By Professor Anthony Rivieccio MBA PFA
Yes my friends hopefully if you are reading this you have survived income tax season 2020! And you got your COVID refund?. Congratulations ! I call it your COVID refund for a reason— were in a National Crises.
Everyone, I mean everyone , of some magnetude, every one needs extra money!. So, what is the best way to use your new found tax refund?
- Pay off debt
Let me start by simply asking you : what interest rate are you paying on your debt? After you know that answer, then go to your local bank to see what their savings interest rates are. Depending on your debt the answer could be, for example; debt 5-10%. Savings 1%. So yes folks, $1 invested in paying off your debt is like receiving $5-$10 dollars in hidden savings. Pay that debt first!. If your credit card debt for example is 10% per year a quick 2 payment pay off could equal savings of 1.7%
- Lower your mortgage
I spoke with some Clients in the last 12 months and, to be simple, apply the same analogy to your mortgage: What interest rate are you paying? Let’s say 6%. So if you pay 2 extra months, your saving 1%.
- Look at safe investments
Well if you went to the bank for savings you know that’s 1%. How about Treasury Bonds? Muni Bonds?
Many of these investments are paying annually 5%. So a 1 year deposit, will gather you investment interest of 5%.And consider a Muni investment , that could be triple tax free. If you live in NY, that would be a savings of up to 7%.
- Understanding Tax Planning
True lowering of your taxes does not come from tax preparation- it comes from tax Planning- understanding all of the 4000 eligible deductions & credits that could be available to you that could legally lower your tax liability to 0%. So, if your single for example, make $35,000. Add Federal State and city taxes, you will ( before credits & deductions) be expected to pay your fair share of taxes, appox 40%. So if one learned , for example, that they were using their home for ” work related purposes” you could ( generally speaking) maybe reduce those home expenses by ⅓; from supplies to equipment to utilities to rent. In the home office area, there are 28 eligibilities of deductibility. Easily cutting off ⅓ or more of your expenses could bring you a taxable equivalent savings of 12%
While of course their are many other ways , including risk adverse, maybe the main point is to use your tax refund wisely!.
Professor Anthony Rivieccio, MBA PFA, is the founder and CEO of The Financial Advisors Group, celebrating its 25th year as a fee-only financial planning firm specializing in solving one’s financial problems. Mr. Rivieccio, a recognized financial expert since 1986, has been featured by many national and local media including: Kiplinger’s Personal Finance, The New York Post, News 12 The Bronx, Bloomberg News Radio, BronxNet Television, the Norwood News, The West Side Manhattan Gazette, Labor Press Magazine, Financial Planning Magazine, WINS 1010 Radio, The Co-Op City News, The Bronx News, thisisthebronX.info and The Bronx Chronicle. Mr. Rivieccio also pens a financial article called “Money Talk”. Anthony is also currently an Adjunct Professor of Business, Finance & Accounting for both, City University of New York & Monroe College, a Private University. For financial assistance, Anthony can be reached at (347) 575-5045. Have Facebook? Our professional page is: www.facebook.com/iwantmytaxmoney