New Rules for 529 Plans

Education Savings PlanEasing the burden of paying for education

The Tax Cuts and Jobs Act of 2017 will expand the use of 529 Plans to allow savers to accumulate money and pay for education on a tax-free basis. Before we discuss the changes let’s review the basics. A 529 Savings Plan is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs.  You are not required to use the 529 in your domicile state and your plan, regardless of which state is the sponsor, can be used for any college in any state.  Contributions to a 529 Plan are invested and grow tax deferred.  If the funds are ultimately used for education, distributions come out federally tax-free. Contributions to the plan qualify for the $15,000 annual gift tax exclusion.  The Plan has to have a named donor and a designated beneficiary. The donor of a Plan retains control indefinitely and only the donor can request withdrawals and can close the account at any time.  However, if the funds are used for anything other than education, the earnings portion of the account is subject to income tax plus a 10% penalty.  Most plans allow for lifetime contributions of $300,000 or more.
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NJ Governor signs SALT deduction workaround into Law

New Jersey Governor Phil Murphy signed into law May 4th, 2018 the State and Local Tax Deduction bill that would allow New Jersey municipalities to create charitable funds through which NJ taxpayers can donate in exchange for a tax credit of up to 90% of their donation to reduce their property tax bill.  Generally, the charitable deduction would then be fully deductible on the federal income tax return.  The legislation will go into effect in July 2018.
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Explaining “Backdoor Roth IRAs”


Learn how higher income earners can contribute to a Roth IRA

ROTH IRAS ARE A POWERFUL WAY TO SAVE FOR RETIREMENT

Contributions into a Roth IRA are not tax deductible. However, the earnings in the account accumulate tax deferred, and can be distributed completely tax free after age 59½, provided 5 years have elapsed since the tax year of your first Roth contribution. Many investors who might otherwise contribute to a Roth IRA find themselves constrained by the IRS income limits which restrict their ability to contribute to a Roth IRA based on their adjusted gross income (AGI).
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Tax Loss Harvesting: Don’t Miss Out on the Opportunity

Tax Loss Harvesting: Don’t Miss Out on the Opportunity

NOBODY LIKES TO SELL AN INVESTMENT AT A LOSS. However, using a strategy of realizing losses to reduce taxable gains, referred to as tax loss harvesting, can help you enhance the after-tax returns of your portfolios. Tax loss harvesting can not only save an investor taxes in the current year, but if done properly, can provide tax savings for years to come. Many investors avoid tax loss harvesting because they want to avoid selling something at a loss and possibly missing a rebound. We advise our clients to maintain their equity exposure even while tax loss harvesting. You can do this by simultaneously selling your asset that has an unrealized loss and purchasing a similarly correlated asset to the one just sold.

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Taxation of Investment Income

InvestmentNot all investment income is taxed the same. Thanks to the IRS, the tax code regarding your investments is constantly changing, and keeping up with these changes is important to optimize the tax efficiency of your portfolio. Remember, it’s not what you make but what you keep that counts.

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Taxation of Investment Income: What You Need to Know

Taxation of Investment Income

Taxation of Investment IncomeNot all investment income is taxed the same. Thanks to Congress, the federal tax code regarding your investments is constantly changing, and keeping up with these changes is important to optimize the tax efficiency of your portfolio. Remember, it’s not what you make but what you keep that counts.

The main determinants of federal investment income tax rates are your annual income and the type of investment income earned: interest income, dividend, and capital gains. Investments such as savings accounts, certificates of deposit, money markets, annuities, and taxable bonds (as opposed to municipal bonds) produce taxable interest income. This income is considered ordinary income and is taxed at an individual’s ordinary income tax rate, which ranges from 0% to 39.6%.
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