Posted on November 15, 2011May 31, 2016 by Jan Roberg

How Much Can I Contribute to My 401(k)?

Photo by Danielle Elder on Flickr.com

Good question! Starting in 2012, you can put up to $17,000 away for retirement in a 401(k) plan. This figure also holds for people who have 403(b) plans and any of the 457 plans as well. If you happen to be over 50, you’re allowed what’s called a catch-up contribution so you can add an additional $5,500, making your total 401(k) contribution $22,500 for 2012.

Remember, money that goes into a 401(k) is tax-deferred so although you’re not paying tax on the money now, you will pay tax on it when you do withdraw it for retirement. If you take the money out of the plan before you reach the age of 59 ½, there’s a 10% additional penalty on top of the regular tax that you’ll pay. As much as I think 401(k) plans are a great deal, if you think that you’re going to need the money before you retire, you might want to re-think your contribution.

A good rule of thumb is that a person should be contributing 10% of his or her income into a retirement program. If you can afford 15%, that’s better, but 10% for sure.

Some companies have what’s called a Roth 401(k)—it basically works like a Roth IRA: you pay your income tax on your retirement plan contributions now, but when you take the money out later it’s tax free. Roth 401(k) plans have the same limits as regular 401(k) plans. If you have access to one of these plans you should seriously consider using it. For anyone who is in a 15% or lower tax bracket, choosing the Roth should be a no-brainer. If you’re in the 25% tax bracket and under 40, I’d still go with the Roth. After that, I’d start doing some serious considerations of what my future plans were, how early I’d want to retire, and other factors.

If your income is below $58,000, you can make fully deductible IRA contributions in addition to your 401(k) contributions (For married couples it’s $92,000.) This gives you some wiggle room. If you’re not comfortable committing to your 401(k) contribution rate, you can make up the rest with an IRA if you’ve got the funds at the end of the year.

If you haven’t started saving for retirement yet, this is the time to start.

Posted on November 11, 2011May 31, 2016 by Jan Roberg

When a Service Member is Killed in Action-Tax Issues

Photo by James McCauley on Flickr.com

This is one of those things nobody wants to deal with. I don’t remember ever learning about it in tax school (I take update and continuing education classes every year). I don’t remember hearing a thing about it when I took the “Military Taxpayer” class which specifically targeted all sorts of military tax issues. I actually learned about it doing research on something else and landed on the wrong page of a document. It seemed like this information should be shared. If you need to be reading this, I am sorry about your loss.

Tax liability can be forgiven if a member of the US Armed Forces dies while in active service in a combat zone. This also includes death from wounds, disease, or other injury received in a combat zone or incurred in a terrorist or military action.

In addition, any unpaid tax liability at the date of death may be forgiven. When a liability is forgiven, it means that the debt doesn’t have to be paid.

If you’re filing a tax return (or amended return) you will have to identify that you will be claiming tax forgiveness by writing across the top of the tax return:

“Iraqi Freedom-KIA” or “Enduring Freedom-KIA”

If the soldier was killed in a terrorist action, write “KITA”. You will use the same phrase that you wrote across the top of page 1 on the line of your tax return for the total tax. On a 1040 that’s line 61.

You will need to attach the following documents to your return:

Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer, here’s a link for that form: http://www.irs.gov/pub/irs-pdf/f1310.pdf
A certification from the Department of Defense or Department of State (form DD 1300 for military and department of Defense employees)
You will also need to include a sheet that shows how you computed the tax liability to be forgiven. If you have a joint return, only the soldier’s debt is forgiven, not the spouse’s.

Military tax forgiveness returns need to be mailed to a special address. This is not something that can be e-filed.

Internal Revenue Service
333 W. Pershing, Stop 6503, P5
Kansas City, MO 64108

You can get more detailed information on this issue by reading IRS Publication 3: Armed Forces’ Tax Guide. Here’s a link to the book: http://www.irs.gov/pub/irs-pdf/p3.pdf The information you need starts on page 20.

Posted on November 8, 2011May 31, 2016 by Jan Roberg

Everything You Wanted to Know About FAFSA But Were Afraid to Ask

Photo by Jeff Ozvold on Flickr.com

Whether you’re a parent or a student, if you’re going to college next year (parents-you’re staying home, it just feels like you’re going to college) you need to know about the FAFSA. FAFSA is the Free Application for Federal Student Aid. A very important word here is FREE. You see, there are a lot of websites that will say they’ll do the FAFSA for you, but you have to pay them. The real FAFSA application is free.

