Interested in LTC insurance? Consider a tax-free exchange

Long-term care (LTC) insurance can help cover the expenses if you or a loved one requires an extended stay at a nursing home or assisted facility or other long-term health care. One option for financing LTC insurance is to use a tax-free Section 1035 exchange.

An exchange allows you to transfer the cash value of a life insurance policy or annuity directly to a new LTC policy, without triggering a taxable distribution. Typically, partial exchanges are used to fund annual premium obligations, but it’s also possible to use a complete exchange to trade a life insurance policy or annuity for an LTC policy or a hybrid LTC/life insurance policy.

Used clean vehicle tax credit: Handle with care

You’re probably familiar with the $7,500 federal tax credit for purchases of certain new electric, plug-in hybrid and fuel-cell vehicles. But did you know that there’s a tax credit available for used clean vehicles? It’s equal to 30% of the sale price, up to a maximum credit of $4,000. However, strict rules about which vehicles are eligible may make it difficult for many people to qualify for the credit.

To qualify, a vehicle must have a sale price of $25,000 or less, a model year at least two years earlier than the year you buy it, not already have been resold after August 16, 2022, and be purchased from a dealer, along with certain other technical requirements. Also, to be eligible for the credit, you must not have claimed another used clean vehicle credit in the preceding three years, and your modified adjusted gross income must not exceed $75,000 for single filers ($150,000 for joint filers). Note that these income limits are half the size of those for the new clean vehicle credit.

Should you hire your kids?

If you own a business, consider hiring your children for the summer or even part-time while school is in session. Hiring your kids may provide tax benefits, assuming you have age-appropriate work for them to do.

For example, if your children are under 18 and your business is unincorporated, neither the business nor the kids have to pay Social Security or Medicare taxes. Plus, because wages are deductible, this strategy may reduce your family’s tax liability by shifting some income to your children who will be in a lower tax bracket. In fact, kids won’t have to pay any taxes if their income doesn’t exceed the standard deduction ($14,600 in 2024).

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