Many people use IRAs, SEP Plans, SIMPLE IRA plans, and employee-sponsored retirement savings plans such as the 401(k) to save money for their retirement years, but what if you need to tap that money before age 59 1/2? The bad news is that you generally have to pay a 10 percent penalty for early withdrawal of your funds. While that may seem unfair (after all, most of it is probably your money), you need to remember that the purpose of these types of plans is to save money for the years when you are no longer working. Continue reading
Employer-sponsored retirement plans have become a key component for retirement savings. They are also an increasingly important tool for attracting and retaining the high-quality employees you need to compete in today’s competitive environment. Continue reading
If you haven’t contributed funds to an Individual Retirement Arrangement (IRA) for tax year 2016, or if you’ve put in less than the maximum allowed, you still have time to do so. You can contribute to either a traditional or Roth IRA until the April 18th due date, not including extensions. Continue reading
Cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2017 have been announced by the IRS. Here are the highlights: Continue reading
If you are recently separated or divorced, taxes may be the last thing on your mind; however, these events can have a big impact on your wallet at tax time. Alimony, or a name or address change, are just a few items you may need to consider. Here are a few key tax tips to keep in mind: Continue reading
The myRA program, which launched nationwide in November, is intended for taxpayers with taxable income who lack access to retirement savings plan at work. Continue reading
The Internal Revenue Service has announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2016. Continue reading
Here are some things you might want to do before saying goodbye to 2014, as provided by our guest blogger and office-mate Todd Pouliot of Gateway Financial:
What has changed for you in 2014? Did you start a new job or leave a job behind? Did you retire? Did you start a family? If notable changes occurred in your personal or professional life, then you will want to review your finances before this year ends and 2015 begins.
Even if your 2014 has been relatively uneventful, the end of the year is still a good time to get cracking and see where you can plan to save some taxes and/or build a little more wealth.
Do you practice tax loss harvesting? That is the art of taking capital losses (selling securities worth less than what you first paid for them) to offset your short-term capital gains. If you fall into one of the upper tax brackets, you might want to consider this move, which directly lowers your taxable income. It should be made with the guidance of a financial professional you trust.1
In fact, you could even take it a step further. Consider that up to $3,000 of capital losses in excess of capital gains can be deducted from ordinary income, and any remaining capital losses above that can be carried forward to offset capital gains in upcoming years.1
Do you itemize deductions? Now would be a good time to get the receipts and assorted paperwork together. Besides a possible mortgage interest deduction, you might be able to take a state sales tax deduction, a student-loan interest deduction, a military-related deduction, a deduction for the amount of estate tax paid on inherited IRA assets, an energy-saving deduction, a homebuyer credit… there are so many deductions you can potentially claim, and now is the time to meet with your tax professional so that you can strategize to claim as many as you can.
Could you ramp up 401(k) or 403(b) contributions? If you can do this in December, that will lower your taxable income for 2014. Do it enough and you might be able to qualify for other tax credits or breaks available to those under certain income limits. Note that contributions to Roth 401(k)s and Roth 403(b)s are made with after-tax rather than pre-tax dollars, so those Roth account contributions won’t lower your taxable income for 2014 (they will still help to build your retirement savings).2,3
Are you thinking of gifting? How about donating to a charity or some other kind of 501(c)(3) non-profit organization before 2014 ends? In most cases, these gifts are partly tax-deductible. You must itemize deductions using Schedule A to claim a deduction for a charitable gift.4
If you donate appreciated stocks you have owned for at least a year, you can take a charitable deduction for their current value and forego the capital gains tax hit that would result from their sale. If you pour some money into a 529 plan on behalf of a child, you could get a deduction at the state level (depending on the state).2
Of course, you can also reduce the value of your taxable estate with a gift or two. The gift tax exclusion is $14,000 for both 2014 and 2015. So as an individual, you can gift up to $14,000 to as many people as you wish this year and next. A married couple can gift up to $28,000 to as many people as desired this year and next.5
While we’re on the topic of estate planning, why not take a moment to review the beneficiary designations for your IRA, your life insurance policy, and your retirement plan at work? If you haven’t reviewed them for a decade or more (which isn’t uncommon), double-check to see that these assets will go where you want them to go should you pass away. Lastly, take a look at your will to see that it remains valid and up to date.
Should you convert all or part of a traditional IRA into a Roth IRA? You will be withdrawing money from that traditional IRA someday… and those withdrawals will equal taxable income. Withdrawals from a Roth IRA you own are never taxed during your lifetime, assuming you follow the rules. Translation: tax savings tomorrow. Before you go Roth, you do need to make sure you have the money to pay taxes on the conversion amount. If you do this and change your mind, the IRS gives you until October 15 of the year after a conversion to undo it.2
Can you take advantage of the American Opportunity Tax Credit? Now in place through 2017, the AOTC allows individuals whose modified adjusted gross income is $80,000 or less (and joint filers with MAGI of $160,000 or less) a chance to claim a credit of up to $2,500 for qualified college expenses. Phase-outs kick in above those MAGI levels.6
What can you do before they sing “Auld Lang Syne?” Talk with a financial or tax professional now rather than in February or March. Little year-end moves might help you improve your short-term and long-term financial situation.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
1 – bankrate.com/finance/money-guides/capital-losses-can-help-cut-your-tax-bill-1.aspx [9/19/13]
2 – kiplinger.com/article/saving/T047-C001-S003-10-ways-to-improve-your-finances-by-new-year-s-eve.html [12/3/14]
3 – investopedia.com/articles/retirement/06/addroths.asp [12/2/14]
4 – forbes.com/sites/mikepatton/2014/11/25/year-end-charitable-tax-tips/ [11/25/14]
5 – irs.gov/Businesses/Small-Businesses-&-Self-Employed/Frequently-Asked-Questions-on-Gift-Taxes [11/17/14]
6 – irs.gov/uac/American-Opportunity-Tax-Credit [9/23/14]
IRA rollovers are a popular way of obtaining a short-term tax-free loan from an IRA. To receive tax-free treatment, the amount withdrawn from the IRA must be redeposited into the same or another IRA no later than 60 days after the taxpayer received the distribution (the 60-day requirement). In addition, the tax-free rollover privilege is limited to one rollover within any one-year period. The one-year period starts on the date the amount rolled over was received — not the date it was rolled over.
For years, the IRS has held that the one-year waiting period between IRAs applies separately to each IRA. This taxpayer-friendly interpretation allowed taxpayers with multiple IRA accounts to roll over two or more distributions during a 12-month period, provided each was from a different account. Continue reading