Three planning ideas found in the tax schedule

Three planning ideas found in the tax schedule

Most tax figures remain unchanged for 2016, according to the tax schedule released by the Internal Revenue Service.

Taxes are often a leading discussion topic, and the release of the tax rates provides an opportunity to review some tax-smart strategies for investors to consider for 2016.

Here are several discussion points from the tax schedule:

1. Capital gains rate is zero percent for lowest tax brackets. Gifting appreciated assets to family members in lower tax brackets can make the most of the gift. Also certain retired clients in lower tax brackets may reset the cost basis of an appreciated asset tax free in mutual funds or brokerage accounts.

2. The total limit on all retirement contributions is $53,000.* Many investors focus on the individual limit of $18,000* for pretax contributions to retirement accounts. But the maximum for all contributions, including employer match and profit-sharing contributions, is $53,000. Some participants in retirement plans may be able to make after-tax contributions if they are already contributing the maximum pretax deferral and if the plan allows this provision. When participants change jobs or retire, these after-tax balances may be transferred directly to a Roth IRA.

3. The annual gifting allowance for an individual is $14,000. Discussing gifts offers an opportunity to talk about 529 college savings plans. The annual gifting allowance permits an individual to fund a 529 by front-loading five year’s worth of gifts (currently $70,000 total).

* Plan participants age 50 or older are allowed to contribute an extra $6,000 as a catch-up contribution for 2016.


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