Skip to main content
search
Jun 01
Love0

Enhanced Funding for Shooting Practice and Bulletproof Vests

By Blog, Congress at Work

Target Practice and Marksmanship Training Support Act (H.R. 1222 – The Pittman-Robertson Act, passed in 1937, imposes an excise tax on the sale of firearms, archery gear and ammunition. Those proceeds are used to fund hunter education programs, land acquisition and improvement of wildlife habitat. This new bill allocates a higher portion of these federal funds to cover the cost for construction and expansion of public target ranges. The act is designed to encourage states to develop additional shooting ranges for marksmanship training. It was introduced on Feb. 14 by Rep. Ron Kind (D-WI), passed in both the House and Senate and was signed into law by the president on May 10.

To Reauthorize the Bulletproof Vest Partnership Grant Program (H.R. 2379) – This bill would reauthorize federal funding to help state and local law enforcement agencies purchase bulletproof vests for officers working in the field. It was introduced by Rep. Bill Pascrell (D-NJ) on April 29, passed in the House and Senate and is currently waiting to be enacted by the president.

A bill to make technical corrections to the computation of average pay under Public Law 110-279. (S. 1436) – Introduced by Sen. Sherrod Brown (D-OH) on May 13, this bill becomes part of the 2008 Public Law that authorized specified Senate Restaurant employees who became employees of a food services contractor the option to continue coverage of federal benefits, including retirement benefits, life and health insurance, annual and sick leave balances and accrual rates, and transit subsidies. This new bill makes technical corrections to the Public Law, which prohibited the basic pay of these employees from dropping below the rate paid to that worker when he was employed by the government. The bill has been passed by both the House and the Senate and is awaiting the president’s signature.

The Equality Act (H.R. 5) – Reintroduced on March 31 by Rep. David Cicilline (D-RI), this bill prohibits discrimination based on sex, sexual orientation and gender identity in public accommodation areas and facilities (e.g., restrooms, locker rooms, dressing rooms), as well as the education, federal funding, employment, housing, credit and jury systems. It includes gender, sexual orientation and gender identity as prohibited categories of discrimination or segregation. This bill represents the first of its kind to protect LGBT rights and would expand the Civil Rights Act of 1964 and other laws that collectively ban discrimination. The legislation passed in the Democrat-controlled House on May 17, but is not expected to be presented for a vote in the Republican-controlled Senate.

National Flood Insurance Program Extension Act of 2019 (H.R. 2578) – This bill would reauthorize the National Flood Insurance Program through September 30 (roughly, the bulk of hurricane season). The present legislation is set to expire on May 31. The bill was introduced by Rep. Maxine Waters (D-CA) and passed in the House on May 14. The bill is currently with the Senate.

Gold Star Family Tax Relief Act (S. 1370) – This bill would amend the Internal Revenue Code to treat certain military survivor benefits as earned income for purposes of the Child’s Investment and Other Unearned Income Tax (also known as the “kiddie tax”). The legislation was introduced on May 8 by Sen. Bill Cassidy (R-LA). It was passed in the Senate on May 21 and is currently with the House of Representatives.

Alaska Remote Generator Reliability and Protection Act (S. 163) – This bill instructs the Environmental Protection Agency (EPA) to revise regulations regarding particulate matter emissions standards for nonemergency stationary diesel engines in remote areas of Alaska. The objective of the legislation is to prevent the shutdown of remote diesel power engines due to emission control devices. The act, which was introduced on January 17 by Dan Sullivan (R-AK), passed in the Senate on May 20 and is under consideration by the House.

Supporting and Treating Officers In Crisis Act of 2019 (S. 998) – Introduced by Sen. Joshua Hawley (R-MO) on April 3, this bill would amend the Omnibus Crime Control and Safe Streets Act of 1968 to expand support for law enforcement officer family services, stress reduction, suicide prevention and other purposes. The bill was passed by the Senate on May 16 and is awaiting consideration in the House.

Jun 01
Love0

When Saving for Retirement in Taxable Account Is a Good Idea

By Blog, Tax and Financial News

Most people associate saving for retirement with tax deferred or non-taxable accounts: 401(k)s, 403(b)s, Traditional IRAs, Roth IRAs, etc. The tax benefits of these types of retirement accounts give individuals advantages over simply investing in a regular taxable brokerage account.  

Savings for retirement in a standard taxable account can also have its place – and the option shouldn’t be ignored. In this article, we’ll look at a handful of reasons why doing so might just be the best option.

