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More Than Money Newsletter - November 2019

More than Money

with Gene Dickison

 

November 2019

Dear Friends,

Circle December 7th on Your Calendar

We don’t want you to miss our annual More than Money Holiday Event!  On December 7th we invite you to join us at our More than Money World Headquarters – in the Holy Lands – between Bethlehem and Nazareth.  We will offer you warm holiday wishes (we say ‘Merry Christmas’ – after all, we are in the Holy Lands!) from our entire More than Money team.

We open at 8 AM with a live ‘More than Money with Gene Dickison’ radio broadcast, lots of great food and warm drinks, wonderful music from the lovely and talented Scott Besser, and the chance to celebrate the season with some truly caring people.

We hope you’ll join us – and bring a friend. 

  

“Real Life Questions – Real World Answers”

 

Slashing Your 2019 Income Tax Bill with an

IRA, an RMD, and a QCD before December 31st!

Lots of initials – IRA, RMD, and QCD.  What all those letters might spell is big tax savings if you qualify.

A Qualified Charitable Distribution (QCD) is a withdrawal from your IRA (but not other retirement account) that is payed directly to an eligible charity (or charities) of your choice.  Done correctly a QCD can provide outstanding tax benefits.

In order to take advantage of a QCD, a taxpayer must be age 70 ½ or older.  For most taxpayers of that age they are also facing Required Minimum Distributions (RMD).  RMDs are IRS mandated withdrawals that are intended to generate tax revenue for the federal government.  RMDs and QCDs are loosely connected.

If you are facing an RMD from your IRA and have determined that you do not need the funds for personal use and you have identified a charity (or multiple charities) that you would like to support, you can direct your IRA custodian to send those funds (and perhaps more) to the non-profit of your choosing.  Your taxable income will not rise.  You do not need to itemize deductions on your tax return to receive this tax advantage.  You will receive a 1099 from your custodian reporting the withdrawal and you (or your tax preparer) will indicate a QCD on your 1040 return.  You will receive these tax benefits in addition to your standard deduction. Additionally, any other income based costs you might face (Medicare Part B premiums come to mind) will not be increased.

Note, the charities that you choose may be ones you are already supporting out of your pocket.  You may be supporting your place of worship or pledging to important programs.  You can use the QCD strategy to stretch those dollars even further.  We recently counseled a client who has tithed to her church for her entire adult life.  It has become a bit more difficult to do since she retired.  By using the QCD strategy and benefiting from the resultant tax savings she can continue to support her church at a level that makes her very happy.

Independent of the actual RMD dollar amounts, the IRS code permits a taxpayer to direct up to $100,000 each year to charity through a QCD.  Married couples can direct up to $200,000 annually.  One of our More than Money clients used this technique to support a capital campaign at their church at a level they did not dream they could afford.  With proper planning throughout their entire financial picture (and careful cash flow analyses) they were able to see their church benefit now instead of waiting for a bequest in their estate plans.

It is critical that you consult with your financial advisor and/or tax professional prior to exercising a QCD.  There are nuances to the QCD process that must be identified and followed.  Do not delay.  With December 31st literally around the corner, you must explore this opportunity to reduce your (already too high) income taxes.  Call today!

 

 Not 70 ½, but still want to cut your income taxes?

For many taxpayers the idea of investing in a tax shelter sounds like a quick trip to an IRS audit – or worse.  But this tax shelter, of sorts, is one the IRS wants you to use to slash your income tax bill.

If you are employed and investing in a 401(k) you are participating in an IRS approved tax shelter – and – retirement savings plan.  If you are like most folks you are paying more in income taxes than you want, but putting less in your 401(k) than you are allowed.  You can cut your taxes and pump up your retirement at the same time.

Many employees are unaware that they can direct far more into their 401(k)s than they are currently.  Many believe they are ‘maxing out’ their contributions because they are putting in the highest amount their employers will match.  It is common for an employer to match the employee’s contributions up to a percentage limit – 50% up to 7% for example.  In this case if the employee’s salary is $70,000, they invest 7% of that salary ($4,900) in their 401(k) and their employer matches 50% ($2,450).  This is very nice, indeed.

