The Ziggler’s have been married for 6 years. They have two children, Myra (5) and Brenden (3). The Ziggler’s have considered having more children but at the present time they would like to begin some personal projects.
Brett Ziggler has just finished his bachelor’s degree in accounting. He would like to return to school part-time to obtain a master’s degree in accounting so that he can sit for the CPA certification exam. In the meantime, he has just begun working for PricewaterhouseCoopers (PwC), as a transactions service representative making $40,000 per year. In one month Brett will begin taking advantage of the firm’s 401K plan and intends to deposit 2% of his yearly income into this account. Aleysia Ziggler is a wedding planner and currently works for firm making $45,000 per year without benefits. Aleysia would like to open her own event planning business focusing on weddings and special occasions. Ideally Aleysia would like to work from home but she worries that the apartment the family has been renting will not provide a stable enough office for her business. Aleysia and Brett have considered purchasing a home but they do not want to spend more money on their housing costs each month. The couple already spends $1500 each month on rent and the average home in their area is $280,000 and mortgage interest rates are around 6.25%. Brett and Aleysia decided 3 years ago to start saving for their children’s college education and weddings. The couple opened a savings account which returns 2.3% interest. They have decided to set aside $40 per month in the account. Including their opening deposit and their monthly contributions; the account now has $4000. Brett and Aleysia have been donating 3% of their income to charities for the past 4 years. The couple feels that the donations are their way of supporting the community and worthy causes. The family also volunteers for a charity organization, 10 miles from their home, once a month to assist in teaching their children this value.
Brett and Aleysia have a small investment portfolio worth $4700 from which they receive $30 annually in the form of dividends. The couple received this portfolio as a wedding gift but has not made any changes to it. Brett and Aleysia have a lot of decisions to make over the next few months and they would like to make the best decisions. They have asked for your help in providing them with a tax and financial planning strategy.
1.What is the Ziggler family’s gross income?
2.What is the Ziggler family’s taxable income?
3.What kind(s) of deductions do the Zigglers qualify for at this point?
4.How could the Zigglers legally increase their tax deductions?
5.Should the Zigglers consider purchasing a home? Why?
6.How should the Zigglers approach tax planning if Aleysia opens a business?
7.If the Zigglers could sell a portion of their stock portfolio, and replace that portion with a higher yielding stock which changed their dividend payments to $1,000 per year, what would you advise them to do? Why?
8.If Brett left his job to return to school and Aleysia kept her current position, how would your advice to the Zigglers change?
9.If Aleysia’s income grew to twice its current rate, how would the Ziggler’s taxes change? If this occurred, how would your advice to the Zigglers change?
10.Summarize your tax-planning strategy for the Zigglers and provide at least five tax-planning tips.
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i REALLY NEED HELP ABOUT THIS QUESTION. I AM ON THE SAME CLASS
I need help with number 7 on the worksheet for Ziggler case study
1. To calculate the Ziggler family's gross income, we need to add Brett and Aleysia's incomes together. Brett earns $40,000 per year and Aleysia earns $45,000 per year. Therefore, the Ziggler family's gross income is $40,000 + $45,000 = $85,000.
2. To calculate the Ziggler family's taxable income, we need to consider deductions and exemptions. Deductions are subtracted from gross income to arrive at adjusted gross income (AGI), and exemptions further reduce taxable income. However, the provided information does not mention any deductions or exemptions for the Ziggler family. Therefore, their taxable income would be the same as their gross income, which is $85,000.
3. The Zigglers may qualify for various deductions and tax credits. Some possible deductions include mortgage interest deduction (if they decide to purchase a home), state and local tax deductions, charitable contribution deductions, and potentially education-related deductions if Brett continues his master's degree. However, without specific information about their expenses or other qualifying factors, it is difficult to determine the exact deductions they may qualify for.
4. To legally increase tax deductions, the Zigglers could consider the following strategies:
- Increase their charitable contributions, which would allow them to claim a higher deduction for donations.
- Maximize contributions to tax-advantaged retirement accounts like an Individual Retirement Account (IRA) or a Health Savings Account (HSA).
- Take advantage of any available education-related deductions or credits by utilizing Brett's pursuit of a master's degree.
- Consider any other deductions they may qualify for, such as business expenses if Aleysia opens her own event planning business.
- Carefully document and track their expenses to ensure they can claim all the deductions they are eligible for.
5. Whether the Zigglers should consider purchasing a home depends on various factors, such as their long-term financial goals, stability of their income, and personal preferences. While there can be potential benefits to homeownership, such as building equity and potential tax benefits (such as the mortgage interest deduction), they should also consider the costs associated with homeownership, such as property taxes, maintenance, and potential fluctuations in the housing market. They should weigh these factors and determine if homeownership aligns with their financial goals and lifestyle.
6. If Aleysia opens her own business, the Zigglers should approach tax planning in a way that maximizes deductions related to the business. They should consult with a tax professional or accountant to ensure they are taking advantage of all available deductions and credits for the self-employed. This may include deductions for business expenses, home office deductions (if Aleysia uses a designated space at home for her business), and potentially qualifying for certain business-related tax incentives.
7. If the Zigglers could sell a portion of their stock portfolio and replace it with a higher yielding stock, that would increase their annual dividend payments from $30 to $1,000. In such a scenario, it would be advisable to consider the potential tax implications of selling the stock, such as capital gains taxes. Additionally, they should evaluate the potential risks and returns associated with the new stock investment. It is recommended they consult with a financial advisor to assist them in making an informed decision based on their individual financial goals, risk tolerance, and tax considerations.
8. If Brett left his job to return to school, the Zigglers' tax strategy would likely change. They would potentially lose Brett's income, which could affect their tax bracket and eligibility for certain deductions or credits. They should re-evaluate their financial situation and consult with a tax professional or financial advisor to understand the impact of this change and adjust their tax planning accordingly.
9. If Aleysia's income grew to twice its current rate, the Zigglers' taxes would change as their taxable income would increase. This increase in income may push the family into a higher tax bracket, resulting in higher tax liabilities. They should consult with a tax professional to understand the specific implications of this change and adjust their tax planning accordingly. It is possible that they may need to explore additional tax-saving strategies or consider other financial planning options.
10. Summarized tax-planning strategy for the Zigglers:
- Maximize contributions to tax-advantaged retirement accounts to lower taxable income and save for the future.
- Take advantage of available deductions and credits, such as charitable contributions and education-related deductions.
- Consider purchasing a home if it aligns with long-term financial goals, weighs the potential tax benefits, and fits within the monthly housing cost limit.
- Carefully track and document expenses to ensure eligibility for deductions.
- Consult with tax professionals or financial advisors to optimize tax strategies and financial planning based on individual circumstances.