There may still be time to maximize your health savings account (HSA) contributions for 2018 you have until April 15th to make your HSA contributions. Current contributions limits include $6,850 for family and $3,450 for single. Family members (or any other person) may also make contributions on behalf of an eligible individual. High deductible health plan (HDHP) requirements are:
2018 HDHP minimum deductible
2018 HDHP maximum out of pocket
Note: There is no penalty in 2019 for failure to maintain minimum essential health coverage. The penalty for 2018 was $695.
You have until April 15th to make your IRA contributions for 2018. Contribution limits for traditional and Roth IRAs are $5,500, with catch-up contribution of $1,000 for those 50 and over.
Traditional IRA deduction phase-outs for 2018
Roth IRA income phaseouts for Roth IRA contributions
Be sure to indicate you have earned income, such as wages or self-employment income — otherwise, they won't qualify to make a nondeductible IRA contribution, which is the first step in this process. This will not work if you are over 70½ years old or older as there are age limits for making traditional IRA contributions.
Note: The funds that end up in the Roth IRA through a back-door conversion are converted funds, not Roth IRA contributions, which creates a five-year wait for penalty-free access for those under age 59½. Also pro rata rules apply for all owned IRAs including SEP and SIMPLE IRAs. Please consult with your tax professional prior to implementing any of these topics discussed.
For the new year, the IRS has bumped up the individual income tax brackets, adjusting them for inflation. See below for your new bracket:
Retirement incentives for traditional retirement accounts like a 401(k) or individual retirement account still offer some of the most valuable tax benefits. Ensure to review your monthly contributions for 2019. Contributions reduce taxable income at the time they are made, and clients don’t pay taxes until they take the money out at retirement. The 2019 contribution limits are $19,000 for a 401(k) and $6,000 for an IRA (not including catch-up contributions for those 50 years of age and older of $6,000 for workplace plans and $1,000 for IRAs).
Tax reform created one of the most generous tax incentives ever to encourage investment in areas in need of development. If your clients are thinking of selling assets that would generate large capital gains this year, they can defer the gain if they invest an equal amount in an opportunity zone fund within six months of the sale. They won’t recognize the gain until the investment is sold, or by Dec. 31, 2026, at the latest. They can get up to 15 percent of the deferred gain forgiven entirely for holding the investment for specified time periods, and if they hold the investment 10 years, they will pay no tax on any additional gain. There are more than 8,000 opportunity zones throughout the United States and numerous funds are expected to be open to investors.
You do not need to wait for year end. Taxpayers can give up to $15,000 to as many people as they wish in 2019, free of gift or estate tax, and get a new annual gift tax exclusion every year, so they shouldn't let it go to waste. Taxpayers and their spouses can use their exemptions together to give up to 30,000 per beneficiary. If they have four children and 10 grandchildren, for example, they can remove $420,000 from their estate tax-free this year. The market is xx% off its’ highs making the impact of a stock gift that much more significant.
The historically low interest rates and lifetime gift and estate tax exemption presents an even better estate planning opportunity. Many estate and gift tax strategies hinge on the ability of assets to appreciate faster than the interest rates prescribed by the IRS. With the economy growing and unemployment down, the Federal Reserve has been raising rates. There’s a small window of opportunity to employ estate-planning techniques while interest rates are still low and the lifetime gift exemption is at an all-time high. Tax reform doubled the gift and estate tax exemptions, but like the rest of the individual provisions, this change is set to expire in a few years.
For more information on tax planning and other financial services, please contact us.
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