Your employer doesn’t offer 401(k), 403(b) or similar type plan

Some employers, especially very small ones, don’t offer retirement plan options to their employees due to the cost or administrative burden. Others have restrictions on participation, such as waiting periods (sometimes up to one year) or cut out part-time employees.

In this situation, your options may be limited to opening an IRA, but contributions are limited ($6,000 or $7,000 per year, depending if under or over 50) so an IRA alone may not allow you to save enough to meet your goals. Savings in a taxable account can help bridge the gap between what the IRA allows and your target needs.

You have maxed out and still want to save more

Even if you have access to a tax advantaged savings plan, contributions are limited. For example, 401(k) plans limit contributions to $19,000 ($25,000 if age 50 or older) in 2019. Depending on your income or projected needs, this might not be enough.

Consider for example that many experts say a target savings rate of approximately 15 percent is needed to give a retiree sufficient income. Someone earning $200,000 a year should be putting away $30,000 per year using the 15 percent rule, considerably more than what a 401(k) permits.

Accessibility to your investments

Retirement accounts come with strings attached to those tax benefits. Taking money out of a 401(k), 403(b) or IRA early can trigger steep costs in terms of penalties and taxes.

If you’re someone who values options and access to long-term investment savings, a taxable account provides flexibility. You can add and remove money without limits, penalties or restrictions. You’ll also have more control in retirement as there will be no required minimum distributions later in life.

Benefits for your heirs

Passing on the balance of a 401(k), 403(b) or Traditional IRA to an heir puts him or her in a taxable situation. Typically, someone who inherits an IRA will have to pay taxes on the distributions as if they were ordinary income, just like the retiree during their lifetime. Generally speaking, someone who inherits a taxable account receives a step-up in basis (at the date of death or other depending on elections).

Let’s look at a simple example to understand this better. Assume you bought 1,000 shares of Apple for $20 ($20,000) and when you passed away it was worth $200 per share ($200,000). If you purchased this in your 401(k), then your heir would have to pay tax on the entire $200,000 as ordinary income as it’s distributed. If this investment was held in a taxable account, however, they could receive a step-up in basis. This means that while your basis was the $20,000 you originally paid, your heir’s basis would step up to the $200,000 value. This means he could sell the $200,000 worth of stock and pay zero in taxes.

Conclusion

As you can see, tax deferred and advantaged accounts offer many perks that make them excellent vehicles for saving; however, taxable accounts are often needed as well. The need to save beyond contribution limits or desire to pass on an inheritance in a tax-advantaged manner can behoove looking beyond 401(k)s and IRAs.

Aug 24
Love0

The Tax Cuts and Jobs Act and the Transfer of Wealth

By Estate Planning

Under the newly enacted Tax Cuts and Jobs Act, the Federal estate, gift and generation-skipping tax (GST) lifetime exemption amounts have now increased to $11.18 million for individuals and $22.36 million for married couples. After increasing with inflation each year through 2025, the exemption amounts will revert back to the 2017 levels ($5,490,000 and $10,980,000) on Jan. 1, 2026. These substantial, yet temporary, increases in the exemption amounts present a unique opportunity for the implementation of various estate planning techniques that will allow the transfer of wealth to future generations.

Although this dramatic increase at the Federal level is no doubt beneficial, New Yorkers with significant wealth must be cautious. The current New York estate tax exemption remains at $5,250,000 and will rise only to $5,490,000 in 2019, indexed for inflation. As a consequence of this decoupling, although a New York resident may avoid Federal estate tax, he/she may still incur New York estate tax. New Yorkers should heed the “estate tax cliff” or risk incurring a significant estate tax liability. If the amount of a New York resident’s taxable estate is more than 5% higher than the New York exclusion amount at the time of death, none of the New York estate tax exemption will be available for use. An estate under these circumstances would be taxed in its entirety. As a side note, a decedent’s remaining lifetime exemption is only portable for Federal purposes. Proper planning must be executed at the state level to ensure maximum use of the lifetime exemption.

