City National Bank’s 2015 Wealth Planning Guide discusses a host of issues, including the income-tax deductions you will be permitted to take, how the alternative minimum tax may affect you, the effect of the Affordable Care Act on your personal tax situation, and the amounts you are permitted to contribute to your qualified and non-qualified retirement plans.
For instance, did you know:
Paying for education: Contributions to 529s are generally excluded from a donor’s estate, making these a great way to reduce an estate and the potential for taxes on it. You can deduct from your estate in the first year the first five years’ worth of gifts to a child’s prepaid tuition account in a 529 plan, so $70,000 can exit the estate (or up to $140,000 for a couple) in the first year for each child. Each state puts limits and conditions on its plans, but your advisor can help you find the best one for you.
Charitable giving: The deduction for charitable contributions is usually limited to 50% of your adjusted gross income. The limit falls to 30% for gifts to private charities and gifts of appreciated stock. First deduct gifts that qualify for the 50% limit, then other gifts. In general, there’s a five-year carryover for any unused charitable deduction in a given year. The IRS website (www.irs.gov) has a database, updated monthly, of charities eligible to receive deductible contributions.
Preparing for retirement: A new retirement account, the myRA, designed to jump-start saving for retirement, is now available through participating employers. The myRA is a risk-free Roth IRA backed by the U.S. Treasury. It is designed for wage earners without access to retirement plans at work. Currently, after-tax contributions are made via direct deposit each pay period through your employer (as long as the employer offers direct deposit and is able to direct your contribution to the myRA account). Contributions can be made for 30 years or until the account balance reaches $15,000. When either limit has been reached, the account must be rolled into a private-sector Roth IRA.
Running a small business: The IRS continues to focus on misclassifications of workers as contractors (and violations of fringe benefit and executive pay rules). If you have workers you claim are contractors, give them 1099 forms at year-end. Employees get W-2s. Firms that voluntarily correct misclassifications may be allowed to pay lower penalties, but this is not so if they are already under audit.
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