HSAs, FSAs and HRAs all offer tax-advantaged funding of health care expenses. But each type of account has its own rules and limits. Here’s the lowdown on how they compare.

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With health care costs continuing to climb, tax-friendly ways to pay for these expenses are more attractive than ever. Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs) and Health Reimbursement Accounts (HRAs) all provide opportunities for tax-advantaged funding of health care expenses. But what’s the difference between these three accounts?Here’s an overview:

HSA. If you’re covered by a qualified high-deductible health plan (HDHP), you can contribute pretax income to an employer-sponsored HSA — or make deductible contributions to an HSA you set up yourself — up to $3,350 for self-only coverage and $6,750 for family coverage for 2016. Plus, if you’re age 55 or older, you may contribute an additional $1,000.
You own the account, which can bear interest or be invested, growing tax-deferred similar to an IRA. Withdrawals for qualified medical expenses are tax-free, and you can carry over a balance from year to year.

 
FSA. Regardless of whether you have an HDHP, you can redirect pretax income to an employer-sponsored FSA up to an employer-determined limit — not to exceed $2,550 in 2016. The plan pays or reimburses you for qualified medical expenses.
What you don’t use by the plan year’s end, you generally lose — though your plan might allow you to roll over up to $500 to the next year. Or it might give you a 2 1/2-month grace period to incur expenses to use up the previous year’s contribution. If you have an HSA, your FSA is limited to funding certain “permitted” expenses.

 
HRA. An HRA is an employer-sponsored account that reimburses you for medical expenses. Unlike an HSA, no HDHP is required. Unlike an FSA, any unused portion typically can be carried forward to the next year. And there’s no government-set limit on HRA contributions. But only your employer can contribute to an HRA; employees aren’t allowed to contribute.

 
Questions? We’d be happy to answer them — or discuss other ways to save taxes in relation to your health care expenses.

Trying to decide the perfect price for your products? Here are 3 suggestions!

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The prices you set for your products and services affect every aspect of your business, including long-term viability, short-term profits, market share, and customer loyalty. While the guidebook or financial guru who can provide the perfect answer to this important decision doesn’t exist, tried-and-true principles can help. Here are three suggestions to arrive at reasonable pricing for your market and industry.

 
Cover costs. The price you charge for a particular product must at least equal the cost of producing that product. Depending on your industry, production costs might include raw materials, storage, salaries, advertising, delivery, rent, equipment, taxes, and insurance. Some of these will be categorized on your income statement as “cost of goods sold.” Others will be overhead. Some, such as rent and utilities, are relatively fixed. Others are variable, such as shipping and stocking fees. Adding the amount of profit you want to earn as a percentage (called the cost-plus pricing method) is one way to arrive at an appropriate price.

 
Know your market. Some businesses hire research firms to develop detailed reports on competitors, markets, and forecasts for a particular region or industry. But you may be able to get a handle on your market by using surveys and other methods of ferreting out customer perceptions about your product and service quality, the effectiveness of your advertising, and the reasonableness of your prices as compared to your competition.

 
Monitor regularly. Product pricing is not a one-time event. Instead, you’ll want to monitor the impact of price fluctuations on sales revenue over time. Overpricing – charging more than a reasonable buyer can be expected to pay – may limit sales. Underpricing may create the perception of poor quality or lead to unsustainably low profit margins.

 
Contact us for more tips and techniques that can help you manage your company profitably.

6 financial tips to follow when a spouse dies

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The death of a spouse is emotionally and financially devastating. Making decisions of any kind is difficult when you’re vulnerable and grieving, but having a plan to follow may help. Here are suggestions for dealing with financial tasks.

 
1. Wait to make major decisions. Put off selling your house, moving in with your grown children, giving everything away, liquidating your investments, or buying new financial products.

 
2. Get expert help. Ask your attorney to interpret and explain the will and/or applicable law and implement the estate settlement. Talk to your accountant about financial moves and necessary tax documents. Call on your insurance company to help with filing and collecting death benefits.

 
3. Assemble paperwork. Documents you’ll need include your spouse’s birth certificate, social security card, insurance policies, loan and lease agreements, investment statements, mortgages and deeds, retirement plan information, credit cards and credit card statements, employment and partnership agreements, divorce agreements, funeral directives, safe deposit box information, tax returns, and the death certificate.

 
4. Determine who must be paid, and when. You’ll need to notify creditors and continue paying mortgages, car loans, credit cards, utilities, and insurance premiums. Notify health insurance companies and the Social Security Administration, and cancel your spouse’s memberships and subscriptions.

 
5. Alert credit reporting agencies. Request the addition of a “deceased notice” and a “do not issue credit” statement to the decedent’s file. Order credit reports, which will provide a complete record of your spouse’s open credit cards.

 
6. Determine what payments are due to you, such as insurance proceeds, social security or veteran’s benefits, and pension payouts. File claims where needed.

Why record keeping is a good idea when renting all or part of your home

bookkeepingAre you thinking of signing up with one of those websites that link travelers to property owners with space to spare? If you plan to offer for rent all or part of your main home, establishing sound recordkeeping procedures from day one is a good idea.

 
In addition to a bookkeeping system to track the income and expenses related to your rental, a calendar detailing the days your home was rented will be useful at tax time. The reason? Deductible expenses may be limited when rented property is also your personal residence. Having a written record helps determine which tax-reporting rules apply.

 
For example, say you rent your primary home to a vacationer for 15 days or more during a year. All of the rental income is taxable. However, expenses such as interest, property taxes, utility costs, and depreciation are split between the time your property was rented for a fair rental price and the days you used it personally. The portion related to the rental is deductible up to the amount of your rental income.

 
What if you have rental expenses in excess of your rental income? You may be able to carry them forward to next year.

 
Different rules apply when your home is rented for less than 15 days, and when the property you offer for rent is your vacation home or timeshare. Please contact our office. We’ll help you plan a tax-efficient rental program.

Did you know summer day camp can save you taxes?

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Although the kids might still be in school for a few more weeks, summer day camp is rapidly approaching for many families. If yours is among them, did you know that sending your child to day camp might make you eligible for a tax credit?

 
The power of tax credits
Day camp (but not overnight camp) is a qualified expense under the child and dependent care credit, which is worth 20% of qualifying expenses (more if your adjusted gross income is less than $43,000), subject to a cap. For 2016, the maximum expenses allowed for the credit are $3,000 for one qualifying child and $6,000 for two or more.
Remember that tax credits are particularly valuable because they reduce your tax liability dollar-for-dollar — $1 of tax credit saves you $1 of taxes. This differs from deductions, which simply reduce the amount of income subject to tax. For example, if you’re in the 28% tax bracket, $1 of deduction saves you only $0.28 of taxes. So it’s important to take maximum advantage of the tax credits available to you.

 
Rules to be aware of
A qualifying child is generally a dependent under age 13. (There’s no age limit if the dependent child is unable physically or mentally to care for him- or herself.) Special rules apply if the child’s parents are divorced or separated or if the parents live apart.
Eligible costs for care must be work-related, which means that the child care is needed so that you can work or, if you’re currently unemployed, look for work. However, if your employer offers a child and dependent care Flexible Spending Account (FSA) that you participate in, you can’t use expenses paid from or reimbursed by the FSA to claim the credit.

 
Are you eligible?
These are only some of the rules that apply to the child and dependent care credit. So please contact us to determine whether you’re eligible.