Education and economic stability rated most important

The highest-ranked milestone of adulthood by Americans today is completing a formal education: More than 60% of Americans believe that doing so is extremely important. Ranked second is working full-time (52%), followed by the ability to support a family financially (50%).

More young adults today have achieved this educational milestone compared with their counterparts 40 years ago. For example, less than one-fourth of 25- to 34-year-olds had a college degree in 1975, compared with more than one-third in 2016.

Marriage and parenthood are delayed milestones

Over half of Americans believe that getting married and having children are not important to becoming an adult, but this does not mean they plan to forgo these milestones altogether. Instead, getting married and having children are occurring later in life.

Whereas eight in 10 young adults in the mid-1970s had married before age 30, this milestone isn't reached today by the same proportion of Americans until their early 40s. Similarly, more than two-thirds of women in the mid-1970s were mothers by the time they were ages 25 to 29, but today that proportion is not reached until ages 30 to 34.

Living independently is less important

Only about one-fourth of Americans rank moving out of a parent's home as an extremely important adult milestone. So it's not surprising that the number of young adults living independently has declined. In 1975, 26% of young adults (ages 18 to 34) were living in their parents' home, compared with 31% in 2016.

Also noteworthy is that in just a decade, living arrangements changed dramatically. In 2005, a majority of young adults lived independently in their own households (either alone, with a spouse, or with an unmarried partner) in 35 states. By 2015, though, only six states had a majority of young adults living independently.

Not completing a formal education and lack of a steady job are contributing factors to the decline in young adults living independently. Young people who still live with their parents today are far less likely than their peers to have a college degree or a full-time job. Of young adults (ages 25 to 34) today who are living independently, 41% have a bachelor's degree and 64% have a full-time job. Not surprisingly, young people living independently also tend to have higher incomes: More than half of older millennials living in their own households earn $30,000 or more in income, compared with only about one-third of their peers who live with roommates and one-fourth who live with their parents.

Of young adults (ages 25 to 34) living in their parents' home today, one in four are not attending school or working. Often they are older millennials who have only a high school education. This group typically faces challenges such as the loss or unavailability of a job, unaffordable housing rates, and child-rearing responsibilities.

The shifting paths of young adulthood

Over the last 40 years, the milestones of adulthood have remained largely the same, but the importance and timing of these milestones have changed. Young adults today are less focused on marriage and parenthood in their 20s and early 30s and are more concerned about establishing financial security by finishing school and gaining work experience. More of them have college degrees and full-time jobs than their counterparts did in 1975, but fewer own their own homes. As a result, young people today often delay establishing a household and settling down with a family until they are able to support themselves financially.

The term "qualified education expenses" is used frequently in education circles, but it can mean various things depending on the context. Below describes what the term means in specific situations. (Note: The term "post-secondary education" includes graduate school unless otherwise noted.)

The disconnect between national trends and local realities for so many Americans underscores the need for policymakers to grapple with the profound effect of place on an individual’s life outcomes and access to opportunity. Years into a steady economic expansion, it is all too easy to look at a low unemployment rate or record stock market gains and conclude that the tide is rising everywhere. As we will see, hidden beneath the national numbers is a deeply fragmented landscape of economic well-being—one in which far too many communities are being left behind. This report intends to bring renewed attention to those forgotten places and people.

According to the Social Security Trustees Report, during 2016, an estimated 171 million people paid payroll taxes on earnings covered by Social Security. At the end of 2016, approximately 61 million people were receiving some type of Social Security benefits.

According to the Medicare Trustees Report, in 2016, Medicare covered 56.8 million people: 47.8 million ages 65 and older and 9.0 million disabled.

After falling for two consecutive years, interest rates on federal student loans are now rising. The following table shows the interest rates for new Direct Loans first disbursed on or after July 1, 2017, and before July 1, 2018. The rate is fixed for the life of the loan.

On September 7, 2017, Equifax, one of the three main credit reporting agencies, announced a massive data security breach that exposed vital personal identification data — including names, addresses, birth dates, and Social Security numbers — on as many as 143 million consumers, roughly 55% of Americans age 18 and older. (1)

Do you work at home or have a home-based business? If so, you should be aware that the IRS has created a simpler option for calculating the deduction for the business use of your home. The new option makes recordkeeping easier because, instead of maintaining records of specific home office expenses, you can use a standard rate per square foot. The rate is $5 per square foot (up to a maximum of 300 sq. feet or $1,500) for qualifying business use space in place of taking a pro rata percentage of items such as mortgage interest, taxes and repairs.

If your business falls behind in paying its payroll taxes, you may be contacted sooner rather than later by an Internal Revenue Service revenue officer. This may even be the case if you are using a third-party payroll service or if the deposits you are making have simply decreased over time. The contacts, which may include visits to your business, are part of the IRS Federal Tax Deposit Alert process, which aims to spot payroll tax problems before they become insurmountable—and incur significant interest and penalties.

If your business is a partnership, new audit and adjustment rules passed by Congress have significantly increased the chances that it could be audited. Your partnership operating agreement should be reviewed and possibly revised to address the rules and the new tax terms and concepts that they introduce. It is possible for some partnerships to opt out of the rules’ provisions, but careful consideration should be given to this decision and to other concerns.

Have you made building improvements recently or are you planning any in the near term? Then you may qualify to take advantage of new rules for “qualified improvement property.” This category is broader than the former “qualified leasehold improvement property” category. Businesses may now be eligible to use bonus depreciation for improvements to the interiors of nonresidential real property made after the building was placed in service. There are limitations, but we can help you determine which property or improvements will or won’t qualify. 

Many people make donations to charities whose work they support, but if you are planning to take a tax deduction for your gift, you must have the proper paperwork. Assembling the right documentation can also be tricky because the requirements vary based on whether the donation is cash and on the value of your gift. If you donate less than $250 in cash, for example, a canceled check, credit card statement or similar record may be sufficient, but if you give more, you will need a written acknowledgement from the charity. An additional tax form—and possibly an appraisal—may be needed for non-cash donations, depending on their value. Of course, the organization itself must also qualify as a charity under IRS rules.

Year-end planning for your business is more important than ever since change is likely. Be sure that your books and records are in good order so we can review planning opportunities.

Changes to Tax Breaks

• Bonus Depreciation — Businesses have historically been able to deduct 50% of the adjusted basis of qualifying property in the first year the asset is placed into service, with any remaining basis subject to regular depreciation rules. Now businesses can plan to use it through 2019. However, the percent that can be deducted declines in 2018.
• Section 179 — Small businesses can immediately write off up to $500,000 of tangible business property (computers, office furniture, etc.) placed in service during the tax year. Both the $500,000 expensing limit and the $2 million phase-out are indexed to inflation and expanded to include qualified real property. Also, businesses can now expense air conditioning and heating units placed in service after 2015.
• Self-Employed (SE) Income Tax Rates:  
  • 12.4% Social Security tax on income up to $127,200
  • 2.9% Medicare tax — all SE income
  • 0.9% additional Medicare tax on earnings over $200,000 (single)

People are sometimes surprised to learn that the IRS regulates gifts over a certain size.  As a donor, you are responsible for reporting the gift if it exceeds $14,000 and paying the gift tax if you have given more than $5.45 million in cash or property (over a lifetime). Regardless of the amount, you cannot deduct a gift as you could with a charitable donation.  As a recipient, you do not need to include the gift as part of your taxable income. However, if you receive property other than cash, you will need to determine the cost basis at the time of the transfer to have the proper value in case you dispose of it later.