In an era filled with uncertainty, you can count on one thing: time marches on. Here are some important age-related financial and tax milestones to keep in mind for you and your loved ones:
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The Setting Every Community Up for Retirement Enhancement (SECURE) Act was mainly intended to help individuals save more for retirement. But the new law also contains provisions that help simplify the administration of retirement plans for employers and allow more employees to participate in 401(k) plans. Here are some provisions that may affect business owners.
On December 20, President Trump signed into law the Setting Every Community Up for Retirement Enhancement (SECURE) Act. It was part of the Further Consolidated Appropriations Act federal spending package.
The IRS uses "Collection Financial Standards" to help determine a taxpayer's ability to pay a delinquent tax liability. Allowable living expenses include those that meet the test of being necessary to provide for a taxpayer's (and his or her family's) health and welfare, as well as his or her ability to produce income.
Under current tax law, the federal income tax rate for C corporations is a flat 21%. Under prior law, C corporations faced a graduated federal income tax-rate schedule with a maximum effective rate of 35%.
Residential real estate values have fully recovered in many areas, and rental rates are strong. To take advantage of this favorable situation, consider buying a new residence and converting your current home into a rental property that you can sell later for a higher price. This strategy can be a tax-savvy move, but it's not right for everyone. Here are some important tax issues to consider.
Get the most from Social Security. Younger retirees face a harsh penalty for working part-time. For every $2 earned over $18,240 in 2020 (up from $17,640 in 2019), you lose $1 in Social Security benefits. In the year you reach full retirement age, a higher earnings threshold applies. Your benefits will be reduced by $1 for every $3 of earnings only when earnings exceed $48,600 in 2020 if you reach full retirement age (up from $46,920 for 2019).
The Tax Cuts and Jobs Act (TCJA) introduced a new deduction for individuals, estates and trusts that own interests in so-called "pass-through" business entities for 2018 through 2025. The deduction can equal up to 20% of an owner's share of qualified business income (QBI) from an interest in one or more pass-through business entities. The QBI deduction is subject to limitations for higher-income owners, but it can be an important tax-saving break for many small business owners.
If you routinely have extra cash on hand after paying off your monthly bills, you might want to consider paying down your home mortgage balance faster than is required under your loan agreement. This can be a powerful way to invest surplus cash. But it's not right for everyone.
Thursday, December 5, 2019
For one reason or another, you may need to take some money out of an IRA before reaching retirement. You can withdraw money from an IRA at any time and for any reason, but it's important to keep in mind that most IRA withdrawals are at least partially taxable. In other words, you'll owe regular income tax on the amount. In addition, the taxable portion of a withdrawal taken before age 59 1/2, which is called an "early withdrawal," will be hit with a 10% penalty — unless you qualify for an exception.