To figure it out, you add up all your assets such as savings, investments, real estate holdings, retirement accounts, etc.
Then deduct from that number all your personal liabilities (credit card balances, mortgages, student loans, etc.) and the difference is your Net Worth, assuming your Assets exceed your Liabilities.
This annual limit is raised to $6,500 if you are 50 or older. This is commonly known as the “catch up” contribution.
Your entire contribution amount may or may not be tax deductible.
For example, being covered by a retirement plan at work or having an Adjusted Gross Income (AGI) that exceeds certain limits can both affect the tax deductibility of your contribution.
Check with your tax advisor or on the IRS site to find out these circumstances can impact your taxes.
A Required Minimum Distribution (RMD) is the amount that the IRS requires you to take from your Traditional IRA, Simplified Employee Pension Plan (SEP) or Savings Incentive Match Plan for Employees (SIMPLE) once you reach age 70 ½.
The annual withdrawal amount required varies by your current age and the balance in your IRA account. Most financial firms and banks can help you to calculate and automate this deduction.
The IRS sets the schedule based on its life expectancy tables and usually this distribution must be taken by December 31st each year.
In the year you turn 70 ½ the rules are slightly different and the deadline can be extended into the early part of the following year. This extension of the deadline is only applicable for the year you turn 70 ½.
If you inherited money from any of these type accounts or a ROTH IRA and rolled the money into a Beneficiary IRA, there are minimum RMD amounts that must be distributed each year from that account regardless of your age.
These RMD rules can be complex so be sure to get the tax advice you need.
Not taking the correct RMD can result in a substantial tax penalty, so check the dates that affect you carefully.
Passive Income generally refers to revenue you receive that is not directly related to your effort. It also signifies that you are not “materially participating” in a business under IRS guidelines.
As an example, real estate investments can generate passive income for an owner who is not performing real estate services directly, but rather is just investing in the property & someone else is managing it.
Passive income from eCommerce generally refers to selling products or services 24/7 in an automated format so that you have repeated income from sales without repeated direct effort.
There are other types of passive income, but those are two of the most common.
To calculate your personal net worth, identify all your assets (e.g., cash, investments, personal property, real estate, retirement accounts) and all your liabilities (e.g., credit card debt, auto leases, mortgages, student loans).
Then subtract the total liabilities amount from the total asset amount. The difference is your Net Worth.
The value of your Inventory will be found on your Balance Sheet in the Asset section.
Inventory can be finished goods ready for sale, e.g. a bottle of perfume, packaged & ready to ship.
It can also include the materials that will make up your finished goods, e.g., the bottle, the box, the labels, and the fragrance oils.
How you value your inventory will affect your profits and your taxes.
The content on this site is provided for educational and informational purposes only. It is not intended nor provided as financial or legal advice.