Doctors, dentists and business owners with more than $321,400 of 2019 adjusted gross income have one last chance not to pass up on this tax and retirement planning opportunity.
The Fed cut rates again on October 30th, for the third time in 2019. What's it mean to your long-term financial plan?
It's notable that the stock market in 2019 has not suffered a 10% correction on worries about the China trade confrontation, the manufacturing slump or concerns about the U.S. political situation - three bad-news narratives currently haunting markets.
When you are halfway through your 70th year on the planet, U.S. law says you must start taking money out of IRAs, SEPs and SIMPLE plans, as well as 401(k), 403(b) and other U.S. Government qualified retirement plans. Only a Roth IRA account, which you fund with after-tax dollars, is exempt from federally-required minimum distributions (RMDs).
How much should you withdraw from your tax-deferred 401(k) or IRA, and in what form? Here's a brief summary of four retirement income withdrawal methods to help you optimize the decumulation of your retirement income portfolio prudently.
The American Opportunity Credit (for college students) and the Lifetime Learning Credit - for undergrad, graduate and vocational students - are the two education tax credits available from the federal government. Students can claim either of the two credits for schooling costs, or their parents can - provided they don't opt for married filing separately.
In the first and second quarters of 2019, productivity of U.S. workers surged. Meanwhile, the labor force participation rate was higher than expected by the U.S. Government's research arm, the nonpartisan Congressional Budget Office.
Negative rates abroad have driven down bond yields in the U.S. and could make the stock market multiple expand.
Negative rates abroad are driving down bond yields in the U.S., which could make the stock market multiple expand. Investing always carries risk, and current financial economic conditions are unprecedented. For the first time in modern history, you have to pay the bank to hold your money in Europe! You have to pay a bond issuer to hold your money. Here's a factual analysis of factors driving what's happening and how it might affect your portfolio.
For years, year-end tax tips were delivered in this space every September, but this year's story is a real cliffhanger. The twist in the plot is the pending tax legislation. Ironically known as the SECURE Act, an acronym, the legislation is officially named, "Setting Every Community Up for Retirement Enhancement." The bill is likely to cause frantic last-minute tax maneuvering at the end of 2019.
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Retirement Income Alert: Do You Own A $1 Million Plus IRA In A High Income-Tax State?
If you own a $1 million IRA account and live in a state with a high income-tax rate, here's a financial planning tip that could save you thousands annually on state income tax. The strategy requires setting up a trust in a state with no income tax, which is probably not something you do every day. So, here's a primer.
This is a new way to legally reduce your taxes and comply with current tax law, and a key principle driving the strategy recently was affirmed by a Supreme Court ruling. Basically, the non-grantor trust you would set up creates a new taxpayer in a state with no income tax. Then, the non-grantor trust distributes income. If you live in a state with an income tax, establishing the trust outside the reach of the state in which you live eliminates the state income tax you'd otherwise owe.
A recent U.S. Supreme Court ruling upheld the key principle behind the strategy. The June 21st, 2019 majority opinion of the Court ruled against the state of North Carolina, which had argued that Kimberly Rice Kaestner, the beneficiary of a North Carolina trust, owed the state tax on income she received through the trust. The North Carolina trust had been set up by her father, Joseph Lee Kaestner III, a New York resident, in 1992, with Ms. Kaestner named as one of the beneficiaries. In 1997, Ms. Kaestner moved to North Carolina and many years later the state assessed an income tax on the trust, citing a law authorizing North Carolina to tax any trust income for the benefit of a state resident.
The Court rejected North Carolina's argument, saying it had violated the Fourteenth Amendment's due process clause, since the beneficiaries had no right to demand the income from the trust and are uncertain to receive it. In fact, the trust had paid no income to the beneficiaries in the years for which North Carolina claimed taxes were owed!
This strategy is particularly timely because of a looming reform to the federal tax law. The tax proposal, which is widely expected to be signed into law by the end of 2019, requires that distributions of income from IRAs you leave to non-spouse beneficiaries — your children and other loved ones — be distributed over 10 years. This would prevent your heirs from taking minimum annual distributions based on their life expectancy on inherited IRAs — a popular strategy known as a "Stretch IRA." By utilizing a trust to move the IRA distributions to a state with no income tax, your beneficiaries avoid state income tax on those required distributions of income on inherited IRAs.
Why does this advisory merit urgent attention of individuals with IRAs exceeding $1 million in high income tax states, even though the proposal may not be signed into law until the end of the year? The answer: Because both chambers of Congress and President Trump have expressed support for the reform.
This aspect of retirement income planning is fraught with complexity. New York and California recently enacted laws adversely affecting non-spouse beneficiaries residing in states with an income tax. Please contact us with questions about this topic, as this strategy requires personal advice from a qualified tax professional.
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