contributions

End-of-Year Tax Strategies: Gifting and Charitable Giving

As the year draws to a close, it’s the perfect time to review your financial and tax strategies. Whether you’re looking to benefit loved ones or support charitable causes, there are several ways to make tax-efficient financial decisions before December 31. This guide highlights two key strategies: annual exclusion gifts to reduce your taxable estate and qualified charitable distributions (QCDs) to maximize the tax benefits of your charitable contributions.


Annual Exclusion Gifts

As the end of the year approaches, many people start to think about their finances and tax strategies. One effective way to reduce potential estate taxes and show generosity to loved ones is by giving cash gifts before December 31. Under tax law, you can gift a certain amount each year without incurring gift taxes or requiring a gift tax return. Taking advantage of this rule can help you reduce the size of your taxable estate while benefiting your family and friends.

Taxpayers can transfer substantial amounts, free of gift taxes, to their children or other recipients each year through the proper use of the annual exclusion. The exclusion amount is adjusted for inflation annually, and in 2024 is $18,000. It covers […]

By |2024-11-18T19:24:34+00:00November 18th, 2024|charity, contributions, gift tax, year-end|0 Comments

Tax-Wise Ways to Take Cash from Your Corporation While Avoiding Dividend Treatment

If you want to withdraw cash from your closely held corporation at a low tax cost, the easiest way is to distribute cash as a dividend. However, a dividend distribution isn’t tax efficient since it’s taxable to you to the extent of your corporation’s “earnings and profits,” but it’s not deductible by the corporation.

5 different approaches

Thankfully, there are some alternative methods that may allow you to withdraw cash from a corporation while avoiding dividend treatment. Here are five possible options:

1. Salary. Reasonable compensation that you, or family members, receive for services rendered to the corporation is deductible by the business. However, it’s also taxable to the recipient(s). The same rule applies to any compensation (in the form of rent) that you receive from the corporation for the use of property. In either case, the amount of compensation must be reasonable in relation to the services rendered or the value […]

By |2024-02-28T16:52:55+00:00February 28th, 2024|contributions, dividends, tax planning|0 Comments

There Still May Be Time To Make An IRA Contribution For Last Year

If you’re getting ready to file your 2022 tax return, and your tax bill is higher than you’d like, there may still be an opportunity to lower it. If you’re eligible, you can make a deductible contribution to a traditional IRA right up until this year’s April 18 filing deadline and benefit from the tax savings on your 2022 return.

Rules for eligibility

You can make a deductible contribution to a traditional IRA if:

  • You (and your spouse) aren’t an active participant in an employer-sponsored retirement plan, or
  • You (or your spouse) are an active participant in an employer plan, but your modified adjusted gross income (MAGI) doesn’t exceed certain levels that vary from year-to-year by filing status.

For 2022, if you’re a married joint tax return filer and you are covered by an employer plan, your deductible IRA contribution phases out over $109,000 to $129,000 of MAGI. If you’re single or a head of household, the phaseout range is $68,000 to $78,000 for 2022. For married filing separately, the phaseout range is $0 to $10,000. For 2022, if you’re not an active participant in an employer-sponsored retirement plan, but your spouse is, your deductible […]

By |2023-02-21T15:53:28+00:00February 21st, 2023|contributions, ira|0 Comments

Tax-Wise Ways To Save For College

If you’re a parent or grandparent with college-bound children, you may want to save to fund future education costs. Here are several approaches to take maximum advantage of the tax-favored ways to save that may be available to you.

Savings bonds 

Series EE U.S. savings bonds offer two tax-saving opportunities when used to finance college expenses:

  1. You don’t have to report the interest on the bonds for federal tax purposes until the bonds are cashed in, and
  2. Interest on “qualified” Series EE (and Series I) bonds may be exempt from federal tax if the bond proceeds are used for qualified college expenses.

To qualify for the college tax exemption, you must purchase the bonds in your own name (not the child’s) or jointly with your spouse. The proceeds must be used for tuition, fees, etc. — not room and board. If only some proceeds are used for qualified expenses, only that part of the interest is exempt.

If your modified adjusted gross income (MAGI) exceeds certain amounts, the exemption is phased out. For bonds cashed in 2023, the exemption begins to phase out when joint MAGI hits $137,800 for married joint filers ($91,850 for other returns) […]

By |2023-01-16T14:33:45+00:00January 16th, 2023|contributions, savings|0 Comments

Should Your Business Address Retirement Plan Leakage?

Under just about any circumstances, the word “leakage” has negative connotations. And so it follows that this indeed holds true for retirement planning as well.

In this context, leakage refers to early, pre-retirement withdrawals from an account. Now, as a business owner who sponsors a qualified retirement plan, you might say, “Well, that’s my participants’ business, not mine.”

However, there are valid reasons to care about the issue and perhaps address it with employees who participate in your plan.

Why it matters

For starters, leakage can lead to higher plan expenses. Fees are often determined on a per-account or per-participant basis. When a plan loses funds to leakage, total assets and individual account sizes shrink, which tends to hurt administrative efficiency and raise costs.

More broadly, if your employees are taking pre-retirement withdrawals, it could indicate they’re facing unusual financial challenges. These usually have a negative impact on productivity […]

By |2022-02-23T23:45:14+00:00February 23rd, 2022|contributions, retirement|0 Comments
Go to Top