The first thing you want to do is make sure that you’re using the correct website. Here’s the address: http://www.fafsa.ed.gov/index.htm. Notice that it doesn’t have a .com or .org in the address. Make sure you go to the right place.

When you complete the FAFSA application, you’re going to want to have all of your information ready. It’s a pain in the behind to get started and then stop and start a million times. Do yourself a favor and print out a copy of the FAFSA application before you start. Here’s a link to that too: http://www.fafsa.ed.gov/fotw1112/pdf/PdfFafsa11-12.pdf

Did you look at that application? That’s for last year. If you’re looking to do the FAFSA for starting school in September of 2012, you won’t be able to complete that form until after January 1. You’re going to need your tax information for 2011 also, so you should really do your tax returns before you file your FAFSA. You can submit them with estimates based upon last year, but you’re really much better off doing your taxes first if it’s at all possible.

Look at the state deadlines listed to the right of the application. Don’t ignore those. For example: I’m in Missouri, it says April 1 is the date by which the application should be received and has a little # meaning that priority is given to applications received by that date. But make sure you check the deadline for the school you’re applying to as well. Missouri as a state has a deadline of April 1, but if you’re applying to Washington University here in St. Louis, they’ve got a FAFSA deadline of January 30th. Make sure you know those deadlines.

Part of the application process that confuses people is the sections about the student and the parents. FAFSA asks questions with the assumption that the student is filling out the form. The whole first section is for the student. This really messes up parents who are completing the form because it asks questions like, Are you married? Do your children receive more than half of their support from you? As a mom myself, I’m answering, yes, I am married and of course I support my children. Oops! Those are all in the section for the student to fill out. My daughter is not married and she has no children to support—big difference. Don’t make my mistakes! Remember, not all people applying to college are kids in still high school.

Parents will get to answer questions starting on page 6. But it’s all asked like the student is filling out the form—what is your parent’s address? And things like that. Outside of the address part, your kids aren’t going to know most of those answers, especially the financial information. They’ll need your help with that.

One question that I have been asked a few too many times is, “Should I just lie about my income?” No, you shouldn’t. The colleges have a verification process for granting financial aid, in most cases you’ll be asked to provide an actual copy of your income tax return. By lying on the FAFSA, not only do you risk losing your potential financial aid—you could also risk losing admission to the school as well. It’s just not worth it.

When you’ve finished the FAFSA application and submitted it, you’ll get your SAR report which basically tells you how much they think you are able to pay towards your college tuition this year. Let me give you a fair warning: whatever you think you are able to pay for tuition, your SAR score will be about twice that amount. Be prepared for that shock, but don’t let it deter you from applying for college. Remember that even though the FAFSA report might say you can afford more than you think you can—the different schools have different programs so you have a good chance of finding a school that has a more generous financial aid program.

One final thing, you might think that your income is too high for you to receive financial aid and so you shouldn’t even apply. The year my son started college, we didn’t really qualify for financial aid, but had submitted the FAFSA application anyway. Later, my husband lost his job and we were afraid that we wouldn’t be able to pay the tuition. Because we had completed the FAFSA, our son’s school adjusted his scholarship based upon my husband’s new situation. They would not have done that if we didn’t have the FAFSA filed. Even if you think you don’t qualify, it could very well be worth your while to do the application.

Posted on November 4, 2011December 24, 2016 by Jan Roberg

Split Exemption: Claiming One Child on Two Tax Returns — The Legal Way

IRS rules allow for divorced parents to split a child's exemption

Splitting an exemption is not illegal if you follow the proper rules. Learn how here.

Sometimes when I’m working with a divorced couple, it seems that the most beneficial way to prepare the tax return is to split the exemption for their child. When I say that, they always tell me, “But I heard that was against the law!” No—that’s not exactly true. But let me tell you, there is a right way and a wrong way to do it. If you follow the rules and do it correctly, it’s not only legal, it’s the right thing to do. Warning: if you don’t follow the rules, you could be breaking the law. I give a lot of advice to do-it-yourselfers, but if you’re planning to split an exemption, I recommend you go to a professional for it. (And if she tells you it can’t be done—hire somebody who knows what she’s talking about.)

