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Qualified Charitable Distributions (QCD)

Does filing a tax extension increase my chances of an IRS audit?

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If you have earned income after age 70 1/2

You can continue to make contributions to a Roth IRA. Also, since Roth IRA distributions are tax free,you will reduce the exposure the 3.8% tax on investment 

Donor Advised Fund Accounts

Can be set up through your investment advisor in 2019 which will provide more flexibility as to when contributions will be deducted. These accounts will allow you to invest Securities, ETFs, Bonds or other investments in any amount whenever you want.   You will be able to deduct the FMV without having to pay tax on the capital gains. You can parcel out the charitable donations whenever you want & the Fiduciary does the tax reporting.                                             

 Home equity loan Interest

Home Mortgage Equity loans obtained for your Primary Residence will no longer be deductible in 2019. However, interest on loan proceeds used for Home Improvements would be deductible even if it wasn’t an Equity Loan. Please note that you would have to substantiate that the loan was used for home improvement purposes

Social Security Spousal benefits

For taxpayers born before Jan 1954 that have reached their full retirement age (FRA) and have not yet claimed may collect the higher of 50% of their spouses FRA benefits. This will enable their own benefits to continue growing until they reach age 70.

The Sec 529 plans

Allows you to distribute no more than $10K in expenses for tuition incurred during 2019. 529 plan deductions were expanded to include elementary or secondary schools. VA residents may be able to deduct up to $4,000 in contributions for each beneficiary and for each account owner.

A 20% Business deduction

Will continue to be available for the first $315,000 Of qualified business income for joint filers of Pass-Through Businesses such as partnerships and sole proprietorships. Rental income may also qualify with certain limitations. However, you must have a net profit from each rental activity.

Paid on Death bank accounts

Will pass to the Paid on Death (POD) beneficiaries even if the POD account owner had a last will & testament or a revocable Living Trust regardless of what is stated in the will or trust.

Tax free Roth Distributions

To non-spouse beneficiaries can be stretched over their lifetimes but congress has proposed to change that limit to 10 years. They will pay ordinary income tax if the funds are not held for more than 5 years. Spouse beneficiaries are also not required to take RMD distributions. Roth distributions can be made without penalty even if you are under 59 ½.

The IRA Backdoor-Door Contribution loophole

Allows taxpayers, under 701/2 and who exceed the traditional IRA joint contribution income limit of $203,000, to contribute to a Non-deductible IRA account. In the same year you could then convert, tax free, the Non-Deductible IRA contribution to a Roth IRA account. However, you will no longer be able to re-characterize an IRA conversion in or after 2018.


Year End 2019-2020 Client News — 1 Comment