Atlanta Financial Newsroom

Are you Paying More Than You Need in Taxes?

Are you Paying More Than You Need in Taxes?
Chris Blackmon, CFP®, CPA
September 13, 2019

The Tax Cut and Jobs Act of 2017, which became effective for tax years starting in 2018, significantly impacted many taxpayers. The change impacting the most taxpayers was the enhanced standard deduction and loss of many itemized deductions. Tax forms were also presented differently making it difficult for taxpayers who reviewed their returns in detail to compare year-to-year. While there were many changes, there are still some important tax savings strategies that may help you pay less in taxes. Which ones apply to your situation?  Ask yourself the following questions:

Do you expect a significant change in income from the prior year?

Coordinating the timing of significant one-time increases in income can make a big difference.  If possible, try to spread gains across two tax years. For example, you may want to avoid selling a rental property in the same year you exercise stock options. Significant one-time decreases (like a one-time business loss or large capital loss) can provide an opportunity for “gain harvesting” (recognizing gains in lower income years).  If you find yourself in a lower tax bracket than usual, it can also be a good time to discuss converting IRA funds to a Roth.

Are you above age 70.5?

If so, consider making any charitable contributions directly from your IRA. These charitable distributions can satisfy your required minimum distribution. Qualified charitable distributions are not included in your adjusted gross income, which determines the amount of your Social Security that is taxable, whether you are subject to Medicare premium surcharges and also income thresholds for medical expenses if you itemize. Also, if you take advantage of the increased standard deduction, this is a strategy to ensure your charitable contributions are still deductible.  If you are interested in this strategy, be sure to discuss Schwab’s “charitable checkbook” option with us.

Do you own rental property? 

Make sure we discuss whether you have any suspended or carryforward operating loss (Schedule E). Many rental property owners show a taxable loss (even if there is a cash profit) and if your income is above $150,000, the loss may be suspended. It is then taken in the year you sell the property, which can make taxable income vary significantly from one year to the next and present tax planning opportunities.

Do you have a Capital Loss Carryforward?

A Capital Loss Carryforward can present opportunities to rebalance your portfolio while minimizing the tax impact. We consistently review your portfolio to determine if there are tax losses that should be recognized to off-set capital gains. Schedule 1, line 13 lists capital gains and if your return reflects a loss of $3,000, you likely have a Capital Loss Carryforward. Also, depending on your investment accounts, this can provide an opportunity to manage taxable income and convert tax-deferred accounts to a Roth IRA.

Do you have taxable income under $78,750 MFJ or $39,375 Single (or gross income under $105,000 MFJ or $51,375 Single)?

If so, your income places you in the 0% capital gains rates. This provides an opportunity to recognize capital gains and pay 0% tax. This applies to securities and rental properties or other capital assets.

Are you approaching Social Security age?

Making your decision about when to start collecting Social Security will significantly affect your long-term financial plan and should be discussed with your advisor. You should also determine the percentage of your Social Security which will be taxable. You can have tax directly withheld from Social Security payments (similar to withholdings from your IRA distributions or W2 income), which can help avoid surprises at tax time.

If any of these tax planning opportunities seem to apply to you, we look forward to working with you (and your CPA) to discuss the best “next steps” to take to reduce your tax bill.

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What is the SECURE Act and does it matter to me?

The Setting Every Community Up for Retirement Enhancement (“SECURE”) Act was signed into law on December 20, 2019.  With all of the discussion in the news around the political uncertainty, impeachment, and the looming trade war, one of the largest changes to retirement savings laws in recent years was passed with very little fanfare.  However, some of the changes will be significant.  I have tried to highlight what may impact the majority of our clients and readers.

The Act has a lot of positives such as simplifying rules and making 401k plans potentially available to more workers, pushing back the RMD age, and allowing contributions to IRAs past age 70.  The negative impact I see is the elimination of the stretch IRA which is a clear move by the government to raise tax revenues by forcing money out of inherited IRAs sooner.  I will discuss in more detail below, but this should be a time to review beneficiaries and discuss whether any change in your legacy planning should be made in response to the new laws. What do you need to pay attention to?

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Baby Steps: Financial Moves for Every Decade of Life

Recently, my husband and I took care of our 12-month old granddaughter while our daughter and son-in-law took a much-needed vacation together.  When they dropped her off, their parting words were, “She is almost ready to walk, but make sure she waits until we get home!”

Famous last words…  Of course, as soon as they left the house, she was trying to walk – literally everywhere.  And after about 24 hours she was taking her first baby steps.  By the time they arrived back three days later, she was walking (a little unsteadily but walking none-the-less) and was very proud of herself.  Great strides in just a few days but predicated on all of the trial and error and lessons learned in the months before.

Financial planning is a little like this.  You’ll make mistakes along the way – everyone does.  But you will do a lot of things right as well and the important thing to remember is that your financial health is based on doing the little things right, all along the way.

So, what should you be doing when you are 22, 52 or 72?  Here are three important tips for each decade.

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Cathy Miller Receives the Women’s Choice Award® as Highly Recommended Financial Advisor by Women for Women for Seventh Consecutive Year

Atlanta – November 19, 2019 – Atlanta Financial Associates, an independent financial advisory firm, recently announced that Cathy Miller, MBA, CFP® , CRPS®, CDFA™, has received the Women’s Choice Award® for Financial Advisors and Firms.

As the leading advocate for female consumers, WomenCertified Inc. selected Miller based on rigorous research and specific objective criteria; she has received this recognition every year since 2013. 

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