Quick Year-End Tax Points

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Lost in the noise of the impeachment hearings—the Secure Act (Setting Every Community Up for Retirement Enhancement) passed the House earlier this year and is expected to be included in the 2020 appropriations bill, which likely will be passed by the Senate and President by year-end. It sets up major changes in the IRA and 401(k) space regarding the Required Minimum Distribution (RMD) age, eliminates the Inherited IRA stretch rules and several other items. It won’t be effective until next year, so expect us to spend some time with you on the details in your meetings with us in the next decade (wow… it went fast!).

The following are just a few quick tax points as the year comes to a close to be aware of for planning:

Business Owners

  • Best to defer business income and accelerate business deductions in this steady tax rate environment.
  • Manage taxable income to qualify for the 20% Qualified Business Income Deduction (QBI) to keep taxable income below the $315,000 (Married Filing Jointly) threshold for phase outs. Retirement, HSA and Charitable contributions are the low hanging fruit.

Clients Making Wealth Transfer Gifts

  • Review your balance sheet to determine if gifting appreciated assets to heirs in a lower tax bracket would be advantageous.
  • Use your “use it or lose it” annual gift exclusion.
  • Consider taxable gifts using your lifetime gift tax exclusion amount.

Charitably Inclined Clients

  • Ensure you are making gifts of appreciated securities.
  • Determine if a bunching strategy (multiple years of giving) to itemize using a charitable donor advised fund is appropriate.
  • If you are over 70.5 and taking your required minimum distribution, consider making Qualified Charitable Distributions (QCD) directly from your IRA.

Clients with W2s in the Workforce

  • Max-Out retirement plans and remember catch-up contributions if over 50.
  • Max-Out HSA plans if you have an eligible healthcare plan.
  • Nondeductible contributions to IRAs or Roth IRAs.
  • Review Roth IRA conversions.

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