How the SECURE Act could impact your retirement and your taxes

After languishing for several months in bureaucratic limbo, the SECURE Act (Setting Every Community Up for Retirement Enhancement) was signed into law on December 20, 2019; it went into effect on January 1, 2020. With an alarming percentage of Americans not saving enough for retirement, the changes in the SECURE Act are intended to help. It includes changes to some rules for IRAs and other retirement accounts, increases incentives for employers to set up retirement plans and make it easy for employees to enroll in them, and repeals some parts of the tax law passed in 2017. Here are a few important changes that may affect you: Changes to age limits for IRAs Contribution cut-off age Under previous laws, investors were not allowed to add money into a traditional IRA after they reached age 70.5. Under the SECURE Act, that restriction no longer exists — people may now contribute to traditional IRAs for as long as they (or their spouse) earn income, just as with Roth IRAs. NOTE: This law went into effect on January 1, 2020, so people over age 70.5 will not be allowed to fund a traditional IRA for tax year 2019, even though the deadline is

January 3, 2020 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