Gifts that give back: Can the Qualified Charitable Distribution help fill a void in charitable giving?

Following the passage of the Tax Cuts and Jobs Act in December 2017, the law’s impact on charitable organizations has come to the fore. Although the law provides for an increase in cash gifts to public charities from 50% of the donor’s adjusted gross income (AGI) to 60% of AGI, the donor must itemize their deductions to realize a tax benefit for their gift. The new law’s increase in the standard deduction to $12,000 for single filers and $24,000 for married couples filing a joint return is expected to result in a sharp reduction in the number of households that itemize their deductions, reducing the marginal tax benefit of gifts to charity by more than 25%. The impact of the law on charities remains to be seen, but with an estimated 72% of charitable gifts coming from individual donors it may be profound. Fortunately, the Protecting Americans from Tax Hikes (PATH) Act of 2015 has made permanent a hitherto underutilized incentive for older Americans to give to charity. The Qualified Charitable Deduction (QCD) is in vogue once again. Continue reading

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Last Minute Tax Tip: How Entrepreneurs can get BIG Tax Breaks through Retirement Savings

With Tax Day in 2 weeks, you might be wondering whether there are any last minute things you can do to save on taxes from latax-dayst year’s income.  Good news: if you’re an entrepreneur, there is!

Did you know that if you’re self-employed or a small business owner there is a special type of pension plan available for you (and your employees)?  Available for businesses of any size, a simplified employee pension plan (SEP-IRA)is a written arrangement that allows a self-employed individual or a business owner to contribute to a pension plan with significantly higher limits than a traditional IRA.

A self-employed individual can contribute (pre-tax!) between 0-25% of their compensation (maximum contributions up to $51,000 for 2013, $52,000 for 2014); here’s the small catch: each eligible employee has to get the same percentage.

There are distinct advantages to setting up a plan like this:

  1.      You can contribute more (up to $51,000) to a plan like this than the traditional IRA maximum annual contribution of $5,500
  2.      The contribution is tax deductible
  3.      The account grows tax deferred until you withdraw the money
  4.      There are no annual reporting requirements for SEPs as long as each participant or individual who is in the plan receives a copy of the plan agreement and disclosure form (this is unlike a traditional 401K, defined contribution plan, or defined benefit plan, which have an annual 5500 form filing requirement)

In order to deduct the contribution, you must establish the plan by April 15th and contribute to the plan by April 15th (or the due date of your return including extensions – check with your accountant).

There are very few drawbacks to setting one of these plans up.

How to set up a SEP-IRA:

SEP-IRAss can be set up through a financial advisor, through a brokerage house, or through a bank.

Participants are eligible to sign up for a wide variety of investment opportunities including mutual funds, stocks, bonds, ETFs, and many more.

There should be no establishment fees to launch the plan and annual fees are minimal.

This great way anyone who is self-employed who has a profit to shelter some of that income from taxation.   We recommend using this worksheet to figure out your savings or, as always, contact us.