy houses way below market that are nice, premium location due to low income)Note: Strings attached in that resale will be very limited by the community development trust to make it affordable
-No other taxable investments

Mainly my question is where you would start with strategy? I'm a bit bewildered to be honest because as soon as I start to think of a certain conversion strategy I realize it may disqualify me for a credit. Also I noticed that some of the credits are dependent on earned income so it may be critical to ensure I have some earned income. Anyways, any direction or strategic ideas you have would be great. Part of my overwhelm is also the idea of having twins lol. All strategies aside I'm figuring we are going to need more money and more space fast so the idea of efficient living/budgeting seems...tough.

9

Taxes / Re: Considering recharacterizing same year from Roth to TIRA

« on: November 25, 2019, 08:51:31 PM »

Thanks Jeremy...part of the reason I'm on the fence is I think that I am super close to qualifying for the saver's credit.

I just ran the math again and it looks like with $12,000 in tIRA contributions I would be down to $64,200. There is a slight chance I over estimated so I am tempted as I would get the max which would be a $2000 credit.

My tax situation is a bit forced right now so I'm not sure there is much I can do. I already maxed out flex, retirement accounts, etc. I have some RMD's from a small inherited IRA. Probably the worse thing is that I have some CD's kicking off interest in a taxable account. Not much I can do about that now.

I don't really have any losses to claim. I only have one taxable investment position and I think it's slightly up.

Aaaaah so close!!

10

Taxes / Considering recharacterizing same year from Roth to TIRA

« on: November 25, 2019, 09:17:32 AM »

I am a little on the fence whether I should take the tax deduction or go Roth. Jeremy, I guess from your articles you would never go Roth so maybe this post is a waste of time LOL. Nonetheless what are your thoughts?

2018, last year, was about what I expect this year. We will probably make a little more income so I anticipate the following:

Total income, joint: $85,000 (this is after maxing out employer retirement accounts, FSA, health insurance, etc)

Potential IRA deduction: $12,000

Would bring AGI down to: $73,000

It may be a bit of a hassle to re-characterize so didn't want to do so unless totally useful. Part of the reason I did some Roth was we are thinking of buying a house soon so I liked the idea of some roth funds being more accessible for a down payment. I realize both can be accessed for a first time home buyer but it just seems easier to not pay taxes later in a situation like that.

Thanks for any help!

11

Travel hacking / Re: Understanding Transfer partners in rural areas

« on: October 19, 2019, 01:22:12 PM »

I have been searching for MSP to Tokyo or LAX to Tokyo...After I posted I found better luck with LAX.

It seems like part of the problem is when I use the monthly calendar on virgin site...it will always show nothing until you get lucky and find a seat. Once you find one seat, it shows the whole calendar and then you can see all the award seats. I used the british english feature....i think I read somewhere this is one of the tricks? Lol seems goofy...

Ok good to know that one way isn't really a thing but now that I'm talking out loud it may also be an easier way to search for specific routes.

One thing I am still noticing on virgin is that the flights just aren't that far out? Do you notice that? Like for example nothing in march except march 4th. Nothing in may..June..

I am also exploring singapore air. More costly but looks like better experience. We don't quite have the points but I believe Citi, Chase, and venture(bad rate though) all transfer there. If we pooled our points using two player mode I think we might have enough for one way first class both ways(107,000). Our balances are, pooled:

Chase: 145k
Citi: 50k
Capital: 50k, will get another 50k in the next few months
Delta: 150k miles
Alaska: 45k miles

We are not set on Japan...but I have wanted to go there and figured this would be a good first start into travel partners. We are also open to any other cool island trips. We have an alaska companion fare to use up so probably won't bother with a Hawaii flight with miles  this year.

12

Travel hacking / Re: Understanding Transfer partners in rural areas

« on: October 17, 2019, 08:52:04 PM »

Hmmm ok....

So I have tried using virgin atlantic flyer club search engine. It's a total pain in the ass but I'm starting to get the hang of it...However I am really struggling to find first class awards. I have only found one so far and that was out of seattle which I prefer not to fly out of. Trying to fly out of MSP. I am getting a ton of economy options for 40,000 one way tickets...but none for first class.

1.) If only seeing economy...are there any tricks to find out which days mightt have first class availability?

2.) I'm noticing that further out in dates is not better. Is this accurate? Or is it better to look further out? I was wondering if they possibly don't post award seats out 3 months or something.

3.) Is there a strategy to typically booking one ways? I'm accustomed to booking roundtrip awards/cash fares because then if some situation occurs I am covered on both ends...but most of the travel hack blogs I read seem to indicate that one ways is how the awards are won.

Is that accurate? Why is that?

13

Travel hacking / Understanding Transfer partners in rural areas

« on: October 14, 2019, 01:51:43 PM »

Ok so as I have said...pretty new to travel hacking and this will be my first year with some points, chase points, cap one miles, and I am considering citi prestige thank you points. I understand that transfer partners is where really cool redemptions can be had. Frankly when I started this...I was happy to just be able to book domestic tickets home to my family for free. However the thought of an epic first class trip to hawaii or something sounds pretty cool.

My struggle is we do not live near SFO or LA or JFK where a lot of these partners originate. So ...I'm confused--how do people access these transfer partners? Is it not so efficient if you live in rural areas? Or if you live in a rural area, do you "position" yourself by for example flying from Montana to Seattle first....and then utilizing a cool redemption?

Or is there a way to redeem Delta using Virgin from my airport if Delta is there? This is the part where I get a little lost. I see redemptions for delta flights using virgin...but I don't get if you still need to have virgin flights or will virgin book anything delta from anywhere?

Hopefully my question makes sense...as a side note for my airport, it pretty much is Delta, United, Alaska Air, and American Airlines. Most of the places we go Delta has the flights that are most efficient. Utilizing the others would be an extreme waste of flying time. Alaska does work well heading west though which we sometimes do.

Thanks for any help!

14

Travel hacking / Re: Next card. Go premium or capital one venture?

« on: October 06, 2019, 11:03:16 PM »

Thanks. Sorry I meant Citi Prestige.

Yea putting it that way:

Capital One: 0 cost
500 value in points
100 value in global entry

Citi: 500 cost
$500 value in points
$500 value(2 travel credits) in first year
$100 VALUE in global entry

Guess you're right. It's about equal except If I were to value citi prestige benefits like lounge access...or the multipliers. Those are a bit intangible for me because I haven't quite figured out optimal ways to access transfer partners from a rural airport. I realize everyone else would value that high but ultimately i am still a little shaky on what my redemption value will be on various points programs outside delta.

Again, I have considered amex for the more delta-friendly amex points but the airline credit just doesn't make sense to me. There is no way we would normally spend $250 a year in travel incidentals.

15

Travel hacking / Re: Costco Travel hack (Car rental)

« on: October 06, 2019, 04:53:19 PM »

Interesting. I am from MN so will pay attention to the MSP deal you mentioned. Is it state specific in terms of taxes?

Your find is worth looking into ...but must say I have never found a better deal than the airport. Not sure why. There is so much more going on at MSP though....who knows. Could be a lot of different market fluctuations. Last time I flew into Buffalo we didn't find any better deals outside the airport--and I did look.