-
2019 Year-End Tax PlanningNew Year... New Opportunity!!
Jeffrey LevineCPA/PFS, CFP ®, CWS ® MSAAdvisor. CEO, Director of
Financial Planning, BluePrint Wealth AllianceBlogger. Dir. of
Advisor Education, Nerd’s Eye View, kitces.comEducator. Creator,
Program Leader, Savvy IRA Planning®
Tweeter. @CPAPlanner, twitter.com/CPAPlanner
Handouts/Additional Materials at: kitces.com/AICPAOCTW19
-
Quick Message
• The general information contained in this web seminar is
provided by the American Institute of Certified Public Accountants
as a service to the public and our members. It is not intended to
serve as tax, legal or any other professional advice applicable to
any particular person or matter.
AICPA PFP Section & 360 Degrees of Financial Literacy
-
Today’s speaker
AICPA PFP Section & 360 Degrees of Financial Literacy3
Jeffrey Levine, CPA/PFS, CFP®, CWS®, MSA
Advisor. CEO, Director of Financial Planning, BluePrint Wealth
AllianceBlogger. Director of Advisor Education, kitces.comEducator.
Creator, Program Leader, Savvy IRA Planning®Tweeter.
@CPAPlanner
-
© 2018 Michael Kitces | kitces.com Handouts/Additional Materials
at: kitces.com/AICPAOCTW19
360-Degree View
• Take a 360-degree view of your finances to improve your
future.
4
Integrated personal financial
plan
Evaluate Tax Strategy
Evaluate Estate Strategy
Evaluate Retirement
Strategy
Evaluate Risk Management
Strategy
Evaluate Investment
Strategy
-
© 2018 Michael Kitces | kitces.com Handouts/Additional Materials
at: kitces.com/AICPAOCTW19
The Only Thing Constant is Change
•Each year the rules and/or the interpretation of the rules
change dramatically, but…
…this year the changes are BIG!
•There are always new– Laws
– Revenue rulings
– Private letter rulings
– Tax Court cases
– IRS notices
– IRS announcements and other guidance
5
-
© 2018 Michael Kitces | kitces.com Handouts/Additional Materials
at: kitces.com/AICPAOCTW19
Maximize Contributions to Tax-Favored Plans
•401(k) and similar plans–Elective deferrals: $19,000
–Catch-up contribution: $6,000
–Overall limit: $56,000
6
-
© 2018 Michael Kitces | kitces.com Handouts/Additional Materials
at: kitces.com/AICPAOCTW19
Maximize Contributions to Tax-Favored Plans
• IRAs
–“Regular” contribution: $6,000
–Catch-up contribution: $1,000
–Age 50+
• HSA limits:
–Family HDHP: $7,000
–Self-only HDHP: $3,500
–Catch-up contribution: $1,000
–Age 55+
7
-
© 2018 Michael Kitces | kitces.com Handouts/Additional Materials
at: kitces.com/AICPAOCTW19
Spend Through Flexible Spending Accounts
•General rule: “Use it or lose it”
•Employers may:–Adopt a grace period of up to 2 ½ months
• or–Allow up to $500 to be carried over to 2020
•Spend any excess on FSA-eligible purchases
8
-
© 2018 Michael Kitces | kitces.com Handouts/Additional Materials
at: kitces.com/AICPAOCTW19
Double-check Estimated Taxes/Withholdings
• IRS website offers a free tool/calculator
•Among the groups, in particular, who should check their
withholding are people who:– Belong to a two-income family.
– Work two or more jobs or only work for part of the year.
– Have children and claim credits such as the Child Tax
Credit.
– Have older dependents, including children age 17 or older.
– Itemized deductions on their 2017 tax returns.
– Earn high incomes and have more complex tax returns.
– Received large tax refunds or had large tax bills for
2018.
9
-
© 2018 Michael Kitces | kitces.com Handouts/Additional Materials
at: kitces.com/AICPAOCTW19
Take Advantage of Workplace OpenEnrollment Periods
•Many employers hold open enrollment periods towards the end of
the year
•Consider changes to:–Insurance programs
–FSA programs
–Retirement plans
10
-
© 2018 Michael Kitces | kitces.com Handouts/Additional Materials
at: kitces.com/AICPAOCTW19
Take Advantage of Medicare Open Enrollment
•October 15th – December 7th
•Switch between Medicare and Medicare Advantage
•Change Medicare Advantage plans
•Change Medicare Part D plans
11
-
© 2018 Michael Kitces | kitces.com Handouts/Additional Materials
at: kitces.com/AICPAOCTW19
Potential Solutions for Low Estimated Tax
Payments/Withholdings
•Make additional estimated tax payments–Treated as paid when
actually paid
• Increase withholdings–Treated as paid ratably throughout
year
–Salary from work?
–Retirement account distributions?
–Social Security benefits?
12
-
© 2018 Michael Kitces | kitces.com Handouts/Additional Materials
at: kitces.com/AICPAOCTW19
Roth IRA Conversion Before Year-End?