With most divorced couples (I’m including here couples who were never married but have split apart and have lived apart for at least 6 months of the past tax year), one parent (usually the mother) has custody and the other parent (usually the father) has visitation rights. A lot of couples say that they have “joint” custody – for example, the kids stay with the dad every Wednesday night and every other weekend and with the mom the rest of the time. If you count the days, under IRS rules, the mother wins on the custody status. According to the IRS, wherever the child spends the most nights is where the child lives—if you’ve got one of those every other weekend and every Wednesday night agreements, the IRS doesn’t count that as being equal.

In my example, I’m saying the child lives with the mother. In IRS lingo, the mother in this example is the “custodial” parent and the father is the “non-custodial” parent.

In this case, the mom has all the power—she’s the custodial parent. The mom can claim all the benefits of having a child on the tax return. Those benefits include:

Head of Household filing status-a lower tax rate
Childcare tax credit-credit for money you spend on daycare
Childcare exclusion-so you don’t get taxed if your company pays for daycare
Earned Income Credit-this can be worth up to $3,094 for one child
Exemption for the child-a deduction of $3,600 off your income
Child Tax Credit-worth up to $1,000

When tax professionals tell you that you can’t split exemptions, what they’re reading is the section of Pub. 17 (that’s like our Bible for tax stuff) that says these things always go to the same person. What they’re not reading is page 31—the part that tells you about the special rules for divorced or separated parents. Under the special rules section, it says that the mom (our custodial parent) can release the exemption for the child to the father (the non-custodial parent). This lets him claim the exemption and the child tax credit on his return, while the mom keeps the head of household status, the dependent care credit, and the EIC on her return.

Why would anyone want to do this? Lots of reasons! Number one, of course, is to maximize the amount of money you get back from the government. A lot of times, after a divorce, the mom doesn’t have a very high taxable income. Remember, child support isn’t taxable. The dad has lost a lot of his deductions so his tax bill could be pretty high. He’d probably never qualify for an earned income credit anyway, but the $1000 child tax credit would really help him out. If the mom’s taxable income is really low, she wouldn’t even qualify for the $1000 child tax credit. In some cases she could give it away without it hurting her at all. Or maybe the father is behind on child support, she could negotiate: if he catches up on the child support by December 31st, she’ll sign the form to allow the father to claim the child’s exemption. Remember, when claiming the exemption for a child, the custodial parent has all the power. If the dad claims the child without permission, the mom can just file her own return fully claiming the child and sending the dad’s return to the IRS audit division. You don’t want that to happen.

Splitting an exemption isn’t the best choice for everybody. You have to look at both returns and see if it’s going to work. It also helps to be on good terms with the ex—this certainly doesn’t work well with people who are fighting.

There are a lot of other rules that I haven’t even touched. (That Pub. 17 book is 295 pages long!) But if you are divorced or separated, you need to know that splitting an exemption might be an option for you to use on your income tax return.

_____________________________________________________________________________________

Here are some links that might help:

EIC questions of any kind: EITC Assistant

How to find free tax preparers: Free Tax Help

How to find your local IRS office: Find an IRS Office

Posted on November 1, 2011May 31, 2016 by Jan Roberg

Small Business Owners: Are Your Workers Employees or Contract Labor?

Photo by Tess Aquarium on Flickr.com

The biggest issue you’re going to face as a small business owner this year is whether or not the people you hire to work for you are employees or contract labor. This is such a hot topic with the IRS right now that they’re currently running a Voluntary Compliance Program—giving businesses a chance to “change their minds” about how their workers are classified. It’s called the Voluntary Classification Settlement Program (VCSP).

Basically, with the VCSP, if a business has been calling workers contract labor when they really should have been labeled as employees, you get a chance to go in and change your employee’s status before the IRS nails you instead.

So how do you know if you’ve got an employee versus a contract labor situation? That’s a really tough call sometimes and the law isn’t very clear. It’s all based on what’s known as “common law,” which means the issues have been settled in court cases instead of legislation spelling out the rules for us. The basic common law rule that defines an employee is that the service recipient (in English that’s the boss) has the right to direct and control how the service is performed.

Let me use an example: let’s say you hire me to do your taxes for you (Good idea, actually). In this case I would be contract labor to you. You will tell me what you need done, and supply me with the information to do it, but I’m going to use my software programs, my office, my stuff in general. I’m going to do it my own way, when I want to, and wear my pajamas at work if I want. That’s contract labor. (By the way, I never wear pajamas to work but I sometimes wear a St. Louis Cardinals jersey.)