However, the 401(k) plan rules allow an employee age 49 or younger to invest up to $19,000 in their plan.  Employees 50 or older can invest up to $25,000 in their plan.  And, if they choose, they can receive a tax deduction for every dollar.  In our example, this employee can invest an additional $14,100 to $20,100 a year.  If they find themselves in the mythical 20% bracket they would save an additional $2,800 to as much as $4,000 in federal income taxes.

If this is all good news for you, you have until December 31st to increase your contributions to your 401(k).  Each plan has their own rules as to how best to get more funds into your plan so check with your plan administrator and/or your HR department for precise instructions.

 

 Sell Stock for Big Profits, but Pay No Income Taxes?!

Sounds too good to be true?  Sounds like something you would hear on a TV infomercial at 3 AM.  Right before the host yells at you through the screen, ‘But wait, there’s more!’

However . . . if you look carefully at the IRS income tax code, you will find at least three ways you can sell stock (or real estate or any other investment you have that has generated a nice profit) for a profit and pay no capital gains taxes at all.

First, you might well be able to do this yourself.  Simply sell the stock and pay no tax.  How?  If you are a married couple and your taxable income is below $78,750 your capital gains tax rate is zero!  Sell your stock, report the gain, pay no tax, and send Gene a thank you note. 

Second, you may not qualify for a zero per cent capital gains tax rate, but there may be someone in your life that does.  There may be a loved one who does fall into the appropriate bracket (for single tax payers taxable income under $39,375 qualifies them for a zero capital gains tax rate).  You may have a parent or a child that you are helping who find themselves in the correct bracket.  You could gift your appreciated stock to your parent or child.  They in turn could sell the stock and pay no tax on the profits/proceeds.

Third, there may be a non-profit that you support that you could gift your appreciated stock to and have them sell it.  As an eligible non-profit, they would pay no taxes on the proceeds of the sale.  You, however, might well receive a tax deduction (if you itemize deductions) for the market value of the stock you gifted.

Be sure to work closely with your professional tax advisor to insure the result you want.

 

More than Money Radio and Television

 

Have Breakfast with Gene every Saturday Morning at 8:06 as

More than Money with Gene Dickison airs on AM790 WAEB.

Two Full Hours – 8:06 through 10:00 AM.

 

Words are Powerful Tools for American Freedom

 

Capitalism is one of the foundational elements that makes America great.  The ‘American Dream’ is not based on a socialist ‘see how much we can get without working’ philosophy.  The American Dream is based on the fact that through capitalism America is the land of opportunity.  America is the land among all lands where a great idea combined with hard work can elevate any man or woman from the lowest economic levels to the highest.

Napoleon Hill wrote Think and Grow Rich in 1937, after spending twenty (20) years studying, interviewing, and analyzing the most successful capitalists of his time.  Andrew Carnegie, Thomas Edison, and Henry Ford are just three of the many immensely successful business people Hill interviewed before writing his instruction manual for success.

Some folks who do not understand capitalism would have you believe capitalists are cold-blooded, unfeeling beings whose only God is the ‘Almighty Dollar.’  Those folks might wish to read Hill’s writings and may be shocked to find his guidance includes instructions to (1) turn to a higher power (some call this power God), (2) grow in faith, and (3) pray every day.  In a radio broadcast in 1952, Hill said:

“You must believe in prayer.  If you will take your prayers and place them definitely behind your major objective in life and enter into those prayers each day with the belief that they will be fulfilled, you will find that changes will take place in your attitude.  Those changes will attract to you the necessary things and circumstances to carry out the object of those prayers.”

Whatever your major objective in life, daily prayer must be seen as a critical element on your road to success.

Please allow us to serve you and those you love.

Thank you,

Gene

 

P.S.  God wants nothing less than a rich and abundant life for you.  Take the time to get really clear on what a rich and abundant life would look like for you.  Have faith in God and pray every day for his guidance on your journey.

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