To illustrate the benefits of reviewing an estate plan, let’s take a look at a married couple in New York. The wife owns property worth $2.5 million and the husband holds his own assets of $4.5 million. As of 2012, the wife’s will directs the maximum amount of New York estate tax exemption to fund a credit shelter trust, which at the time was $1,000,000. The remainder would be passed to the surviving spouse and qualify for the marital deduction. If the wife passed away this year, $1.5 million of New York state estate tax exemption would be forfeit. This situation would transfer the $1.5 million directly to the surviving spouse and push his total estate over the New York cliff to a total of $6 million. Revisiting her estate plan, the wife could change her will to pass her entire $2.5 million in trust, making full use of her New York state exemption amount. The whole $2.5 million would pass in trust estate tax free and the surviving spouse’s estate of $4.5 million would be completely shielded from Federal and New York estate tax. This is just one example of the benefits of taking a second look at a wealth transfer strategy.

It should be noted that New York State does not require state gift tax filings. The tax on gratuitous transfers of property in New York was repealed in the year 2000. However, as of April 1, 2014, any gifts made by a New York resident decedent within three years of the date of death will be pulled in and added back to the taxable estate. This rule expires as of January 1, 2019.

On the other hand, residents of the state of Connecticut are subject to state gift tax filing requirements. For Connecticut residents, on January 1, 2018, the state estate and gift tax exemption increased from $2 million to $2.6 million. An additional increase to $3.6 million will occur on January 1, 2019. New Jersey residents will be happy to hear that, effective January 1, 2018, the estate tax has been fully repealed. Additionally, New Jersey residents are not subject to state gift tax filing requirements. However, the New Jersey inheritance tax is in full effect, which means that every beneficiary who is not a spouse, domestic partner, child, grandchild, great-grandchild, parent, grandparent, or stepchild will incur a “beneficiary” tax based on the amount received. This is in contrast to the estate tax which is instead imposed on the value of the taxable estate. The inheritance tax rate is graduated, maxing out at 16%.

In order to leverage their gift and GST exemptions, taxpayers can also utilize advanced wealth transfer techniques. These include sales to defective grantor trusts or the funding of grantor retained annuity trusts (GRATs) and split-interest charitable trusts. It is important to note that certain of these techniques are more effective in a low interest rate environment. With interest rates expected to rise significantly, it may be advantageous to act in the near future. Another planning technique to consider is “uptransferring” to parents and grandparents in order to achieve a stepped-up basis in gifted assets.

As mentioned earlier, we recommend that you review the terms of your wills and revocable trusts at this time to ensure they remain in accordance with your wishes. If your post-death trusts are funded according to a formula clause tied to the exemption amount, they may need to be revised to coincide with the new larger exemptions.

Feb 07
Love0

2017 vs. 2018 Federal Income Tax Brackets

By Blog, Tax and Financial News
Single Taxpayers
2018 Tax Rates – Standard Deduction $12,000 2017 Tax Rates – Standard Deduction $6,350
10% 0 to $9,525 10% 0 to $9,325
12% $9,525 to $38,700 15% $9,325 to $37,950
22% $38,700 to $82,500 25% $37,950 to $91,900
24% $82,500 to $157,500 28% $91,900 to $191,650
32% $157,500 to $200,000 33% $191,650 to $416,700
35% $200,000 to $500,000 35% $416,700 to $418,400
37% Over $500,000 39.60% Over $418,400

 

Married Filing Jointly & Surviving Spouses
2018 Tax Rates – Standard Deduction $24,000 2017 Tax Rates – Standard Deduction $12,700
10% 0 to $19,050 10% 0 to $18,650
12% $19,050 to $77,400 15% $18,650 to $75,900
22% $77,400 to $165,000 25% $75,900 to $153,100
24% $165,000 to $315,000 28% $153,100 to $233,350
32% $315,000 to $400,000 33% $233,350 to $416,700
35% $400,000 to $600,000 35% $416,700 to $470,700
37% Over $600,000 39.60% Over $470,700

 

Married Filing Separately
2018 Tax Rates – Standard Deduction $12,000 2017 Tax Rates – Standard Deduction $6,350
10% 0 to $9,525 10% 0 to $9,325
12% $9,525 to $38,700 15% $9,325 to $37,950
22% $38,700 to $82,500 25% $37,950 to $76,550
24% $82,500 to $157,500 28% $76,550 to $116,675
32% $157,500 to $200,000 33% $116,675 to $208,350
35% $200,000 to $500,000 35% $208,350 to $235,350
37% Over $500,000 39.60% Over $235,350

 

