Top-Rated Trusts and Estates Attorney John O. McManus identifies opportunities to minimize what you owe to Uncle Sam
NEW YORK, NY, Dec. 04, 2018 (GLOBE NEWSWIRE) -- via NEWMEDIAWIRE -- With only one month left in 2018, time is running out to finish your wealth management and tax planning to-dos. Top-rated estate planning law firm McManus & Associates has made your list, but it's time for you to check it twice. McManus & Associates today released “10 Tax-Planning To-Dos to Check Off Your List before the End of 2018” as part of its Educational Focus Series. During a recent conference call with clients, the firm’s Founding Principal and AV-rated Attorney John O. McManus identified actions you can take this month to minimize what you owe to Uncle Sam in the future. Hear McManus’s guidance by going to https://bit.ly/2PacT86.
“Many tax opportunities have an annual expiration date of December 31st,” commented McManus. “And this year presents unique possibilities.”
McManus added, “The commitments that come with the holiday season can become all-consuming, so it’s important to schedule time now to review potential tax moves that you may want to make before 2019. Minding your decisions, well before the ball drops in Times Square, can make a significant impact on your wealth.”
10 Tax-Planning To-Dos to Check Off Your List before the End of 2018
1. FREELY GIVE TO HELP OTHERS LIVE: Make annual exclusion gifts of up to $15,000 for individuals and $30,000 for married couples, per chosen loved one (per married couple).
a. Make gifts into trusts for children and grandchildren.
b. Contribute to a 529 Plan, which grows free of income tax.
c. Make unlimited gifts directly to educational institutions and medical facilities.
2. REAP WHAT YOU’VE SOWED (AND TAKE YOUR LOSSES): Harvest losses to offset capital gains realized in your securities portfolio.
3. YOUR HEALTH IS YOUR WEALTH: Take advantage of this year’s lower threshold for Medical Expenses.
For tax year 2018, the 2017 Tax Act reduced the floor (from 10% to 7.5% of adjusted gross income) that must be exceeded to take a deduction for medical expenses on one’s tax return. This is the “last year” to take advantage of this lower floor so, if possible, you should try to accelerate any medical transactions and purchases into the 2018 year.
4. USE A TAX RATE IN ITS INFANCY: Review your children’s portfolio income for application of the new Kiddie Tax.
Prior to 2017, your children’s interest and dividends (unearned income) above $2,100 were taxed at your top marginal tax rate. As a result of the Tax Act, this income will be taxed at the rates that are applicable to trusts. Trust rates are also at the top bracket, but the top rate starts sooner in the earnings curve.
When will your child have to file a separate tax return?
a. If their earned income, such as wages, exceeds $12,000; or
b. If their unearned income (interest, dividends, capital gains) exceed $1,050; or
c. If the child has both earned and unearned income, the child must file if the total exceeds the larger of (a.) $1,050 or (b.) their earned income plus $350.
5. GIVE THOUGHT TO GIVING:
a. Bunch your charitable deductions into the same year. The deduction for cash donations to public charities has increased to 60% of the taxpayer’s adjusted gross income.
b. Charitable donations should be combined every other year in order to exceed the new higher standard deduction ($24,000 married; $12,000 single). Otherwise, your charitable gifts will not enjoy a benefit.
c. If you are over 70 ½, make a qualified charitable donation of your required minimum distribution from your IRA; the income will be excluded from your return and taxable income.
d. Make gifts to charities and family foundations with appreciated assets:
i. Consider gifting low-basis stock (instead of selling the stock to raise cash for gifting that could lead to gains).
ii. Determine liquidity needs in the foundation to meet the requirement to pay 5% of the value of a foundation’s net investment assets.
iii. Fund a charitable remainder trust with concentrated positions in appreciated securities in order to diversify without adverse tax consequences associated with selling appreciated securities.
6. ROCKET FUEL FOR YOUR INVESTMENT VEHICLES: Establish and fund qualified plan contributions.
a. Maximize your 401k contribution, which would be $18,500 generally, and $24,500 for those over 50 years of age.
b. Consider making a gift of up to $5,500 to either a traditional or Roth IRA for your children or grandchildren who are not funding their own IRAs but have enough earned income to report.
7. TAKE A BREAK TO RECONSIDER BREAK-UPS:
While we always support and encourage harmony and reconciliation, if there must be a decision to legally separate or complete the divorce, you may want to do so before year-end. Otherwise, moving forward, the payer of alimony will no longer get a deduction on his or her tax return, and the recipient will no longer have to include the alimony as taxable income.
8. DON’T WAIT TO COMPENSATE (YOURSELF):
An owner of an S Corp must pay themselves a reasonable compensation (what someone in a similar job would be paid). Therefore, make sure you pay yourself a salary before year end.
9. BE BOLD AND REVIEW YOUR WITHHOLDING:
The Tax Act lowered the tax rates and changed the tax bracket income ranges. Therefore, now is the time to do a “check-up” to see if your current tax withholding will be sufficient for next year’s income.
10. GET IN THE GROOVE TO MAKE A MOVE: Make distributions of income from trust accounts and estate accounts to lower your income tax liability.
Estates and trusts are taxed at the highest income tax rate (and a lower threshold at which the 3.8% Medicare surtax applies). Therefore, it may make sense to distribute income to the beneficiaries to be taxed at the beneficiary’s lower income tax rate.
For help tackling your year-end tax planning to-dos, call McManus & Associates at 908-898-0100. Learn more about the award-winning firm at www.mcmanuslegal.com.
About McManus & Associates
Nearly 30 years ago, McManus & Associates was founded to deliver the highest quality estate planning services that the largest firms promise with the more intimate, personalized relationships that a sophisticated boutique law firm can offer. Since that time, some of the most prominent families in finance, media, academia and medicine — both domestic and international — have relied on McManus & Associates to serve as their tax advisory and their advisor in wealth and family mission planning.