Financial Arrangements

Before any recommendation can be made it is imperative that the couple consider such issues as nuptial arrangements. This is in line with the fact that they have previous financial arrangements that may be altered. Tax credits are the safest way that the couple can devise to pay for a partner’s expenses, considering that it is a government tax refund. From their earnings it is apparent that Amber will earn less tax credit, but if they agree to sponsor Jeffrey’s educational degree aspirations, it is a long term investment. Looking at their dreams it would be wise for Jeffrey to finish his undergraduate because he would be able to earn more. This would appear to be splitting responsibilities or doing Jeffrey a favour but looking at another perspective it would be an investment. The amount earned when Amber decides to sell her shares will depend on whether the state they are living in charge the federal tax on top of the state tax. The second aspect that might determine the amount earned by selling the shares will depend on the exemptions allowed if the couple pay the taxes jointly. In other words tax rate paid by any individual is determined among other factors by the income bracket that they fall under, in this case the couple fall under the “married filing jointly”.

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For the couple buying a home at this period of time will be considered a wise move because they will definitely enjoy tax deductions. Per annum, the government deducts all of the money paid towards buying of property from the gross income to reduce the taxable income. The interest rate that will be applicable in the instance that the couple gets a mortgage will also be accordingly deducted on the taxable income. It is therefore advisable that they obtain a mortgage instead of continuing to pay house rent. It is financially advisable because house rents appreciate on at least a yearly basis, some might event appreciate more than once per year. In about thirty years the cumulative amount that will have been paid will be very high as compared to when the couple takes a mortgage. This is because the interest rates on mortgages are fairly stable as compared to house rent. The best course of action would be to opt for a fixed mortgage rate.

Qualified retirement plan is able to enjoy deferral of tax payment until the employee actually receives the retirement benefit. The benefits tax deferral cannot be observed at a go but over the years until someone retires it accrues a lot of income. When the couple increases their contribution towards their employer sponsored retirement plans it will be beneficial. For instance if the couple contribute $100 each month, each one of them will have $1200 in a year and after a period of let’s say thirty the contribution will have grown tremendously . This money will be earning interest which will not be taxed until the time when it is withdrawn. In the event that the money is withdrawn as a lump sum it will only be taxed just that once. Considering a case when the couple decides to invest the money, they will be required to pay tax on every interest earned. The major advantage of contributing towards a pension plan is that one enjoys the benefits of tax deferral. However this is not all because a person will always encounter lower marginal tax rates when they are retired as compared to when they are working.

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Establishing a sideline business for Jeffery’s jewellery operation will definitely increase on their taxable income considering that the interest earned will be taxed. The jewellery operation earns about $ 10,000 per year, for instance this operation is established as a business it might even be able to earn much more than this. Therefore although the taxable income will increase, tax credits will also increase by a closer margin. It is therefore a wise way to invest.