Tax tidbits for year end planning

Try to add to your 401(k) plan.   If you are 5o or over the limit is $24,000.

Add to your IRA (Individual Retirement Account). The limit is based upon age and income. Below age 50 the limit is $5,500. If your over 50 or over it is $6,500..

Does your employer have a Health savings account tied together with major medical policy- then add to it. The limit is $3,400 ($4,400 if you are age 55 or over). The contribution amounts are higher if married. Amounts contributed earn income tax free and are not subject to tax if used to pay medical expenses.

Gather your receipts and credit card statements. – This will make preparation of your return easier when organized.

Look at what investments you have and where. Stocks in foreign companies that pay dividends should not be in a retirement account but a regular account. Reason being- the tax withheld is subject to the foreign tax credit. This usually is dollar for dollar, On the other hand tax free bonds should not be in a retirement account because the amount of the required minimum distribution is fully taxable as ordinary income.

Make your charitable contributions now so you can tax advantage of itemization. If donating stock with a low basis – the charitable deduction is the value the charity receives it in their account, You do not pay tax on the appreciation in value.

Donations of clothing, books, food and household items: Please prepare a schedule of the items with detail ie: 15 technical books on biology (with area of specialization and age) vs. 15 books. Attach a receipt from the charitable organization saying what was received and the date. Please make sure you have a complete name and address. Items valued over $500 need an appraisal so please discuss with the receipent organization as to who pays for this service. Please allow enough time for every one to perform their task.

The new tax bill….It is not law yet but something will be approved. We are aware that the real estate tax deduction will be change as well as mortgage interest but at the same time the dreadful AMT will be ended as well. The tax code is forcing individuals to be able to define and support mortgage interest for a business use otherwise: subject to limitations.

Dividend income currently divided into qualified and non qualified dividends will include previously qualified dividends as non qualified. Foreign entities that were US entities that INVERTED by changing their tax home will be non qualified. Examples: Johnson Controls, Mylan or Allegan.

Please gather your questions and call me or use email:  KLEINCPA@GMAIL.COM