•As long as the funds leave you traditional account by December
31, 2019, it will be considered a 2019 Roth IRA conversion... Even
if the funds don’t get into the Roth IRA until 2020
•Most Americans have a lower tax rate in 2019 than they did
pre-TCJA
•Roth IRA conversions are irrevocable transactions–Changed by
tax cuts and jobs act
13
-
© 2018 Michael Kitces | kitces.com Handouts/Additional Materials
at: kitces.com/AICPAOCTW19
Take All RMDs… Correctly!
• Verify that all RMDs have been correctly calculated
• Ensure that an RMD has been taken from each of your
employer-sponsored retirement plans
–Exception – RMDs for 403(b) plans can be aggregated
• Make sure that you have taken a distribution from at least one
your IRAs large enough to satisfy the RMD requirement for all of
your IRAs
• Double-check to make sure RMDs have been correctly distributed
from any inherited retirement accounts you have
14
-
© 2018 Michael Kitces | kitces.com Handouts/Additional Materials
at: kitces.com/AICPAOCTW19
Qualified Charitable Distributions
•QCD vs. “regular” charitable contribution–QCD
–No deduction
–Not added to income
– “Regular” charitable contribution
– IRA distribution added to income
– Itemized deduction
–Charitable deductions may be limited
–Clients may not itemize
–Does not prevent reduction of tax benefits tied to AGI/MAGI
15
-
© 2018 Michael Kitces | kitces.com Handouts/Additional Materials
at: kitces.com/AICPAOCTW19
Qualified Charitable Distributions
•Overview of key rules–Must be 70 ½ or older on the date the QCD
is made
–Funds must go right from an IRA owner’s IRA to the charity
–Checks made payable to charity also qualify
–Can be made for up to $100,000 and is counted towards
fulfillment of RMD
–Amount needs to be entirely deductible, had it been made with
non-IRA funds
–No concert tickets, books, CDs, DVDs or other gifts in
return
16
-
© 2018 Michael Kitces | kitces.com Handouts/Additional Materials
at: kitces.com/AICPAOCTW19
Basic Tax-Loss Harvesting
•Check to see if you have any investments with losses in your
portfolio
• If so, it may pay to sell them prior to the end of the year to
offset capital gains
–Can offset up to all capital gains, plus $3,000 of ordinary
income
•Be careful of the “wash sale” rule
17
-
© 2018 Michael Kitces | kitces.com Handouts/Additional Materials
at: kitces.com/AICPAOCTW19
Take Advantage of “Free” Step-Up in Basis
•Check to see if you will be in either the 10% or 12% ordinary
income brackets
•Sell investments with a gain
•Keep taxable income (including gains) to less than the top of
the 12% bracket (approximately)
•Buy the investment right back
18
-
© 2018 Michael Kitces | kitces.com Handouts/Additional Materials
at: kitces.com/AICPAOCTW19
#1 - TAKE ADVANTAGE OF “FREE” STEP-UP IN BASIS
2019 Ordinary Income Tax Bracket vs. Long-term Capital Gains
Brackets
19
Single Filers Taxable Income Is Between
Joint Filers Taxable Income Is Between
Ordinary Income Tax
Rate
Long-Term Capital Gains
Rate
Difference Between Ordinary Income Tax Rate and Long-Term
Capital Gains Rate
$0 - $9,700 $0 - $19,400 10.00% 0.00% 10.00%$9,701 - $39,375
$19,401 - $78,750 12.00% 0.00% 12.00%$39,376 - $39,475 $78,751 -
$78,950 12.00% 15.00% -3.00% $39,476 - $84,200 $78,951 - $168,400
22.00% 15.00% 7.00%
$84,201 - $160,725 $168,401 - $321,450 24.00% 15.00% 9.00%
$160,726 - $204,100 $321,451 - $408,200 32.00% 15.00% 17.00%
$204,101 - $434,550 $408,201 - $488,850 35.00% 15.00%
20.00%$434,551 - $510,300 $488,851 - $612,350 35.00% 20.00%
15.00%
$510,301+ $612,351+ 37.00% 20.00% 17.00%
Sheet1
Single Filers Taxable Income Is BetweenJoint Filers Taxable
Income Is BetweenOrdinary Income Tax RateLong-Term Capital Gains
RateDifference Between Ordinary Income Tax Rate and Long-Term
Capital Gains Rate
$0 - $9,700 $0 - $19,40010.00%0.00%10.00%
$9,701 - $39,375 $19,401 - $78,750 12.00%0.00%12.00%
$39,376 - $39,475$78,751 - $78,95012.00%15.00%-3.00%
$39,476 - $84,200 $78,951 - $168,40022.00%15.00%7.00%
$84,201 - $160,725 $168,401 - $321,450 24.00%15.00%9.00%
$160,726 - $204,100 $321,451 - $408,200 32.00%15.00%17.00%
$204,101 - $434,550$408,201 - $488,85035.00%15.00%20.00%
$434,551 - $510,300$488,851 - $612,350 35.00%20.00%15.00%
$510,301+ $612,351+ 37.00%20.00%17.00%
Sheet2
Sheet3
-
© 2018 Michael Kitces | kitces.com Handouts/Additional Materials
at: kitces.com/AICPAOCTW19
Deduction Bunching
•Standard deduction vs. itemized deductions
•Consider bunching expenses, such as:–Medical expenses
–Charitable contributions
–Donor-advised fund?
