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Podcast Episode – Meir Statman
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Embracing the Evidence at Anheuser-Busch – Mid 1980s
529 Best Practices
Three Timely Tax Tips
Around this time of year, taxes are near the top of just about everyone’s to-do list. At Hill Investment Group, we think about taxes every day of the year, working to maximize our clients’ after-tax returns. That means we not only try to maximize the returns in our clients’ portfolios but also limit the amount of money they have to pay in taxes.
Some of you may have already filed your taxes, and good for you. For those that have not already filed, below we share a few tips you can use to hopefully reduce the amount you send to Uncle Sam for 2021.
Contribute to your IRA: Saving in a traditional IRA is one of the simplest ways to reduce taxes. You can contribute up to $7,000 to a traditional IRA (if you are over age 50) and count it as a 2021 contribution to potentially reduce your income.
Contribute to a Health Savings Account: If you are covered under a high-deductible healthcare plan, a family can contribute up to $8,200 (if the owner is over age 55) to a Health Savings Account (HSA) and count it as a 2021 contribution. This is an often-missed opportunity. We were told by one CPA that if you can only contribute to your HSA or 401(k), they would pick the HSA for the tax benefits – quite an endorsement.
Charitable Contributions: Married couples can deduct up to $600 of cash charitable contributions even if they take the standard deduction. So, although you may not have other deductions, be sure to keep track of those cash gifts you made in 2021.
As with all tax planning, we recommend you connect with your accountant or CPA to get more information on your specific situation.
The Good, The Bad, and The Ugly of Projected Tax Implications
There has been a lot of talk about the House Ways and Means Committee’s tax proposal. Whether in The Wall Street Journal or from Take the Long View podcast guest, John Jennings’ break down of the good, the bad, and the ugly, speculation is all over the place. As a client of Hill Investment Group, you can rest assured that we are planning for all of the potential iterations.
Below we’ve reviewed the most relevant points for our clients. Have questions? Feel free to reach out to us to discuss how the potential changes may affect you. Set up a time to talk here.
|House Ways and Means Tax Proposals||Current Law|
|Top Income Tax Bracket||Increase the top individual income tax bracket to 39.6 percent. This new top bracket would start at taxable income levels of $400,000 for single filers, $450,000 for joint filers. Effective 1/1/2022.||The current top tax rate is 37 percent on taxable income over $523,600 for single filers and $628,300 for joint filers.|
|Capital Gains||Increase the statutory capital gains rate to 25 percent. Effective 9/13/2021, subject to a binding contract exception.||The current top statutory capital gains rate is 20 percent.|
|Estate and Gift Tax||Reduce to an inflation-adjusted $5 million. Effective 1/1/2022.||Inflation-adjusted $10 million ($11.7 million in 2021).|
|Roth Conversion||Eliminate Roth conversions for both IRAs and employer-sponsored plans for single filers with taxable income over $400,000 and joint filers with taxable income over $450,000.||A person can convert their eligible IRA assets to a Roth IRA regardless of income.|
Have questions? Feel free to reach out to us to discuss how the potential changes may affect you. Set up a time to talk here.
The Number One Thing to do Before the End of 2020
Last month we shared five things that can still be done in December to minimize your 2020 taxes. With only a day left in the year, the number one thing you can still do to offset your taxes is to GIVE.
Giving is a tax one two punch – lowering taxes today and tomorrow.
Charitable contributions are tax-deductible in the year you make the gift, either to your favorite organization or your Donor Advised Fund. By contrast, gifts to individuals provide a longer-term benefit – they are a great way to lower your overall estate and reduce the amount that is potentially subject to estate taxes in the future. Cumulative gifts to an individual up to $15,000 [$30,000 for a married couple filing jointly in 2020] are under the annual gift exclusion and do not require a gift tax return to be filed. If you give more than $15,000 to one person, you may have to file a gift tax return, and we would encourage you to consult with your tax professional. Of course, for clients of Hill Investment Group, we handle the consultation and coordination.