Reduce Taxable Income with a Qualified Charitable Distribution

Reduce Taxable Income with a Qualified Charitable Distribution

The Tax Cuts & Jobs Act has nearly doubled the standard deduction and as a result, the vast majority of taxpayers will no longer benefit from itemized deductions.

For many, this is a welcomed change, as it simplifies filing and may even reduce your tax bill, as long as your itemized deductions are less than $12,000 (single) or $24,000 (married filing jointly). Seniors qualify for an additional deduction of $1,300 (single) or $2,600 (married filing jointly).

How Much Income Can You Take Home in 2018?

How Much Income Can You Take Home in 2018?

With the tax deadline having just passed, now is the perfect opportunity to start planning for next year. Last year’s return should be readily available, and you may even have many important items committed to memory. Additionally, four months into the year is the perfect time to begin making current year projections. Of course, this year is different. That’s because 2018 will be the first we file under the changes created by the Tax Cuts and Jobs Act (TCJA).

One thing you should do is reexamine your withholding. Back in February, the IRS released an updated withholding calculator that reflects changes under the new tax law. You can find the new withholding calculator here.  The great thing about using the calculator is that you won’t have to deal with the new W-4 worksheets. The IRS specifically encourages taxpayers who fall into the following groups to double-check their withholding:

What Are Your Odds of Being Audited?

What Are Your Odds of Being Audited?

Fewer than 1% of Americans have their federal taxes audited. The percentage has declined recently due to Internal Revenue Service budget cuts. In 2016, just 0.7% of individual returns were audited (1 of every 143). That compares to 1.1% of individual returns in 2010.1,2

The rich are more likely to be audited – and so are the poor. After all, an audit of a wealthy taxpayer could result in a “big score” for the I.R.S., and the agency simply cannot dismiss returns from low-income taxpayers that claim implausibly large credits and deductions.

Last Minute 2016 Tax Tips

Provided by Angel McCall CFP®

Filing Deadline – Monday, April 18, 2017

Reclaim a Social Security Overpayment – Changing jobs in 2016 and making more than $118,500 for year could mean that you overpaid Social Security tax. Employees were assessed 6.2% on pay up to $118,500, but if you changed jobs during the year, your new employer started the counter at zero regardless of how much you already earned. Document the overpayment on line 71 of your Form 1040.

Contribute to an IRA or Roth IRA before Monday 4/18/17 – However, most financial institutions require that contribution by Friday, 4/15/17. If you have not yet contributed to your IRA, it may be better to contribute to a Roth IRA instead. A tax deduction is not worth a lot if you are in a low tax bracket and the Roth will have tax-free growth.

Also, you may be eligible for a tax credit for your contribution.

Did your child have income? Contribute to a Roth IRA for them. (Watch for an extensive article on this topic in a future newsletter.)


Retirement Savings Contributions Credit (Saver’s Credit)

You may be able to take a tax credit for making eligible contributions to your IRA or employer-sponsored retirement plan.

Who's eligible for the credit?

You're eligible for the credit if you're:

1. Age 18 or older;

2. Not a full-time student; and

3. Not claimed as a dependent on another person’s return.

See the instructions for Form 8880, Credit for Qualified Retirement Savings Contributions, for the definition of a full-time student.

Amount of the credit

The amount of the credit is 50%, 20% or 10% of your retirement plan or IRA contributions up to $2,000 ($4,000 if married filing jointly), depending on your adjusted gross income (reported on your Form 1040 or 1040A). Use the chart below to calculate your credit.

*Single, married filing separately, or qualifying widow(er)

Retirement savings eligible for the credit

The Saver’s Credit can be taken for your contributions to a traditional or Roth IRA; your 401(k), SIMPLE IRA, SARSEP, 403(b), 501(c)(18) or governmental 457(b) plan; and your voluntary after-tax employee contributions to your qualified retirement and 403(b) plans.

2017 Key Financial Data

Tax Planning 2017 and Beyond

There's no doubt big tax changes are on the way, but not necessarily overnight. Not only do you need to keep up to date with changes as they happen this year, but more important you need to know what you can do to minimize the tax bite heading into 2017 and beyond.

For your reference, you can print my Key Financial Data for 2017.