But I used to be an employee at a large tax company. While I was working there, I used my boss’s software, I had certain hours that I had to be in the office, I arranged the paperwork for the files exactly as I was instructed (with the staple in the top left hand corner horizontal to the box in the big numbers in it) etc., etc.. My Cardinals jersey would have been a dress code violation and I would have been sent home. I could have even done your taxes while I was working for that company, but you weren’t really hiring me, you were hiring that company that I worked for.

You see how those two examples are different? Even though there isn’t an absolute, defining definition of what makes a person an employee, it’s sort of like Justice Potter Stewart’s famous quote about obscenity, “…I know it when I see it.”

I work with a lot of clients who are classified as 1099 contract laborers but should be labeled as employees. Most of them will never file a complaint with the IRS for fear of losing what jobs they do have, so employers have been pretty safe up until now. But the IRS isn’t stupid (Yes, I put that in writing). If I can look at a 1099 MISC and figure out that the person is really an employee instead of contract labor, the IRS is able to set up a computer screen and they’re going to be able to target suspicious 1099s as well. Did I mention, they’ve been updating their equipment? Faster, stronger, better—it’s like the $6 million man but more expensive.

So how do the people you hire stack up? If you’re paying people as employees, and properly paying your withholding taxes, then you’ve got nothing to worry about. If you’ve got employees but you’re paying them as contract labor it’s time to take a good hard look and decide if you’re doing the right thing. Using the common law test of “direct and control” are these people really contract labor or should you reclassify them as employees? If they should be called employees, you’ll want to find out more about the Voluntary Classification Settlement Program.

The VCSP has a whole list of requirements and there will be costs attached. Although that’s a little scary, it’s much better than the costs associated with an audit over your worker classification. To find more information about the VCSP, here’s a link to the IRS website: http://www.irs.gov/businesses/small/article/0,,id=246013,00.html

It’s perfectly legal to hire contract labor—it’s a very normal, regular part of business and many businesses couldn’t function without it. When you cross that line, when you’re really hiring employees but you’re just calling them contract labor to avoid paying payroll taxes– that will get you into trouble.

Posted on October 27, 2011May 31, 2016 by Jan Roberg

Westport Halloween Parade

Jan Roberg and Bill Stevens, in real life they prepare taxes.

Hi. Thanks for visiting us at the Westport Plaza Halloween Parade. Please click on the link below to find the picture of your child. Sorry we didn’t get to take pictures of everybody this year, we’ve never had so many kids show up before. Next year, we’ll figure things out so that we can keep the line moving and get you some pictures of your kids. Have a great Halloween!

http://www.flickr.com/photos/jroberg/

Thank you so much for letting us celebrate this event with your family. We probably had as much fun as the kids did.

And in case you haven’t already clicked ahead to find your pictures, here’s our brazenly commercial plug: We hope that you’ll consider Roberg Tax Solutions in the future if you need tax assistance. If you’re a do it yourself type, do check back at this site for tips and tricks for preparing your own return. Why not take a look at these popular posts:

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Posted on October 25, 2011May 31, 2016 by Jan Roberg

World Series and Wealth Building: A Baseball Analogy about Building Your Savings

Photo by SD Dirk on Flickr.com

I titled this blog post and later realized that people would think it’s about Albert Pujols’ income prospects after hitting three home runs in game 3 of the World Series down in Texas (Okay, don’t you think the three home runs will help his negotiating now that he’ll be a free agent?). But seriously, it’s about you.

Saving for the future is a little like baseball – you’ve got to work at it every day. Like baseball, in a regular game, the idea is to try to get someone on base, try to get a run in. If you get in a run during an inning you’re doing well. If you can save a little bit from every paycheck, you’re on the right track as well.
Sometimes in baseball, we get those great moments, like Albert Pujols hitting three home runs. That was truly amazing. But it also wasn’t just luck. Albert is out there every day. He works at it, he makes himself better. He learns from his mistakes and from his successes.

Sometimes in life we have great financial moments as well. Maybe you got a bonus at work, a tax refund you weren’t expecting, maybe even a winning lottery ticket—these are your financial home runs where it’s your chance to put your team ahead. You need to make sure you use your financial windfalls to your advantage. Unlike Albert Pujols, who can’t bank those extra runs to use for the next game, you can bank your windfall money.

