Simple tips for money, life, and more,
just using a little common cents.
Graduate students planning to borrow federal student loans should be aware of important changes that took effect on July 1. A last minute court ruling also changed who qualifies for higher borrowing limits, creating uncertainty for some degree programs. For years, many graduate students relied on Graduate PLUS Loans to help cover the full cost of attendance. Under the new rules, those loans are no longer available for new borrowers. Instead, most graduate students will use Direct Unsubsidized Loans, which have annual and lifetime borrowing limits. For most graduate degree programs, federal borrowing is now limited to $20,500 per year, with a lifetime cap of $100,000. Students enrolled in qualifying professional degree programs can borrow up to $50,000 per year, with a lifetime limit of $200,000. Just before the new limits went into effect, a federal judge temporarily blocked the U.S. Department of Education's narrow definition of what qualifies as a professional degree. As a result, students enrolled in several programs, including nursing, psychology, and divinity, remain eligible for the higher borrowing limits while the case moves through the courts. Theology programs, however, fall under the lower borrowing limits based on the current guidance. Because this ruling is temporary, eligibility could change again depending on the outcome of the legal challenge. For students beginning graduate school, these changes may affect how they pay for their education. Those whose programs qualify for the higher borrowing limits may have additional access to federal funding. Others may need to explore scholarships, assistantships, employer tuition assistance, payment plans, or private student loans to help bridge the gap between federal loan limits and the total cost of attendance. If you are planning to start graduate school or are considering returning for an advanced degree, now is a good time to review your financial aid package carefully. Contact your school's financial aid office to confirm how these changes apply to your specific program and discuss your options before borrowing.  As federal student loan policies continue to evolve, staying informed can help you make better financial decisions and avoid unexpected funding challenges.
One of the more surprising financial stories making headlines this week comes from Jeff Bezos. The billionaire entrepreneur is arguing that the bottom half of American earners should pay zero federal income tax. At first glance, that may sound like an idea you would expect from a politician rather than one of the world's wealthiest business leaders. But Bezos says many working Americans are struggling with housing costs, groceries, and everyday expenses, and believes eliminating their federal income tax burden would give them a better chance to get ahead. The idea is simple. Instead of lowering taxes for lower income workers, he wants to eliminate federal income taxes altogether for roughly the bottom 50 percent of earners. According to tax data cited in recent reports, that group currently contributes only a small percentage of total federal income tax revenue. For the average person, the immediate question is obvious: How much money are we talking about? The answer depends on income, family size, deductions, and credits. Many lower income households already owe little or no federal income tax because of existing deductions and tax credits. Because of that, analysts say the biggest benefits would likely go to middle income households rather than the very lowest earners. A similar proposal currently being discussed in Congress would eliminate federal income taxes for many individuals earning less than $46,000 and married couples earning less than $92,000, while also reducing taxes for many middle income families. Of course, the challenge is paying for it. Reducing or eliminating taxes means the federal government would collect less revenue. Some lawmakers have suggested offsetting the cost by increasing taxes on households earning more than $1 million per year. Others argue the focus should be on reducing government spending instead. What makes this story important is not whether the proposal ultimately becomes law. The chances of any major tax overhaul making it through Congress remain uncertain. The bigger story is that conversations about who pays taxes, how much they pay, and whether the tax system should be reshaped are becoming more common across the political spectrum. For many Americans, especially those feeling squeezed by higher living costs, the idea of keeping more of each paycheck is easy to understand.  Whether that happens through tax cuts, spending reforms, or some combination of both will likely remain part of the national debate for years to come.
Now that your tax return has been filed, it is a good time to ensure you have proper documentation to substantiate your tax deductions, in the instance you are examined by the tax authorities. This is important as many banks start deleting online documentation that is more than a year old. Background The use of paper checks is changing dramatically over the past ten years. This shift has greatly reduced the ability to have a canceled check as proof when the auditor comes calling. This is due to more people using credit cards, digital currency, and the advent of online bill paying services. With online bill paying, your only receipt is often just an entry in your checking account. And current laws allow banks to digitally capture checks and then destroy the paper copy without returning it to you. So what do you do if you need proof that you paid for a tax deductible item? Know what the Tax Authorities are looking for Proof of a deduction typically requires two things: An invoice or proof of the transaction. This comes from the organization your activity is related to like a church or charitable organization and is dated and detailed enough to show what the transaction entailed. Proof of payment. This is where the check or detailed proof of payment is required. Some Tips Know your bank. Understand what your bank keeps and for how long. This includes digital statements and digital copies of checks (both front and back). Understand if there are any fees charged if you need to request copies of payments. Retain copies of all bank statements. Review your records to ensure you have copies of all monthly bank statements. This is often the starting point for an IRS agent that wants proof of payment, so it should be yours as well. These copies may be in either paper or digital format. Download online copies of your statements and place them in a password protected file. Collect copies of tax-related proof of payment. Go through your statements and mark the payments that will, in all likelihood, be used as a tax deduction. Make sure you have copies of the front and back of each of these payments. If you do this work now, the copies are often still available online for no fee. Even online bill payments often have a digital copy that can be used. Get independent acknowledgements. If you have larger payments you should also make sure you have independent acknowledgement from the merchant or organization to substantiate the deduction. This is true for charitable contributions of $250 or more, and any business or medical expenses.  While having the traditional proof of an expenditure is now harder to come by, the IRS and State tax authroties understand that and are aware technologies are changing the type of substantiation available for them to review. Retain documentation throughout the year that will support your transaction. This will save you a lot of headaches should you ever need to prove your deductions.