20
-
© 2018 Michael Kitces | kitces.com Handouts/Additional Materials
at: kitces.com/AICPAOCTW19
Utilize a Qualified Opportunity Fund (QOF) to Defer Capital
Gains
•Created by TCJA
•Offer host of tax benefits–Deferral of gain until as late as
12/31/26
–10% increase in basis of still-deferred gain after 5 years
–5% increase in basis of still-deferred gain after 7 years
–Tax-free “gain-on-gain” growth if QOF is held for 10+ years
•180 days to reinvest gain–1231 gain reinvestment window begins
on last day of the year
21
-
© 2018 Michael Kitces | kitces.com Handouts/Additional Materials
at: kitces.com/AICPAOCTW19
Maximize the Qualified Business Income (QBI) Deduction
•Key thresholds:–Joint filers: $321,400*
– Married filing separate: $160,725*
–All other filers: $160,700*
• If income is below thresholds, deduction is available
• If income is above thresholds, deduction may be phased
out.–Speak to a tax professional ASAP!
*Taxable income, less capital gains
22
-
© 2018 Michael Kitces | kitces.com Handouts/Additional Materials
at: kitces.com/AICPAOCTW19
Hire Children
•Children get the $12,400 standard deduction, too!–Kiddie-tax
applied to unearned income
•Be mindful of child labor laws
•Must be bone fide work
23
-
© 2018 Michael Kitces | kitces.com Handouts/Additional Materials
at: kitces.com/AICPAOCTW19
Stop Gifting?
• The Federal estate tax is no longer a concern for most
Americans
• Many assets receive a step-up in basis at death–Beneficiaries
can sell assets that appreciated during the decedent’s lifetime
(after inheritance) with little to no tax liability
–Receipt of the same investments as a gift would result in the
recipient “picking up” the transferor’s basis!
24
-
Where to Turn for Help?
Personal Financial Planning SectionTax | Retirement | Estate |
Risk Management | Investments
-
A CPA Financial Planner and a CPA/PFS are trusted advisors
who…
• Operate at the highest professional level, acting in the
clients’ best interest.
• Integrate advanced tax planning concepts with the entire
financial and investment plan.
• Adhere to high standards as required by the Code of
Professional Conduct and the Statement on Standards in PFP
Services
• Are regulated by state boards of accountancy.
26 Personal Financial Planning SectionTax | Retirement | Estate
| Risk Management | Investments
http://www.aicpa.org/research/standards/codeofconduct/pages/default.aspxhttp://www.aicpa.org/InterestAreas/PersonalFinancialPlanning/Resources/PracticeCenter/ProfessionalResponsibilities/Pages/PFPexposuredraft.aspx
-
www.aicpa.org/pfp | Consumer
Personal Financial Planning Section Tax | Retirement | Estate |
Risk Management | Investments
27
http://www.aicpa.org/pfp
-
360 degrees of financial literacy 360financialliteracy.org
Personal Financial Planning Section Tax | Retirement | Estate |
Risk Management | Investments
28
http://www.360financialliteracy.org/
-
Questions?
Personal Financial Planning SectionTax | Retirement | Estate |
Risk Management | Investments
2019 Year-End Tax Planning�New Year... New Opportunity!!�Quick
MessageToday’s speaker360-Degree ViewThe Only Thing Constant is
ChangeMaximize Contributions to Tax-Favored PlansMaximize
Contributions to Tax-Favored PlansSpend Through Flexible �Spending
AccountsDouble-check Estimated Taxes/WithholdingsTake Advantage of
Workplace Open�Enrollment PeriodsTake Advantage of Medicare �Open
EnrollmentPotential Solutions for Low Estimated Tax
Payments/WithholdingsRoth IRA Conversion Before Year-End?Take All
RMDs… Correctly!Qualified Charitable DistributionsQualified
Charitable DistributionsBasic Tax-Loss HarvestingTake Advantage of
“Free” Step-Up in Basis2019 Ordinary Income Tax Bracket vs.
Long-term Capital Gains BracketsDeduction BunchingUtilize a
Qualified Opportunity Fund (QOF) to Defer Capital GainsMaximize the
Qualified Business Income (QBI) DeductionHire ChildrenStop
Gifting?Where to Turn for Help?A CPA Financial Planner and a
CPA/PFS are trusted advisors who…www.aicpa.org/pfp | Consumer360
degrees of financial literacy
360financialliteracy.orgQuestions?