Taxes – Safe Retirement Income

December 27, 2018 by Tim Barton Leave a Comment

2019 Adjustments to Taxable Income

What Adjustments to 2019 Gross Income Are Available?

Once total or gross income from all sources has been determined, certain adjustments to income are available. These adjustments amount to a reduction in gross income and generally are granted to achieve tax fairness or in recognition of a desirable social objective. Adjustments to income are available regardless of whether a taxpayer itemizes deductions or takes the standard deduction.

The available adjustments to income include:
IRA Contributions. Eligible individuals can contribute and deduct up to $6,000 to an IRA; $12,000 for an eligible married couple, even if one spouse has no earned income. For workers age 50 and older, the IRA contribution limit is $7,000 for 2019.

Education Savings Account Contributions
Subject to income limitations, up to $2,000 per beneficiary (generally a child under age 18) per year may be contributed to an Education Savings Account and deducted; subject to income limitations.
Student Loan Interest Deduction
Up to $2,500 of the interest paid in 2019 on a loan for qualified higher education expenses may be deducted, subject to income limitations.
Health Savings Account Deduction
Contributions to a Health Savings Account, up to specified maximums, may be deducted.

One-Half of SelfEmployment Tax
Self-employed taxpayers generally deduct one-half of their self-employment tax, as determined on Schedule SE.

Self-Employed Health Insurance Deduction
Self-employed taxpayers can deduct 100 percent of the health insurance premiums (including long-term care insurance premiums) they pay for themselves, their spouses and dependents.

December 12, 2018 by Tim Barton Leave a Comment

Many Americans Want Convenient Way to Handle RMDs That Helps Offset Taxes, Leaves Legacy

November 12, 2018
Study Examines Views of Consumers Navigating the Necessities of RMDs
MINNEAPOLIS – November 12, 2018 – Required minimum distributions (RMDs) – which can be complicated, mandatory and challenging from a tax perspective – have come back into the spotlight due to potential government rule changes.
According to the new RMD Options Study* from Allianz Life Insurance Company of North America; A majority (88%) of high net worth consumers ages 65-75 are familiar with RMD rules on tax-deferred retirement plans. A full 80% of these respondents believe they will not need all of their RMDs for day-to-day living expenses; This can potentially leave these Americans feeling unsure of how to use this money and confused on how it may impact their finances, particularly their taxes.

The study, which asked these consumers about their opinions and behaviors with RMD payments, found that almost a third (32%) find it difficult to understand the impact RMDs might have on their taxes. Additionally, 71% said they are interested in using RMD payments to fund a financial product that could help offset the impact of taxes. The study also confirmed the vast majority (95%) of respondents believe it is imperative to reduce their taxes in retirement.
“For some consumers, RMDs have long been thought of as a necessary evil,” said Paul Kelash, VP of Consumer Insights, Allianz Life. “The government mandates that people take them, even though many find they don’t need the money for everyday expenses. So consumers face the challenge of managing the impact on their taxes while being unsure of how to use the leftover funds.”
Confusion over the impact RMDs can have on taxes leaves many Americans seeking methods to more efficiently handle their RMD payments. More than half (57%) of respondents in the study said they want the disbursement and tax payment to occur “without getting involved.”
In addition to determining their tax strategy with RMDs, these consumers also must decide how to use the funds left over after taxes, which tends to vary by age. While half of the study respondents said they are interested in leaving a significant portion of their savings to beneficiaries, older consumers in the study (age 71-75) are even more likely (58%) to want to leave a legacy.
“Different age groups within the study have different priorities for their RMDs,” said Kelash. “The 65-70 age group is most interested in tax-deferred growth of their RMD disbursements and may feel unsure about how to best use RMDs. In contrast, the 71-75 age cohort, who have already started taking their payments, is realizing they don’t need the additional money and are looking to leave a legacy – either to leave to family or another beneficiary like a charity.”
Overall, these Americans want to use RMDs to work with their financial goals – whatever they may be – with two-thirds wanting another way to use RMD payments to improve their financial situation. Further, 79% wish they could use RMDs in a way that allows their portfolio to grow.
Of those who work with a financial professional, 77% feel they have gotten good advice from them about managing their RMDs.
“For those who are taking RMDs or preparing to do so, working with a financial professional is a key way to finding a solution to more efficiently handle the taxes on their RMDs and use them in a way that works with their larger financial strategy,” said Kelash.

This content is for general educational purposes only. It is not, however, intended to provide fiduciary, tax or legal advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement.
About Allianz Life Insurance Company of North America
Allianz Life Insurance Company of North America, one of FORTUNE’s 100 Best Companies to Work For® in 2018, has been keeping its promises since 1896. Today, it carries on that tradition, helping Americans achieve their retirement income and protection goals with a variety of annuities and life insurance products. In 2017, Allianz Life provided a total of $2.7 billion in benefit payments that supported policyholders’ financial objectives. As a leading provider of fixed index annuities, Allianz Life is part of Allianz SE, a global leader in the financial services industry with 142,000 employees in more than 70 countries worldwide. More than 85 million private and corporate customers rely on Allianz knowledge, global reach, and capital strength to help them make the most of financial opportunities.

