Archive for Retirement

Eldercare Can Be A Medical Deduction

With people living longer, many find themselves becoming the care provider for elderly parents, spouses and others who can no longer live independently. When this happens, questions always come up regarding the tax ramifications associated with the cost of nursing homes or in-home care.

Generally, the entire cost of nursing homes, homes for the aged, and assisted living facilities are deductible as a medical expense, if the primary reason for the individual being there is for medical care or the individual is incapable of self-care. This would include the entire cost of meals and lodging at the facility. On the other hand, if the individual is in the facility primarily for personal reasons, then only the expenses directly related to medical care would be deductible and the meals and lodging would not be a Read More

Written by | Posted in Retirement

Reverse Mortgages – A Cash Flow Solution for Seniors

Some retirees are faced with mounting debt and inadequate income. What options do these seniors have, especially if they have a mortgage on their home and their retirement income is too low to cover the mortgage payments and have enough left over to have some enjoyment in their golden years?

One option that you see promoted on television is the “reverse mortgage” which allows a homeowner to borrow against the equity they have built up in their home over the years. The loan is not due until the homeowner passes away or moves out of the home. If the homeowner dies, the heirs can pay off the debt by selling the house and any remaining equity goes to them. If at that time the loan balance is equal to or more than the value of the home, the repayment amount is limited to the home’s worth. Read More

Written by | Posted in Real Estate • Retirement

Receiving Social Security Benefits While Living Abroad

Social Security – that onerous tax we pay to work in the United States, supposedly for our own retirement but it seems to be more to fund those who are already drawing on it! I have quite a few clients who are on temporary work visas here in the US. They rightfully question whether they will be able repatriate Social Security when they are eligible to draw on it. Or there are those US Citizens who travel after they retire and may even choose to settle abroad or go back to their home country if they had migrated to the USA.

Are You A US Citizen or Not?:

Retirees who are U.S. citizens are entitled to continue receiving benefits for as long as they live outside the United States. However, citizens of other countries who receive Social Security may have some restrictions on how long they can receive benefits while outside Read More

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Receiving Social Security Can Be Taxing

Generally, your Social Security (SS) benefits are not taxable until your modified adjusted gross income (MAGI) is more than the base amount for your filing status. MAGI is your regular AGI (without Social Security income) plus 50% of your Social Security income plus tax-exempt interest income plus certain other infrequently encountered modifications.

The base amounts (threshold where the SS benefits become taxable) are:

• $25,000 if you are single, a head of household, a qualifying widow or widower with a dependent child, or married filing separately and did not live with your spouse at any time during the year;

• $32,000 if you are married and file a joint return; Read More

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Plan For The Potential IRA-To-Charity Provision Extension

If you are 70.5 or over, have not taken all or any of your 2015 required minimum distribution (RMD) from your IRA, and plan to but have not yet made a significant charitable contribution, here is a tip that could save some tax dollars.

In previous years, there has been a tax provision allowing an individual age 70.5 or older to make a direct transfer of money, up to $100,000, from his or her IRA account to a qualified charity. That provision expired on December 31, 2014. However, Congress has extended that provision in the past, and there is a good chance it may be extended again. In fact, the Senate Finance Committee working group on individual tax reform, just recently, recommended extending the provision. Read More

Written by | Posted in Individual • Retirement

Planning Your RMD And IRA Distributions For 2015

We spend most of our lives saving for retirement by putting funds away in tax-advantaged ways. But many of us forget about planning the withdrawals so that they are tax advantaged as well.

Although there are exceptions, retirement funds generally cannot be withdrawn until we are age 59.5. If taken out sooner there is a 10% penalty that applies in most cases (in addition there may be a state penalty).

A large number of taxpayers do not take distributions until they are forced to at age 70.5, not realizing they might benefit tax wise by taking money out sooner. For example, if you are in a low or zero tax-bracket this year, you can take a certain amount out with no or Read More

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Planning Your IRA Withdrawal?