When it comes to your life, you’re in it for the long haul. You need to start saving today to make tomorrow worthwhile.

The goal is to save 10% of your income. If you make $200 a week, then you bank $20. If you make $2,000 you save $200. For a lot of people, that’s impossible—at least it is to start. If you can’t do 10%, then I say you need to match your social security withholding. It’s not that much. If you look at your payroll stub, it should be listed right there. If you make $200, then your social security withholding is $8.40. That you can do. Work your way up to 10%.

If you can’t handle a bank account, you can save it in a jar or under the mattress for all I care. Once you’ve got enough to get free banking, then you can open an account and maybe earn a little interest. You always hear the people need to have money to make money—you’re slowly turning yourself into one of those people who have money. Just like baseball—one run at a time.

Posted on October 21, 2011May 31, 2016 by Jan Roberg

I Lost My Job, Now What? Tax Issues of Unemployment, Part 5: What Can I Deduct?

You may have heard about some of the things that you can deduct if you’re looking for a job: copying and mailing your resume, trips to another city for a job interview, fees you may pay to a headhunter, etc. Basically, any costs that you incur in trying to obtain a new job are considered tax deductible—but before you get too excited about that, let me explain the restrictions. When all is said and done, the likeliness that you’ll get a deduction for your job search is pretty slim.

First, you can only deduct your job search if you are looking for a job in the same career field—and boom, college students looking for their first job after graduation are automatically excluded because you have to already be in a career. For example; let’s say you’re a cop and you get laid off, but you also have a degree in accounting. You can write off your expenses if you’re looking for police work, but not if you’re looking for an accounting job.

Okay, so Dirty Harry would not be looking for an accounting job.

Sorry, I got a little off track. Anyway, the next issue you have to deal with in claiming these deductions is the 2% limitation rule. That means that any expenses that you deduct will have to be more than 2% of your income. So if you only spend $50 on copying and mailing your resume, then your income will have to be less than $2,500 for you to be able to take a deduction. Let’s face it, if your income is under $2,500 for the year—you don’t need a deduction!

But suppose you had some serious job search expenses—you took a few flights that were not reimbursed by the company, add a few hotel stays, paid a fee to an employment agency, etc. Maybe you spent $4,000 on job hunt expenses. Now if you had income of $40,000 before you were laid off, then your 2% threshold would be $800—that would give you a $3,200 deduction on your schedule A. So this is starting to look pretty good right? But what if you don’t have any other deductions to claim on your schedule A? You don’t own a home so there’s not real estate tax or mortgage interest to deduct. Maybe your other deductions only total $2,000. That means you’d still be better off claiming your standard deduction so there’s still no tax benefit for your job search expenses.

But that doesn’t mean you shouldn’t keep track of those expenses. Save your receipts and keep track of that mileage. Despite my gloomy forecast about being able to claim those expenses they just might come in really handy. For example: let’s say you’re in marketing. You join several networking groups, use your cell phone as a business line, meet with several different people over lunch to discuss opportunities, and you print up some personal business cards. Then company X needs a marketing guy to do a project for them—not a permanent hire but just a subcontracting job. They call you. At tax time, you don’t get a W2, you get a 1099MISC because you were contract labor. Suddenly, all those receipts become very handy because you can use many of them as self employed business expenses. Now, instead of being worthless, they are incredibly valuable deductions because 1099 income is taxed at the self-employment rate plus your regular tax rate.

When making spending decisions about your job hunt, make the assumption that you’ll get no tax benefit from what you’re doing. Make your decisions based upon, “Is this a smart move for me to make or not?” If you manage to get a deduction for it, great—but if you don’t, you won’t feel cheated because you’ll know that you spent the money for the right reason.

Posted on October 18, 2011May 31, 2016 by Jan Roberg

I Lost My Job, Now What? Tax Issues of Unemployment, Part 4: Unemployment Compensation

Photo by Gary J. Wood on Flickr.com

After you lose your job, you’re going to want to sign up for your unemployment compensation right away. The first thing you’re going to do is check out your state’s website about unemployment compensation. Make sure that you go to a state government website—it will have a .gov in the address. You’ve got to be careful not to try to apply through one of the .com websites. Those aren’t government sponsored sites—they’re just compiling email lists and you’ll be deluged with spam that you agreed to receive by using that site. (Yep, you lost your job, you’re broke, and now they want to sell you more stuff.) In Missouri you’ll go to: www.moclaim.mo.gov.

