Author: Arabian Media staff

Taxable Income vs. Gross Income: An Overview Gross income includes all income that you receive from any possible source. Taxable income is the portion of your gross income that’s actually subject to taxation. Allowable deductions are subtracted from gross income to arrive at your taxable income. Key Takeaways Gross income is all income from all sources that isn’t specifically tax-exempt under the Internal Revenue Code.Taxable income starts with gross income, and then certain allowable deductions are subtracted to arrive at your adjusted gross income.Adjusted gross income then can be reduced by the standard deduction or itemized deductions for the final…

The qualifying widow(er) with dependent child tax filing status offers several tax benefits for individuals with a child who have lost a spouse. The tax breaks include a lower tax rate, a higher standard deduction, and potentially beneficial tax treatment of some investments. Key Takeaways Qualifying widow(er) status is a special tax filing status available to surviving spouses for two years following the year in which their spouse died.In general, this status allows a widow(er) with a dependent child to continue receiving the same tax rates for the married filing jointly status for two years following their spouse’s death if they…

You’ve left your job. What should you do with the 401(k) plan you’ve faithfully contributed to for years? Conventional wisdom says to roll it over into an individual retirement account (IRA). In many cases, that is the best course of action. But there are times when a rollover is not your smartest option. Let’s take a look at five of those situations and the rationale for keeping your 401(k)—or, if you’re a public or nonprofit employee, your 403(b) or 457 plan—in place at your now-former employer’s plan. Key Takeaways Leaving your 401(k) account with your employer can save on fees…

You can make withdrawals from your 401(k) at various times and in various sums, but is it a good idea to do so? Usually, the answer to that is no. Tax-deferred retirement plans, such as 401(k)s, are designed to provide income during retirement and not before. So in most cases, if you make any withdrawal and are younger than 59½, you’ll pay a 10% early withdrawal penalty in addition to income taxes on the amount you withdraw. Here is what you need to consider regarding withdrawals from your 401(k) while working and once you retire. Key Takeaways You can make…

The social and economic implications of an aging population are increasingly apparent in many industrialized nations. With people in North America, Western Europe, and Japan aging more rapidly than ever before, policymakers are confronted with several interrelated issues, including a decline in the working-age population, increased healthcare costs, unsustainable pension commitments, and changing demand drivers within the economy. These issues could significantly undermine the high living standard enjoyed in many advanced economies. Key Takeaways Many industrialized nations are realizing the effects of an aging population.Declines in the working-age population are resulting in a supply shortage of qualified workers.Nations with larger…

Deferred Compensation Plans vs. 401(k)s: An Overview Deferred compensation plans offer an additional choice for employees in retirement planning and are often used to supplement participation in a 401(k) plan. Deferred compensation is simply a plan in which an employee delays accepting part of their compensation until a specified future date. For example, an individual who’s 55 years old and earning $250,000 a year might choose to defer $50,000 of annual compensation per year for the next 10 years until retiring at age 65. Key Takeaways Highly-compensated executives often opt for deferred compensation plans.Deferred compensation plans cannot generally be accessed early.Deferred…

Income inequality is consistently a major topic in U.S. presidential races. Gini coefficient figures have ranked the U.S. as one of the worst places for income equality among developed economies for many years now, and this issue is only getting worse. With a host of social ills—such as slavery, immigration problems, and Japanese internment camps—correlated with high levels of income inequality, it is crucial for the U.S. to figure out how to reduce its income inequality. Fortunately, history gives us a useful guide to policies that can be implemented to aid in that goal. A brief history of income inequality…

Federal, state, and inheritance tax rules explainedReviewed by Anthony BattleFact checked by Suzanne KvilhaugStephanie Deissner / F1online / Getty Images When a loved one dies and leaves you with an inherited IRA, the rules can be very different from your existing IRAs.Money or property you inherit may be subject to estate taxes and inheritance taxes, but it’s not likely. Most estates are not rich enough to qualify for the federal estate tax. The federal estate tax applies only to those whose estates are valued in the multiple millions. Surviving spouses are exempt.Moreover, most states have neither an estate tax, which…

Tax Brackets and Social Security As a taxpayer, total income determines your highest tax bracket. Social Security benefits are included in that total income, as reported on Form 1040. Your taxable income is your gross income minus all allowable deductions. A portion of your Social Security benefits may be subject to federal taxation. In fact, up to 85% of your benefits may be taxable if your total income meets a certain threshold amount noted by the Internal Revenue Service (IRS). Key Takeaways Your taxable income equals your gross income less all the deductions that you are allowed. Up to 85%…

When a spouse dies, each of their assets transfers to their beneficiary, who is typically their surviving spouse. Unlike Social Security benefits, which have an automatic survivor benefit, retirement plans require account holders to choose their beneficiaries. These beneficiary designations take precedence over what is stated in a will. Without a named beneficiary, a retirement account will be transferred through a legal process called probate. Key Takeaways Individuals should name beneficiaries on their accounts so that their assets are distributed as they want at their death.Individual retirement accounts (IRAs) can be rolled over, inherited, converted to a Roth IRA, or…