Advance planning can, in many cases, minimize or even avoid taxes on IRA distributions and other qualified plan distributions. When contemplating future retirement and when to begin tapping taxable IRA and other qualified retirement accounts, taxpayers need to consider a number of important issues.

Early Distributions (before 59.5) – If funds are withdrawn before reaching age 59 ½, the taxpayer is also subject to a 10% early withdrawal penalty (and state penalties if applicable) in addition to the income tax on the IRA distribution, unless what is referred to as the substantially equal payment exemption is utilized. Under this exception, an early retiree can begin taking substantially equal payments at least once a year over the owner’s life or joint lives of the owner and designated beneficiary. The payments must Read More

Written by | Posted in Estate Planning Tax • Retirement • Tax Planning

Saver’s Credit Can Help You Save For Retirement

Low- and moderate-income workers can take steps to save for retirement and earn a special tax credit.

The saver’s credit, also called the retirement savings credit, helps offset part of the first $2,000 workers voluntarily contribute to traditional or Roth Individual Retirement Arrangements (IRAs), SIMPLE-IRAs, SEPs, 401(k) plans, 403(b) plans for employees of public schools and certain tax-exempt organizations, 457 plans for state or local government employees, and the Thrift Savings Plan for federal employees. Also known as the retirement savings contributions credit, the saver’s credit is available in addition to any other tax savings that apply as a result of contributing to retirement plans. Read More

Written by | Posted in Individual • Retirement • Tax Planning

Relief For Certain Small Business Retirement Plans

Small businesses that have failed to timely file certain required retirement plan returns have until Tuesday, June 2 to take advantage of a special IRS penalty relief program.

Launched June 2, 2014, the one-year temporary pilot program is designed to help small businesses with retirement plans that may have been unaware of the reporting requirements that apply to these plans. Normally, plan administrators and sponsors of these plans who fail to file required annual returns, usually Form 5500-EZ, can face stiff penalties–up to $15,000 per return.

By filing late returns by June 2, eligible filers can avoid these penalties. So far, about 6,000 delinquent returns have been filed under this program. Read More

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Tax Implications of Retiring Overseas

Are you approaching retirement age and wondering where you can retire to make your retirement nest egg last longer? Retiring abroad may be the answer. But first, it’s important to look at the tax implications because not all retirement country destinations are created equal. Here’s what you need to know.

Taxes on Worldwide Income

Leaving the United States does not exempt U.S. citizens from their U.S. tax obligations. While some retirees may not owe any U.S. income tax while living abroad, they must still file a return annually with the IRS. This would be the case even if all of their assets were moved to a foreign country. The bottom line is that you may still be taxed on income Read More

Written by | Posted in Individual • International • Retirement

IRA Contribution By April 15 May Prevent Paying Back Premium Tax Credit

The Premium Tax Credit (PTC) for individuals who purchased health insurance on the Exchange (Marketplace) is an important tax break. As income goes up, this subsidy in the form of a refundable credit decreases. Then, it hits a cliff and completely disappears if one’s household income exceeds 400% of the Federal poverty line (FPL). This can result in a tax bill of thousands of dollars!

Here is an example. A married couple, both age 64, thought their 2014 income would be about $62,000. Being eligible for insurance on the Exchange, they purchased a policy and obtained a PTC of $14,112. When they file their return, they realize they actually have $63,000 of income for 2014. this is above 400% of the FPL so they must repay all of the $14,112 PTC! If they can drop their income to $62,040 (400% of the FPL for 2014), they Read More

Written by | Posted in Affordable Healthcare Act • Individual • IRS • Retirement • Tax Policy

Turning 70 1/2 This Year?

Article Highlights:

• Turning 70 1/2
• Traditional IRA Contributions
• Excess Contributions Penalty
• Required Minimum Distributions
• Still Working Exception
• Excess Accumulation Penalty

If you are turning 70 1/2 this year, you may face a number of special tax issues. Not addressing these issues properly could result in significant penalties and filing hassles. Read More

Written by | Posted in Individual • Retirement • Tax Deductions
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