IRAS, QUALIFIED CHARITABLE DISTRIBUTIONS, & TAXES WHAT SENIORS - - PowerPoint PPT Presentation

IRAS, QUALIFIED CHARITABLE DISTRIBUTIONS, & TAXES

WHAT SENIORS NEED TO KNOW ABOUT THE TAX CUTS AND JOBS ACT (TCJA) AND RECENT MINNESOTA CHANGES

A LITTLE ABOUT ME

• MY PROFESSIONAL BACKGROUND
• MY FAMILY
• MY TIME AT ST. RICHARD’S CATHOLIC CHURCH

A LITTLE ABOUT ME

TODAY’S TALK

• 2017 CHANGES TO MINNESOTA TAX LAW
• SOCIAL SECURITY DEDUCTION
• DEDUCTION FOR 529 PLANS
• CHANGES IN FEDERAL TAX LAW
• CHANGE IN LIMITATIONS ON MEDICAL EXPENSES
• ELIMINATION OF PERSONAL EXEMPTIONS/INCREASE IN STANDARD DEDUCTION
• CHANGE IN TAX RATES
• WHAT CAN I DO?

MINNESOTA SOCIAL SECURITY DEDUCTION

• STARTING IN 2017, A SUBTRACTION IS ALLOWED FOR MINNESOTA TAXPAYERS

BASED ON INCOME

If your filing status is And your provisional income is Your maximum subtraction is Married filing joint or qualifying widow(er) Less than $77,000 $4,500 $77,000-$99,500 $4,500 minus 20% of your provisional income

• ver $77,000

More than $99,500 $0 (You are not eligible) Single or head of household Less than $60,200 $3,500 $60,200-$77,700 $3,500 minus 20% of your provisional income

• ver $60,200

More than $77,700 $0 (You are not eligible) Married filing separate Less than $38,500 $2,250 $38,500-$49,750 $2,250 minus 20% of your provisional income

• ver $38,500

More than $49,750 $0 (You are not eligible)

MINNESOTA CREDITS AND SUBTRACTIONS FOR 529 PLAN CONTRIBUTIONS (COLLEGE SAVINGS PLANS)

• Beginning in tax year 2017, Minnesota residents that contribute to a section 529 college savings plan may

be eligible for a nonrefundable credit.

• Do I qualify for this credit?
• You may qualify if you are a Minnesota resident or part-year resident who contributes to a qualified

section 529 college savings plan and meets certain income guidelines. However, you may not claim the credit if you claim the Education Savings Account Contribution Subtraction.

• You must have made contributions to a qualified plan by December 31, 2017 to qualify for the 2017

credit.

CREDITS FOR COLLEGE SAVINGS PLANS HOW MUCH IS THE CREDIT?

If your filing status is And your Adjusted Gross Income (AGI) is Your maximum credit is Single, head of household, or married filing separate less than $75,000 $500 between $75,000 and $100,000 $500 reduced by 2% of AGI exceeding $75,000 more than $100,000 $0 (You are not eligible) Married filing jointly less than $75,000 $500 between $75,000 and $100,000 $500 reduced by 1% of AGI exceeding $75,000 between $100,000 and $135,000 $250 between $135,000 and $160,000 $250 reduced by 1% of AGI exceeding $135,000 more than $160,000 $0 (You are not eligible)

EDUCATION SAVINGS ACCOUNT CONTRIBUTION SUBTRACTION

• Do I qualify for this subtraction?
• You may qualify if you are a Minnesota resident or part-year resident who contributes to a section 529 plan. However, you may

not claim the subtraction if you claim the Education Savings Account Contribution Credit.

• You must have made contributions to a qualified plan by December 31, 2017, to qualify for the 2017 subtraction.
• How much is the subtraction?
• Taxpayers filing single, head of household, or married filing separate may qualify for a subtraction up to $1,500. Married couples

filing joint returns may qualify for up to $3,000.

• Do I have to contribute to a Minnesota plan?
• No. Many states offer 529 college savings plans. Contributions to a qualifying account are eligible regardless of which state

administers the plan.

• Do I have to be the account owner or beneficiary for my contributions to qualify?
• No.

