Minnesota’s New Gift Tax: What You Need to Know

Minnesota may hold a steady place near the top of Gallup’s annual Best Places to Live, but a recent Wall Street Journal article claimed the state is also edging out the competition on another list: Worst Places to Die.

Minnesota’s place on the list, which also recommends against passing away in Washington and Nebraska, was established by its high 16% estate tax (or “death tax”). But the state’s number shot up recently after the state passed an additional 10% gift tax—a fee for transferring property to another person during your lifetime.

Here’s the breakdown: 10% of gifts in excess of $14,000 are counted toward your lifetime credit of $100,000 (which comes to an exemption of about $1 million in gifts total). While legislators are quick to assure panicked residents that the majority of people in the state won’t ever see the tax, for many small-business or multiple-property owners, the … Read More

Tax Credits for Summer Camps and Childcare

Summertime has a special meaning for children: bike rides, swimming, sleeping late, and most importantly, no school for two and a half months. But many parents—whose work schedule is unaffected by the changing seasons—dread the end of the school year, because finding summer childcare during the day becomes a difficult (and expensive) task.

Sound stressful? Don’t worry, there’s good news.

To ease the financial burden of summer expenses, the IRS offers special tax credits for qualifying taxpayers who pay for summer childcare. This means that the money you pay these next couple of months for daycare, summer day camps, and even in-home baby-sitters can help you earn a significant tax credit on next year’s return—up to 35% of what you pay now. This helps offset the cost as you go to work every day (or look for work, if you are unemployed).

Of course, there are certain rules that apply:… Read More

Parents: Get the 4-1-1 on the 529 College Savings Plan

Have a child who’s headed off to college in the future? It’s never too early to start planning how you’re going to cover the rising costs of higher education. A 529 savings plan can help you save for your child’s (or other dependent’s) college tuition. The rules differ by state (you can look up your state here), but the basics are the same: you make regular contributions to an investment and then withdraw from that pool of money to pay for college-related expenses.

The good news: your withdrawals are tax-free, meaning you won’t be subject to any taxes each time you take out money to pay for a qualified expense.

The bad news: not all college-related costs are considered qualified expenses.

So before your child heads off to earn his first degree, you’ll want to do some homework yourself. Using 529 money to pay for the wrong kinds of expenses … Read More