Gary W. Pelletier, CLU, ChFC, AIF®

Northeast Planning Associates, Inc.

Corporate, Estate

& Financial Planning


To Do List Before the End of 2018

| November 26, 2018
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As the year winds down, there are some important actions you may want to take before the clock runs out on 2018. 

Roth IRA

First and foremost, check your eligibility to contribute to a Roth IRA.  With most of us seeing a tax deduction in 2018, it may make sense to contribute some after-tax dollars to a Roth IRA to grow tax-free throughout retirement.  Not eligible for a Roth this year?  We can discuss whether it makes sense to contribute to a non-deductible IRA and subsequently convert to a Roth IRA.

Charitable gifts

In order for charitable gifts to be deductible for 2018, they must be made before January 1, 2019.  Be sure to keep any receipts, and any gift over $250 must have a bank record or acknowledgement in order to be deductible.

Now, with the new higher standard deduction due to the passage of the Tax Cuts and Jobs act, you may be asking yourself if making a gift to charity makes sense if you conceivably cannot get a tax deduction for the gift.  Giving is, of course, always a great thing, but if you are looking to realize a tax break from Uncle Sam for your generosity, consider doubling up your usual year-end gift.  Let’s assume your itemized deductions under the new tax law would be $15,000 including your usual $10,000 year-end charitable gift.  If married, the standard deduction is $24,000 so it would not make sense to itemize in this scenario.  However, if you doubled your charitable gift this year to $20,000, and planned to not give next year, your itemized deductions would be $25,000, which is greater than the standard deduction resulting in a greater benefit for your good deed.

If you are 70 ½ or older and are required to take minimum distributions from your IRAs, and if you don’t need this mandatory withdrawal, consider gifting it directly to a charity.  Doing so will satisfy your requirement, avoid this money being included your taxable income, and help out a worthy organization.  Win.  Win. Win.  This is particularly helpful for those who may no longer itemize their deductions due to the increased standard deduction, and also helps lower adjusted gross income which can affect Medicare Part B premiums and Social Security taxes.  The gift must be made directly to the charity.  If the money is withdrawn from the IRA first, then later gifted to charity, the money will be included in your AGI but you can take the charitable deduction if deductions are itemized.  Maximum total is $100,000 each year.  If you have check-writing on your IRA, confirm with your custodian that they will allow a check to be written to a charity.  If not, most custodians have a form.

Self-employment income

Did you have self-employment income in 2018?  Did you do some consulting work on the side?  Did you sell some of those hand-made items you used to think were just a hobby? If so, let’s talk about some options to reduce your taxable income and save more towards retirement, like a SEP IRA, which can allow you to save up to 20% of your net income into a tax-deferred account. 

Information in this material is for general information only and not intended as investment, tax or legal advice. Please consult the appropriate professionals for specific information regarding your individual situation prior to making any financial decision.

No strategy assures success or protects against loss. Investing involves risk including loss of principal.

The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

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