Tax Filing Reminders
IRS Sets 2017 HSA Limits
FSA or HSA? Choosing Between Health Accounts
Could You Qualify for a Partial Home-Sale Exclusion?
Consider These Financial Tips in Troubling Economic Times
Are You Familiar with These Tax Code Sections?
• September 15 - Filing deadline for 2015 tax returns for calendar-year corporations that received an automatic extension of the March filing deadline.
• September 15 - Filing deadline for 2015 tax returns for partnerships that received an extension of the April filing deadline.
• October 1 - Generally, the deadline for businesses to adopt a SIMPLE retirement plan for 2016.
• October 17 - Deadline for filing 2015 individual tax returns on extension.
• October 17 - Deadline for reconverting a Roth IRA to a regular IRA.
The IRS announced inflation-adjusted limits for deductible contributions to health savings accounts (HSAs) for 2017. For family coverage, the contribution limit will be $6,750, and for individual coverage, the limit will be $3,400. If you're age 55 or older, you can contribute an additional $1,000 during 2017. HSAs combine high-deductible health insurance plans with pretax contributions to a healthcare savings account. The savings account funds can be withdrawn tax-free to pay unreimbursed medical expenses.
Are you confused about your choices for paying medical expenses under your employer's benefit plan? Here are differences between two types of commonly offered accounts: a health savings account (HSA) and a health care flexible spending account (FSA).
Overview. An FSA is generally established under an employer's benefit plan. You can set aside a portion of your salary on a pretax basis to pay out-of-pocket medical expenses. An HSA is a combination of a high-deductible health plan and a savings account in which you save pretax dollars to pay medical expenses not covered by the insurance.
Contributions. For 2016, you can contribute up to a maximum of $2,550 to an FSA. Typically, you have to use the funds by the end of the year. Why? Unused amounts are forfeited under what's commonly called the "use it or lose it" rule. However, your employer can adopt one of two exceptions to the rule.
If you are single, the 2016 HSA contribution limit is $3,350 ($6,750 for a family). You can add a catch-up contribution of $1,000 if you are over age 55. You do not have to spend all the money you contribute to your HSA each year. You can leave the funds in the account and let the earnings grow.
Earnings. FSAs do not earn interest. Your employer holds your money until you request reimbursement for qualified expenses. HSAs are savings accounts, and the money in the account can be invested. Earnings held in the account are not included in your income.
Withdrawals. Distributions from both accounts are tax- and penalty-free as long as you use the funds for qualified medical expenses.
Portability. Normally, your FSA stays with your employer when you change jobs. Your HSA belongs to you, and you can take the account funds with you from job to job. That's true even if your employer makes contributions to your HSA for you.
Because you generally can't contribute to both accounts in the same year, understanding the differences can help you make a decision that best fits your circumstances. Contact us for help as you consider your benefit choices.
Generally, when you're single, you can exclude up to $250,000 of gain from the sale of a home ($500,000 if you're married filing jointly) when the home is used as a primary residence for two years in a five-year period that ends on the date of sale.
Tax law also provides for a partial exclusion when the time and ownership requirements are not met, if the primary reason for the sale is unforeseen circumstances. "Unforeseen" means events you could not have reasonably anticipated before buying the home and moving in. How flexible is the definition? Recently, the IRS allowed a partial exclusion when a family living in a two-bedroom, two-bath condominium gave birth to another child and needed a larger residence before the two-year rule was met.
Reacting badly to bad national economic events can turn a challenging situation into a devastating one. When troubling headline news comes your way, consider these tips before making financial moves.
• Don't be an average investor. Economists have noted that even in good times average investors usually fail to benefit fully from a market upswing. The reason: not staying invested for the duration of the cycle. Average investors tend to bail out when the future looks troubling, in essence "locking in" losses. Good investing techniques can be as much about mental toughness as about financial acumen.
• Focus on costs. Periods of economic uncertainty are a good time to focus on costs, especially in a low-return environment. Make sure you're not overpaying for fund management or sales commissions. And be mindful of tax costs, which can have a negative effect on overall returns. If you decide to sell a stock in a taxable account, consider choosing one you have held for more than one year to qualify for the long-term capital gain tax rate. A market downturn might provide an opportunity to harvest capital losses to help offset previous gains.
• Revisit your tax planning. Unfavorable economic news might require a tweak to your tax planning. Lower anticipated income could justify reduced estimated tax payments or income tax withholding. If you're retired, consider deferring retirement account withdrawals or changing the type of investments you were planning to liquidate. A review of your tax situation is always a smart move.
The bottom line: Don't make a bad economic situation worse. Contact us for help in navigating the current financial environment.
While the tax code sometimes seems like a foreign language, understanding the lingo can help you make informed decisions. The good news: You probably know more tax code sections than you think. Here are three you may be able to benefit from as you review your 2016 tax planning.
• Section 179. Section 179 is shorthand for an Internal Revenue Code section titled "Election to expense certain depreciable business assets." Essentially a very accelerated form of depreciation, Section 179 lets you write off the cost of business equipment in the year you place it in service instead of having to depreciate the asset over a specified useful life. For 2016, you can elect to deduct up to $500,000 of the cost of assets purchased, as long as the total cost of the assets you purchase and place in service during the year is less than $2,010,000. Your deduction is also limited by your taxable income for the year.
• Section 529. Section 529 plans provide a tax-advantaged way to save for higher education expenses, and take two forms: prepaid plans and savings plans. With a prepaid plan, you pay for tomorrow's tuition costs at today's rates. With a savings plan, you put money in an investment account and the account grows tax-free until you make withdrawals to pay for higher education. The withdrawals are also tax-free as long as the expenses you pay meet the tax code definition of "qualified higher education expenses," such as tuition, books, and certain computer expenses.
• Section 1031. You're probably familiar with Section 1031 in the form of the expression "like-kind exchange." An exchange of similar business or investment properties that meets the requirements of Section 1031 allows you to postpone the federal income tax on gain from the transaction. Keep in mind the tax is postponed, or deferred, not eliminated. You'll still need to track your basis in property you acquire in an exchange.
