Accounting Commons^™

If you have clients subject to tax in neighboring states, make sure you are aware of the variations in each state's 529 college savings plans to ensure your clients receive maximum tax savings.

The tax advantages of a 529 account are better than a Roth retirement account: Earnings on the investments are exempt from all income taxes; withdrawals are tax-free if used for the beneficiary's expenses at any higher education institution in the U.S. where students are eligible to receive federal financial aid; there is no income limitation on who can contribute to a Missouri 529 account; a larger annual amount can be contributed than to a Roth IRA; and it generates Missouri income tax savings.

Millions of American workers are "leaving money on the table" because they don't take full advantage of employee stock purchase plans (ESPPs). Employees should purchase the maximum number of shares (at a discount) allowed under the plan and the most conservative strategy is to sell them immediately. This will increase the employee's wealth.

Do this First: Invest in a 401(k) or 403(b) retirement account up to the full extent of the employer's matching contributions.

If you're able to (i.e., if you still have some cash available), do this Second: Pay off high interest rate debts in order—beginning with those that have the highest after-tax interest rate.

If you're able to (i.e., if you still have some cash available), do this Third: If higher education costs are an issue, invest in a section 529 college savings plan up to the maximum amount eligible for state tax benefits.

If you're able to (i.e., if you …

For 2003, it appears that Heinz Kerry paid tax of about $23,333 (Heinz Kerry's marginal AMT rate of 28 percent multiplied by $83,333) because she owned "AMT bonds" (i.e., private activity muni bonds). Heinz Kerry would have been better off if she owned non-AMT muni bonds instead of the AMT bonds. If we assume that she would have received 25 fewer basis points of interest if she owned non-AMT bonds, Heinz Kerry would have been approximately $20,000 richer at the end of 2003. Heinz Kerry was caught by the tax trap of owning AMT bonds when she was subject to …