Head of Household
2018 Tax Rates – Standard Deduction $18,000 2017 Tax Rates – Standard Deduction $9,350
10% 0 to $13,600 10% 0 to $13,350
12% $13,600 to $51,800 15% $13,350 to $50,800
22% $51,800 to $82,500 25% $50,800 to $131,200
24% $82,500 to $157,500 28% $131,200 to $212,500
32% $157,500 to $200,000 33% $212,500 to $416,700
35% $200,000 to $500,000 35% $416,700 to $444,500
37% Over $500,000 39.60% Over $444,500

 

Estates & Trusts
2018 Tax Rates 2017 Tax Rates
10% 0 to $2,550 15% 0 to $2,550
24% $2,550 to $9,150 25% $2,550 to $6,000
35% $9,150 to $12,500 28% $6,000 to $9,150
37% Over $12,500 33% $9,150 to $12,500
N/A N/A 39.60% Over $12,500

 

FICA (Social Security & Medicare)
FICA Tax 2018 2017
Social Security Tax Rate: Employers 6.2% 6.2%
Social Security Tax Rate: Employees 6.2% 6.2%
Social Security Tax Rate: Self-Employed 15.3% 15.3%
Maximum Taxable Earnings $128,400 $127,200
Medicare Base Salary Unlimited Unlimited
Medicare Tax Rate 1.5% 1.5%
Additional Medicare Tax for income above $200,000 (single filers) or $250,000 (joint filers) 0.9% 0.9%
Medicare tax on net investment income ($200,000 single filers, $250,000 joint filers) 3.8% 3.8%

 

Education Credits & Deductions
Credit / Deduction 2018 2017
American Opportunity Credit (Hope) 2500 2500
Lifetime Learning Credit 2000 2000
Student Loan Interest Deduction 2500 2500
Coverdell Education Savings Contribution 2000 2000

 

Miscellaneous Provisions
2018 2017
N/A – No longer exists N/A Personal Exemption $4,050
Business expensing limit: Cap on equipment purchases $2,500,000 Business expensing limit: Cap on equipment purchases $2,030,000
Business expensing limit: New and Used Equipment and Software $1,000,000 Business expensing limit: New and Used Equipment and Software $510,000
Prior-year safe harbor for estimated taxes of higher-income 110% of your 2018 tax liability Prior-year safe harbor for estimated taxes of higher-income 110% of your 2017 tax liability
Standard mileage rate for business driving 54.5 cents Standard mileage rate for business driving 53.5 cents
Standard mileage rate for medical/moving driving 18 cents Standard mileage rate for medical/moving driving 17 cents
Standard mileage rate for charitable driving 14 cents Standard mileage rate for charitable driving 14 cents
Child Tax Credit $2,000 Child Tax Credit $1,000
Unearned income maximum for children under 19 before kiddie tax applies $1,050 Unearned income maximum for children under 19 before kiddie tax applies $1,050
Maximum capital gains tax rate for taxpayers with income up to $51,700 for single filers, $77,200 for married filing jointly 0% Maximum capital gains tax rate for taxpayers in the 10% or 15% bracket 0%
Maximum capital gains tax rate for taxpayers with income above $51,700 for single filers, $77,200 for married filing jointly 15% Maximum capital gains tax rate for taxpayers above the 15% bracket but below the 39.6% bracket 15%
Maximum capital gains tax rate for taxpayers with income above $425,800 for single filers, $479,000 for married filing jointly 20% Maximum capital gains tax rate for taxpayers in the 39.6% bracket 20%
Capital gains tax rate for unrecaptured Sec. 1250 gains 25% Capital gains tax rate for unrecaptured Sec. 1250 gains 25%
Capital gains tax rate on collectibles 28% Capital gains tax rate on collectibles 28%
Maximum contribution for Traditional/Roth IRA $5,500 if under age 50 $6,500 if 50 or older Maximum contribution for Traditional/Roth IRA $5,500 if under age 50 $6,500 if 50 or older
Maximum employee contribution to SIMPLE IRA $12,500 if under age 50 $15,500 if 50 or older Maximum employee contribution to SIMPLE IRA $12,500 if under age 50 $15,500 if 50 or older
Maximum Contribution to SEP IRA 25% of eligible compensation up to $55,000 Maximum Contribution to SEP IRA 25% of eligible compensation up to $54,000
401(k) maximum employee contribution limit $18,500 if under age 50 $24,500 if 50 or older 401(k) maximum employee contribution limit $18,000 if under age 50 $24,000 if 50 or older
Estate tax exemption $11,200,000 Estate tax exemption $5,490,000
Annual Exclusion for Gifts $15,000 Annual Exclusion for Gifts $14,000
Close Menu