Your unemployment compensation is taxable—it’s all taxable. A lot of people don’t realize that and don’t have withholding taken out and then they really get dinged at tax time. Let’s say that your spouse is still working and your combined income for the year puts you in the 25% tax bracket. If you’ve received $10,000 in unemployment benefits, then the tax on that would be $,2500. If you’re not withholding for that, it can be an ugly surprise in April.

On the other end of the income spectrum, let’s say that your unemployment is the only income you’re receiving—the standard deduction and exemption for a single person is $9,350. You’re probably better off not withholding and using the full amount of your unemployment check to put food on the table.

For persons with children—unemployment compensation will not qualify you for an Earned Income Credit. You must have wages or self employment income in order to qualify for the Earned Income Credit, unemployment doesn’t count.

Different states have different rules regarding their unemployment benefits. I recommend signing up for benefits as soon as possible to avoid missing any deadlines and possibly losing out on potential benefits. In most cases, you’re going to need the following information before you sign up:

Your name , including any prior names if you’ve changed it
Address
Social security number
Telephone number
Name of county where you live
Employment history: Employers names, mailing addresses (including zip code), last day of employment and why you’re not working any more (quit, fired, laid off, leave of absence, etc.)
Bank routing and account number if you want direct deposit of your benefits
Information about any holiday pay, sick pay, or severance pay that you received or are still entitled to
Pension information, if you began receiving one
If you’ve served in the military within the past 18 months you’ll need DD form 214– record of service and discharge
If you’re a Federal employee you’ll need your SF8
You’ll need your SF 50– where your duty station was– if you have one of those

A word about collecting benefits: Unemployment compensation is part of an insurance program. Your employer pays into the system for you to cover situations like this. Unemployment insurance is paid by your employer based upon a percentage of your income. Your employer pays state and federal unemployment insurance. You wouldn’t think twice about using your health insurance if you were sick, it should be the same way with your unemployment insurance. It’s there for you to use when you need it. Don’t let your pride get in the way of receiving something that is rightfully yours.

Posted on October 14, 2011May 31, 2016 by Jan Roberg

Job Loss Part 3: Losing Your Health Insurance

Photo by Claus Rebler on Flickr.com

While losing your income is probably the worst thing about losing a job, the second worst thing for most people is losing you health care benefits. If you’re young and reasonably healthy, this might not seem like such a big problem, but for older workers or persons with pre-existing health conditions it can be a nightmare.

COBRA is named for the Consolidated Omnibus Budget Reconciliation Act, the health benefit provision act enacted in 1986. This allows you some time to stay on your employer’s health insurance program for awhile after leaving your job. Generally, you can be covered under COBRA for 18 months. Here’s a link to the Department of Revenue page about COBRA coverage: http://www.dol.gov/ebsa/faqs/faq-consumer-cobra.html.

Under COBRA, you will pay 102% of the real cost of your health insurance. (There’s an extra 2% administrative charge added.) That can be a real shocker if your employer was paying a portion of your insurance while you were working. If you have no income, you might not be able to afford your COBRA payments.

You’re going to have to make a decision, but here’s the important thing you need to know—you’ve got 60 days to make it. This buys you some important thinking time. Don’t sign up for the COBRA immediately unless of course you know you’ve got pre-existing conditions and you won’t be able to get insurance elsewhere. You can hold off signing up for COBRA while you shop around for other insurance (or get another job!). If something happens to you and you need that insurance, you can backdate your enrollment and be covered for the emergency. This is also helpful if you just can’t afford health insurance at all.

Remember, purchasing private health insurance takes time so you want to start right away. If you can’t get coverage elsewhere, you don’t want to miss the 60 day deadline to sign up for the COBRA. Don’t forget to look into state programs as well. Here in St. Louis we’ve got Missouri HealthNet for Kids which provides health insurance to children on a sliding scale basis. Here’s a link to their website: http://www.dss.mo.gov/mhk/ Check out all your options. For many people, COBRA is not the lowest cost option.

For tax purposes, your COBRA or private health insurance is considered to be a deductible medical expense. That said, you’ll have to spend over 7.5% of your income on healthcare in order for it to be deductible. For most people, it won’t give them much of a tax benefit if any.

One more health care issue: If you had an FSA (flexible spending account) at your old job, make sure that you submit all of your health reimbursement forms before the account expires. No sense in leaving money behind.