*Allianz Life Insurance Company of North America conducted an online survey. The RMD Options Study was conducted in February/March 2018 and included a nationally representative sample of 805 respondents ages 65-75 with retirement savings of $500,000 if single or $750,000 if married and who are the primary decision maker or share equally in decision making.

May 26, 2016 by Tim Barton Leave a Comment

2016 Qualified Plan Contribution/Benefit Limitations

2016 Qualified Plan Contribution/Benefit Limitations:

Type of Plan	Maximum Deductible 2016 Contributions/Benefits (only the first $265,000 of compensation can be used in applying these limits)
Money Purchase Pension Plan	Annual additions cannot exceed the lesser of 100% of the participant’s compensation or $53,000.
Profit-Sharing Plan	Annual additions to individual plan participants cannot exceed the lesser of 100% of the participant’s compensation or $53,000.
401(k) Plan	Employer contributions: Up to 15% of covered payroll. Elective employee deferrals: $18,000 ($24,000 if age 50 or older) Allocation limits: Total of employer contributions and elective employee deferrals cannot exceed the lesser of 100% of a participant’s compensation or $53,000.
Simplified Employee Pension (SEP) Plan	Annual additions cannot exceed the lesser of 25% of the participant’s compensation or $53,000.
SIMPLE Plan (401(k) or IRA)	Maximum annual salary reduction deferral: $12,500 ($15,500 if age 50 or older)
Target Benefit Pension Plan	Annual additions cannot exceed the lesser of 100% of the participant’s compensation or $53,000.
Defined Benefit Pension Plan	Benefit provided cannot exceed the lesser of 100% of the average of the participant’s highest three consecutive years of compensation or $210,000.
Tax-Sheltered Annuity	Maximum annual salary reduction: $18,000 ($24,000 if age 50 or older)
Section 457 Plan	Maximum annual deferral: $18,000 ($24,000 if age 50 or older)
NOTE:	Withdrawals from a qualified plan prior to age 59-1/2 may be subject to a 10% early withdrawal penalty, as well as taxation.

Are you taking full advantage of the power of tax deductions and tax-deferred accumulations in your retirement planning?

May 25, 2016 by Tim Barton Leave a Comment

2016 Gross Income Adjustments

What Adjustments to 2016 Gross Income Are Available?

Once total or gross income from all sources has been determined, certain adjustments to income are available. These adjustments amount to a reduction in gross income and generally are granted to achieve tax fairness or in recognition of a desirable social objective. Adjustments to income are available regardless of whether a taxpayer itemizes deductions or takes the standard deduction.

The available adjustments to income include:

IRA Contributions	Eligible individuals can contribute and deduct up to $5,500 to an IRA; $11,000 for an eligible married couple, even if one spouse has no earned income. For workers age 50 and older, the IRA contribution limit is $6,500 for 2016.
Education Savings Account Contributions	Subject to income limitations, up to $2,000 per beneficiary (generally a child under age 18) per year may be contributed to an Education Savings Account and deducted; subject to income limitations.
Student Loan Interest Deduction	Up to $2,500 of the interest paid in 2016 on a loan for qualified higher education expenses may be deducted, subject to income limitations.
Health Savings Account Deduction	Contributions to a Health Savings Account, up to specified maximums, may be deducted.
One-Half of Self-Employment Tax	Self-employed taxpayers generally deduct one-half of their self-employment tax, as determined on Schedule SE.
Self-Employed Health Insurance Deduction	Self-employed taxpayers can deduct 100 percent of the health insurance premiums (including long-term care insurance premiums) they pay for themselves, their spouses and dependents.

May 19, 2016 by Tim Barton Leave a Comment

Capital Gains & Dividend Taxation

The Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) provided capital gains tax relief for long-term capital gains realized after May 5, 2003 and extended capital gains tax rates to qualified dividends, beginning with dividends paid by corporations to individuals in 2003, but only through December 31, 2008. The Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA), signed into law in May 2006, extended the lower JGTRRA capital gains and dividend tax rates through December 31, 2010. The 2010 Tax Relief Act further extended the favorable tax treatment through December 31, 2012. The American Taxpayer Relief Act of 2012 made permanent the lower capital gains and dividend tax rates for all but higher-income taxpayers.

Long-Term Capital Gains and Dividend Tax Rates

A capital gain results when an asset is sold or exchanged for more than its cost basis. Capital gains realized on assets held for one year or less are short-term capital gains and are taxed at ordinary income tax rates. Long-term capital gains resulting from the sale or exchange or an asset held more than one year, however, receive more favorable tax treatment.

2015 Tax Brackets	2015 Tax Rate
10%, 15%	0%
25%, 28%, 33%, 35%	15%
39.6%	20%

Medicare Contribution Tax

Higher-income taxpayers are subject to a 3.8% Medicare contribution tax on unearned or net investment income, which includes interest, dividends, rents, royalties, gain from disposing of property, and income earned from a trade or business that is a passive activity. The tax applies to single taxpayers with modified adjusted gross income (MAGI) in excess of $200,000 and to married taxpayers filing jointly with a MAGI in excess of $250,000.