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Financial Questions and Answers

Q: I plan on buying a large life insurance policy. Is there a way to assess the likelihood that the insurance company will still exist when it’s time to provide the promised policy proceeds to my beneficiaries?

A: Take a look at the ratings assigned to an insurance company by different ratings agencies. These agencies — A.M. Best, Moody’s Investors Service, Standard and Poor’s, and Fitch Ratings — measure the financial health of insurance companies and their ability to pay policyholders’ claims. Each ratings agency employs its own ratings system, though these are generally similar to letter grades used in education.

Q: Is there a simplified method for calculating the home office deduction?

A: The IRS allows eligible taxpayers to use a safe harbor method and deduct $5 per square foot for a home office of up to 300 square feet. That means that the annual deduction is capped at $1,500 even if the portion of your home devoted to business use is more than 300 square feet. (The IRS may update the $5 rate periodically.) To use the simplified method, you still have to meet all the tax law conditions for claiming the deduction. Qualified mortgage interest and property taxes are separately deductible as itemized deductions.

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