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Will you be withdrawing money from a Section 529 college savings plan for education expenses this fall?
If so, you may want to do a quick review of the tax consequences of withdrawals. * Qualified distributions of contributions and plan earnings are tax-free, as long as you use withdrawn amounts to pay qualified higher education expenses.? * Qualified higher education expenses include your out-of-pocket expenses for tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. Also included is a limited, reasonable amount of room and board costs when you attend at least half-time (defined as half the school's standard full-time course load). Expenses for special-needs services in connection with enrollment or attendance qualify too.
* As a general rule, an eligible educational institution is a college, university, graduate, technical, or vocational school. * A 10% additional tax applies to the earnings portion of distributions that fail to meet the tax-free criteria - unless an exception applies. Exceptions include withdrawals in cases of a beneficiary's death, disability or attendance at specified military schools, and certain rollovers or transfers to other 529 plans.
Please call me for more information, including the most tax-efficient way to take distributions from your 529 plan and the interaction of withdrawals with educational tax credits and amounts taken from other tax-advantaged accounts. |
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Your retirement funds are protected from creditors even if you file for bankruptcy, with only a few limitations. This protection extends to funds in all government-qualified pension plans, including IRAs (traditional and Roth), 401(k)s, 403(b)s, Keoghs, profit sharing, money purchase, and defined benefit plans.
A recent U.S. Supreme Court decision has held, however, that an inherited IRA is not a "retirement fund" and therefore doesn't qualify for bankruptcy protection. An inherited IRA is a traditional or Roth IRA that a deceased owner has bequeathed to a beneficiary. It differs from a "true" retirement account in three ways:
1. The beneficiary is not allowed to contribute additional retirement funds to the inherited IRA. 2. The beneficiary, regardless of age, may withdraw funds from an inherited IRA in any amount and at any time without penalty. 3. The beneficiary, regardless of age, is required to take annual minimum distributions from any inherited Based on the above characteristics, the Court unanimously concluded that with respect to beneficiaries, inherited IRAs are "not funds objectively set aside for one's retirement" and instead constitute a "pot of money that can be used freely for current consumption."
If you need more information about this Court ruling in your situation, contact my office. |
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As year-end approaches, take a closer look at your investment portfolio. There may be some tax-saving strategies worth considering.
For example: * Offsetting losses and gains. Harvesting your losses - or gains - is a standard year-end strategy. The goal of this strategy is to offset gains and losses, then to use any excess loss to offset up to $3,000 of ordinary income (e.g., dividends, interest, and wages). If you still have an excess loss, it can be carried over to next year. With long-term capital gain tax rates as high as 20% and the 3.8% net investment income surtax, harvesting losses can be an effective year-end tax-cutting strategy. * Calculating tax efficiency. Have you shifted your asset allocation and begun buying municipal bonds to reduce the effect of the 3.8% net investment income surtax? Review the impact of the change on any alternative minimum tax you may be liable for. Also, assess whether it makes sense to hold bonds in your retirement fund accounts, such as your IRA. Putting nontaxable municipal bonds in a tax-advantaged retirement account means you're effectively converting sheltered income to taxable income when you eventually take distributions from your IRAs and other retirement accounts.
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* Wash sale trap. If you decide to sell a security before year-end to take advantage of a capital loss, be sure to avoid the wash sale trap. If you sell a security and then buy a substantially identical security within a 30-day period before the sale and 30 days after the sale, it's considered a wash sale and the loss is not currently deductible. . Consider all the relevant tax and financial factors in making investment decisions. Contact my office for details and assistance in your year-end portfolio review. |
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Tax Tip of the Week: If you are planning on making any gifts before the end of the year, you should make sure that all of the paperwork has been completed. Read this article for more into.
Business Tip of the Month: As a business owner you should always be looking at ways to reduce your rent , storage and inventory costs. Sometimes we have to be creative and find ways to add to those black figures at the bottom line. Check out this article for a few helpful tips. Financial Tip of the Month: These days we can "rent-to-own" just about anything. We're told that we don't have to wait for whatever it is that we want. We could pay rent towards owning the item but when we look at the final cost, we're paying more than double! Does this sound like a good deal?? Read the article for the in-depth info if you're even considering a "rent-to-own" deal!
Fraud Alert: Have you had a fast talking, pushy sales person tell you that you need to buy NOW or sign on the dotted line NOW or you'll miss out on this "once-in-a-lifetime" deal? That old line of "if it's too good to be true, it's usually not true" should be sounding the alarm whenever you are being pressured into a "great deal." Ponzi schemes are around in every industry so beware. Check out this article for more into. |
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Let me know if I can help you with any Quickbooks problems.
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https://www.facebook.com/pages/Linda-L-Heineman-CPA/266124360085715?ref=tn_tnmn
Sincerely,
Linda Heineman
Linda L. Heineman, CPA
email:
linda@llhcpa.com
phone:
626-577-0979
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