You may claim this subtraction for your contributions to any qualifying account regardless of the owner or beneficiary.

FEDERAL CHANGES: MEDICAL DEDUCTIONS

• MEDICAL DEDUCTIONS ARE LIMITED BY ADJUSTED GROSS INCOME
• THIS MEANS THE HIGHER

YOUR INCOME THE MORE EXPENSES YOU NEED TO INCUR IN ORDER TO DEDUCT MEDICAL EXPENSES

• FOR 2017 AND 2018, THE LIMITATION DROPS TO 7.5% OF ADJUSTED GROSS

INCOME FOR ALL TAXPAYERS FOR FEDERAL PURPOSES (MN REQUIRES AN ADDBACK FOR THE DIFFERENCE BETWEEN 7.5% AND 10%)

EXEMPTIONS AND STANDARD DEDUCTION 2017

• VS. 2018

2017

• EXEMPTION PER PERSON: $4,050
• STANDARD DEDUCTION:
• SINGLE: $6,350
• HEAD OF HOUSEHOLD: $9,350
• MARRIED FILING JOINTLY: $12,700
• EXTRA $1250 PER PERSON OVER 65

MARRIED/$1550 SINGLE

2018

• EXEMPTION PER PERSON: $0
• STANDARD DEDUCTION:
• SINGLE: $12,000
• HEAD OF HOUSEHOLD: $18,000
• MARRIED FILING JOINTLY: $24,000
• EXTRA $1300 PER PERSON OVER 65

MARRIED/$1600 SINGLE

CHANGES IN STANDARD DEDUCTION: WHAT DOES THIS MEAN?

• The Tax Policy Center estimates that 30% of all taxpayers have itemized in the past.
• Now, it is estimated that only 10% of all taxpayers will itemize in the future.

CHANGES IN TAX BRACKETS

2017 BRACKETS

Federal tax brackets: 2017 tax brackets (for taxes due April 17, 2018) Tax rate Single Married Filing Jointly 10% Up to $9,325 Up to $18,650 15% $9,326 to $37,950 $18,561 to $75,900 25% $37,951 to $91,900 $75,901 to $153,100 28% $91,901 to $191,650 $153,101 to $233,350 33% $191,651 to $416,700 $233,351 to $416,700 35% $416,701 to $418,400 $416,701 to $470,000 39.6% $418,401 or more $470,001 or more

2018 BRACKETS

Tax rate Single Married Filing Jointly 10% Up to $9,525 Up to $19,050 12% $9,526 to $38,700 $19,051 to $77,400 22% $38,701 to $82,500 $77,401 to $165,000 24% $82,501 to $157,500 $165,001 to $315,000 32% $157,501 to $200,000 $315,001 to $400,000 35% $200,001 to $500,000 $400,001 to $600,000 37% $500,001 or more $600,001 or more

WHAT CAN I DO?

• SENIORS OVER 70 ½ ARE REQUIRED TO TAKE A REQUIRED MINIMUM DISTRIBUTIONS

(RMD) FROM IRAS.

• BUT, YOU CAN ASK THAT A PORTION (UP TO $100,000) TO BE PAID DIRECTLY FROM

THE IRA TO A QUALIFIED CHARITY.

• HOWEVER, YOU THEN DON’T INCLUDE THE PORTION DIRECTLY DISTRIBUTED TO

CHARITY! THIS IS ESPECIALLY HELPFUL IF YOU CAN NO LONGER ITEMIZE

• THE DISTRIBUTION IS REPORTED ON FORM 1099-R AS NORMAL.

YOU WILL NEED TO COMMUNICATE THIS TO YOUR TAX PREPARER.

• EXAMPLES

OTHER OPTIONS

• TAXPAYERS OF ANY AGE CAN CONTRIBUTE APPRECIATED PROPERTY TO

CHARITY

• THIS, TOO, IS EXCLUDED FROM INCOME
• TAXPAYERS CAN ACCELERATE CONTRIBUTIONS TO CHARITIES (TO TAKE

ADVANTAGE OF ITEMIZING)

• DONOR ADVISED FUNDS ARE ALSO A GOOD TOOL