Four year-end tax strategies to consider

It’s hard to believe we’re fast approaching the end of 2019, but it’s true. Here are four things to consider as you weigh potential tax moves between now and the end of the year. 1. Be smart about your charitable giving If you’re already inclined to donate to charity, then consider donating appreciated securities rather than cash to your favorite charity or to a donor advised fund. Donors who can afford to put away more than $100,000 may want to consider starting a charitable lead trust (CLT). Charitable lead trusts are designed to provide income payments to at least one qualified charitable organization for a period measured by a fixed term of years, the lives of one or more individuals, or a combination of the two; after that, trust assets are paid to either the grantor or to one or more noncharitable beneficiaries named in the trust instrument. 2. Maximize retirement savings Deductible contributions to a traditional IRA and pre-tax contributions to an employer-sponsored retirement plan such as a 401(k) can reduce your taxable income. If you haven’t already contributed the maximum amount allowed, consider doing so by year-end. If you’re a business owner, consider opening a traditional 401(k) profit

December 10, 2019 No Comments

Understanding capital gains in light of new tax laws

The U.S. stock market this year has given total returns so far of close to 10 percent, which is a good thing for investors. But with the exception of savings in retirement accounts such as 401(k)s and individual retirement accounts (IRAs), Uncle Sam will probably take a cut of your newfound wealth in capital gains tax. An increase in the value of your assets is called capital gains, and how much tax you pay depends on how long you held the investments and how much other income you make. Long-term vs. short-term capital gains taxes Long-term capital gains applies to gains (increased value) on investments or other assets you’ve owned for more than a year. The current capital gains tax rates under the new 2018 tax law are zero, 15 percent, and 20 percent, depending on your income. This chart shows the brackets. 2018 long-term capital gains tax brackets For example, a married couple filing jointly pays no capital gains tax if their total taxable income is less than $77,200. They’ll pay 15 percent on capital gains if their income is between $77,201 and $479,000. For couples above that income level, the rate is 20 percent. In addition, capital gains may

October 5, 2018 No Comments

How to take advantage of long-term capital gains rates

Did you know that you or your heirs might be eligible for a 0% rate on long-term capital gains and dividends? The Tax Cuts and Jobs Act (TCJA) signed into law late last year kept the three federal income tax rates on long-term gains (0%, 15%, and 20%). But unlike the old rules, these rates are no longer tied to the ordinary income rate brackets. What’s more, many individual taxpayers may still qualify for the 0% federal income tax rate on long-term capital gains and dividends. Before you object that your income is too high to benefit, remember that you may have children, grandchildren, or other loved ones who may still be able to take advantage. Here’s what you need to know. Help loved ones to cash in on the 0% rate While your income may be too high to benefit from the 0% rate, you may have relatives who qualify. If so, consider giving them some appreciated stock or mutual fund shares that they can then sell and then pay 0% federal income tax on the resulting long-term capital gains. Gains will be long-term as long as your ownership period plus your gift recipient’s ownership period (before the recipient

August 3, 2018 No Comments