Medicare premiums could lower your tax bill
Americans who are 65 and older qualify for basic Medicare insurance, and they may need to pay additional premiums to get the level of coverage they desire.
News & Tech Tips
Make a deductible IRA contribution for 2018. It’s not too late!
Do you want to save more for retirement on a tax-favored basis? If so, and if you qualify, you can make a deductible traditional IRA contribution for the 2018 tax year between now and the tax filing deadline and claim the write-off on your 2018 return.
Tax planning for investments gets more complicated
For investors, fall is a good time to review year-to-date gains and losses. Not only can it help you assess your financial health, but it also can help you determine whether to buy or sell investments before year end to save taxes.
Alternative-asset IRAs: Handle with care
Most IRA owners invest their funds in traditional assets, such as stocks, bonds and mutual funds. But some intrepid investors have enjoyed impressive, tax-deferred returns — or even tax-free returns in the case of a Roth IRA — by using their IRAs to hold rental real estate, business interests or other alternative assets.
Despite the appeal of earning higher returns in a tax-advantaged account, alternative-asset IRAs contain a minefield of tax traps that can quickly wipe out the potential benefits. For example:
- Mortgaged real estate held in an IRA can trigger unrelated business income tax. Real estate may also create problems when traditional IRA minimum distributions are required (beginning after age 70½).
- Your dealings with a business in which your IRA has an interest may violate the prohibited transaction rules, resulting in substantial taxes and penalties.
- Transferring S corporation stock to an IRA may terminate the company’s S status and trigger corporate tax liability.
So if you’re contemplating an alternative-asset IRA, please contact us for professional advice.
Portability doesn’t preclude the need for marital transfers and trusts
Exemption portability, made permanent by the American Taxpayer Relief Act of 2012, provides significant estate planning flexibility to married couples if sufficient planning hasn’t been done before the first spouse’s death. How does it work? If one spouse dies and part (or all) of his or her estate tax exemption is unused at death, the estate can elect to permit the surviving spouse to use the deceased spouse’s remaining estate tax exemption.
But making lifetime asset transfers and setting up trusts can provide benefits that exemption portability doesn’t offer. For example, portability doesn’t protect future growth on assets from estate tax like applying the exemption to a credit shelter trust does. Also, the portability provision doesn’t apply to the GST tax exemption, and some states don’t recognize exemption portability.
Have questions about the best estate planning strategies for your situation? Contact us — we’d be pleased to help.