Now is a good time to think about the investing, saving, or budgeting methods you could employ toward specific objectives. What financial, business, or life priorities do you need to address for 2017? We provide our list of a few “To-Dos” for the year that might prove useful:
Can you contribute more to your retirement plans this year? In 2017, the contribution limit for a Roth or traditional IRA remains at $5,500 ($6,500 for “catch-up” contributions). Keep in mind: single filers and heads of household with modified adjusted gross income (MAGI) above $133,000 and joint filers with MAGI above $196,000 cannot make 2017 Roth contributions.
As with IRAs, the maximum contribution levels remain unchanged for employer-sponsored plans – up to $18,000 with a $6,000 catch-up contribution allowed if you are age 50 or older. However, if you are self-employed, you should review your options between a SEP IRA and Individual 401k. You may be able to contribute up to $54,000 ($60,000 if over 50) to one of these plans AND qualify to make Roth IRA contributions.
Should you convert to Roth in 2017? If you’re retired or expect to earn little income in 2017, you might want to consider converting a portion of your traditional IRA to a Roth IRA. This is no snap decision; the tax impact of the conversion must be weighed versus the potential future benefits. Conversely, if your income prevents you from being eligible to contribute to a Roth IRA, you may still be able to add to a Roth IRA by first contributing to a traditional IRA and then converting to Roth. However, these strategies are complex and should not be undertaken without first consulting with us here at Kendall Capital and your accountant.
Make a charitable gift. You can claim the deduction on your 2017 return, provided you itemize your deductions with Schedule A. The paper trail is important here.
If you give cash, you need to document it. Even small contributions need to be demonstrated by a bank record, payroll deduction record, credit card statement, or receipt from the charity with the date and amount. Incidentally, the IRS does not equate a pledge with a donation. If you pledge $2,000 to a charity this year, but only end up giving $500, you can only deduct $500.
Do you own highly appreciated securities? If you have owned them for more than a year, you can transfer securities directly to a charity’s brokerage account and deduct the fair market value on that day. The beauty of this strategy is you avoid paying the 15% capital gains tax that would have resulted from simply selling the investment, and then donating the proceeds. Additionally, many of our clients are enjoying the use of their own personal Charitable Fund where they can donate stock effortlessly and then send checks to multiple charities. Please call us at Kendall Capital to learn more.
Open an HSA. If you are enrolled in an eligible, high-deductible health insurance plan, you can open a Health Savings Account which is like an IRA for health-related expenses. You can make tax-deductible contributions, depending on the type of coverage you have, of $3,400 (individual) or $6,750 (families) regardless of your income. Catch-up contributions of up to $1,000 are permitted for those 55 or older who aren’t yet enrolled in Medicare. Moreover, HSA assets can be invested in mutual funds and grow just like a traditional IRA. However, withdrawals from these accounts are tax free if used to pay for a wide variety of health-related expenses at any age! Use it for prescriptions, long-term care premiums, COBRA premiums, or even a new pair of glasses. Best of all, after you reach 65, you can use this money tax free for any reason which makes it the best tax-deferred vehicle on the market.
Review your withholding status. Should it be adjusted due to any of the following factors?
* You tend to pay a great deal of income tax each year.
* You tend to get a big federal tax refund each year.
* You recently married or divorced.
* A family member recently passed away.
* You have a new job and you are earning much more than you did last year.
* You started a business venture or became self-employed.
Are you turning 70½ this year? Don’t forget to take your RMD. When you turn 70 ½, must begin taking Required Minimum Distributions from traditional IRAs and 401(k), 403(b), and profit-sharing plans by December 31st of each year. The IRS penalty for failing to take an RMD equals 50% of the RMD amount that is not withdrawn. If you still work and contribute to a 401k, it’s possible to avoid some or all of your Required Minimum Distribution. Please call us to discuss your unique situation – we may determine it’s a terrific opportunity.
If you have questions about our To-Dos, let us know. Vow to focus on being healthy and wealthy in 2017.