How You Can Trim Both Estate Taxes and Income Taxes This Year

How You Can Trim Both Estate Taxes and Income Taxes This Year

Giving on a yearly basis could trim both your estate and income taxes. First, there’s the annual exclusion for gifts. Currently, you can give $14,000 annually to any number of recipients without paying federal gift tax. Married couples can double this amount by gift-splitting – a gift of $28,000 from one spouse is treated as if it came half from each.

Why giving is a two-way street

Gifts do more than help out children who need the money. They also reduce your estate so your estate will pay less estate tax upon your death. Apart from annual gift giving, you can currently transfer (during your lifetime or through your estate) a total of $5.49 million with no estate or gift tax liability. On amounts above this threshold, you or your estate will be faced with taxes at the current top rate of 40 percent. So a consistent program of annual gift giving might create substantial tax savings.

Note that gifts to individuals do not entitle you to an income tax deduction. A gift isn’t a charitable contribution. Conversely, a gift doesn’t constitute taxable income to the recipient. Gifts of income-producing property may, however, reduce your taxable income. Once you’ve given the property away, the recipient (not you) receives the income it produces and pays any income tax due on it.

Giving can be easy

One advantage to annual gift giving is that it is relatively simple to do, especially if you’re giving away cash. Another advantage is flexibility. You’re not locked into anything; you can see how much you can afford to give away each year. You can give away anything – cash, stock, art, real estate, etc. Valuation is the fair market value on the date of the gift. Subsequent appreciation, if any, belongs to the recipient’s estate (not yours).

Before you give away assets, be sure you will not need them yourself to provide income in later years. Consider the impact inflation will have on your resources.

Proper planning is essential in this area; get professional assistance before you do any gift giving. Contact our office if we can help.

Single People Need Financial Planning Too

Single People Need Financial Planning Too

Single people have different financial considerations than do those who are married. But this doesn’t mean they should overlook financial planning.

Whether you are a lifelong single person or you found yourself single through divorce or the death of your spouse, you have your own financial considerations and complications. Unfortunately, many single people overlook financial planning. Don’t make this costly mistake.

Financial and estate planning help you protect your earnings and your property. For single people who do not have someone to fall back on, planning for an unexpected financial setback is especially important.

Protecting your earnings (your ability to provide basic needs for yourself and your dependents) should start with creating an emergency fund that could pay for your basic living expenses for six to twelve months. The fund should be separate from your other investments, readily accessible, and reserved solely for emergency use.

Insurance is an important factor when it comes to protecting your income. Disability insurance provides a steady income stream when you’re sidelined by illness or injury. Employers frequently offer disability policies, but they are also available through private insurers. Life insurance may not be a priority for you if you do not have dependents, but if anyone relies on you financially, a term life insurance policy would offer an income stream to your loved ones in the event of your death.

Asset protection is more complex. Through powers of attorney, you can appoint trustworthy people to make financial or medical decisions for you in the event you become incapacitated. By creating a will (and perhaps a trust) and naming beneficiaries for your IRA or 401(k) plans, you can ensure that your assets will go to the individuals or charities of your choice.

Your financial planning needs are unique. If you’d like to learn more about protecting your finances and property, let’s talk.

IRS Increases Health Savings Account Limits for 2018

IRS Increases Health Savings Account Limits for 2018

The IRS has just announced that the amount Taxpayers will be able to contribute to their HSA accounts in 2018 will be increased.  The contribution limit for those with self-only coverage will increase from $3,400 to $3,450.  Taxpayers with family coverage will see their contribution limit increase from $6,750 to $6,900.+

 

 

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