BETTER BUSINESS & SALES
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Professional Distributor I October 2018 I VehicleServicePros.com 49
“It almost doubles from 2017,”
Fydryck says.
Amounts increase to $12,000
for individuals, $18,000 for heads
of household and $24,000 for married
couples filing jointly and
surviving spouses.
...Except you’ll get no
exemptions
The standard deduction amounts may
have doubled, but personal and dependent
exemption deductions are eliminated.
That means if you are caring
for a parent you will not get the $4,150
deduction you may have expected to get
this year. Also, be aware that once your
child turns 17 you will not be eligible
for the child tax credit, either.
That’s crazy.
“No,” Fydyck says. “That’s congress.”
Share your tax tips
Any tool dealer tax tips I may have
overlooked? Shoot me an email at phil@
philsasso.com or leave a personal voicemail
for me at 847-250-PHIL (847-
250-7445).
Saving on your taxes by
saving for your future
Tax-Advantaged accounts are savings
or investment accounts that may be tax
deferred or tax exempt. This reduces
your current taxes while increasing
your nest egg. The most popular taxadvantaged
accounts for Mobile Dealers
are IRAs and HSAs.
Individual Retirement Account (IRA)
As a one-person business, the simplest
retirement savings opportunity for you
may be the common Individual Retirement
Account (IRA). These come in two
flavors: Traditional and Roth.
Traditional IRAs - save you taxes on
your income now, but your principal
and earnings will be entirely taxable
when you withdraw them in retirement.
“This can be a better deal for older
workers,” Fydryck says. If you start an
IRA when you’re 50, there’s not much
time to earn interest or dividends. A
Traditional IRA offers more tax savings
when you’re older and in a higher tax
bracket. So, when you’re retired and
presumably in a lower tax bracket you’ll
pay less taxes on that same money.
BEWARE: If you withdraw funds from
your Traditional IRA before you are
59-and-a-half years old, you will owe a
10 percent penalty on the amount you
withdraw plus taxes.
Roth IRAs require you to pay taxes on
the money you put in now. But when
you withdraw it at retirement the entire
amount is tax exempt.
“Younger people can sometimes benefit
the most from a Roth IRA”, Fydryck
says. Putting money in an account in
your 20’s and letting ride for 40 years
plus can be a huge benefit because the
return on all that money is not taxable.
BEWARE: There are rules associated
with IRAs. Your tax advisor can explain
the limits and details.
Most major corporations offer employees
401(k) retirement accounts. As a
one-man business, it’s cost-prohibitive
to set-up one of these, but you can set
up a SIMPLE or SEP-IRA (Self Employed
Pension IRA) to save larger amounts
than the above options. Ask your
broker, banker and/or tax advisor for
details on these options.
Health Savings Account (HSA) - An
HSA allows you to save money tax-free
for medical expenses. You need an eligible
High-Deductible Health Plan (HDHP)
to qualify (in 2018 that’s $1,350/individual
or $2,700/family), says Fydryck. The
2018 cap on HSA contributions is $3,450
for individuals, $6,900 for families (add
$1,000 if you’re 55+).
There is no need to wait until retirement
to use these funds. You can use
them on any qualified medical expense
for anyone covered by your insurance
policy. This may cover chiropractors
and other professionals not covered by
your insurance. (As always, ask your
tax professional before making any
major moves.)
BEWARE: If you withdraw funds from
your HSA for anything other than
qualified medical expenses, you’ll get
zapped with a hefty 20 percent penalty
plus taxes. (That’s enough to make me
feel sick just thinking about it!)
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