If you’re a business owner and you hire your children (or grandchildren) this summer, you can obtain tax breaks and other nontax benefits. The kids can gain on-the-job experience, save for college and learn how to manage money. And you may be able to:
Shift your high-taxed income into tax-free or low-taxed income,
Realize payroll tax savings (depending on the child’s age and how your business is organized), and
Enable retirement plan contributions for the children.
Estate planning isn’t just about what happens to your assets after you die. It’s also about protecting yourself and your loved ones. This includes having a plan for making critical medical decisions in the event you’re unable to make them yourself.
Section 529 plans are a popular education-funding tool because of tax and other benefits. Two types are available: 1) prepaid tuition plans, and 2) savings plans. And one of these plans got even better under the Tax Cuts and Jobs Act (TCJA).
Enjoy valuable benefits
529 plans provide a tax-advantaged way to help pay for qualifying education expenses.
In the course of operating your business, you probably spend time and money “wining and dining” current or potential customers, vendors and employees. What can you deduct on your tax return for these expenses? The rules changed under the Tax Cuts and Jobs Act (TCJA), but you can still claim some valuable write-offs.
Did you make large gifts to your children, grandchildren or other heirs last year? If so, it’s important to determine whether you’re required to file a 2018 gift tax return — or whether filing one would be beneficial even if it isn’t required.
Filing requirements
Generally, you must file a gift tax return for 2018 if, during the tax year, you made gifts:
That exceeded the $15,000-per-recipient gift tax annual exclusion (other than to your U.S. citizen spouse),
That you wish to split with your spouse to take advantage of your combined $30,000 annual exclusion,
That exceeded the $152,000 annual exclusion for gifts to a noncitizen spouse,
To a Section 529 college savings plan and wish to accelerate up to five years’ worth of annual exclusions ($75,000) into 2018,
Of future interests — such as remainder interests in a trust — regardless of the amount, or
Of jointly held or community property.
When you file your 2018 income tax return, you’ll likely find that some big tax law changes affect you — besides the much-discussed tax rate cuts and reduced itemized deductions. For 2018 through 2025, the Tax Cuts and Jobs Act (TCJA) makes significant changes to personal exemptions, standard deductions and the child credit.
What if the unthinkable happens and your spouse dies unexpectedly? As the surviving spouse, there are several steps you need to take during this difficult time. For example, secure copies of the death certificate and inform life insurance companies and the Social Security Administration of the death.
Retirement plan contribution limits are indexed for inflation, and many have gone up for 2019, giving you opportunities to increase your retirement savings:
Elective deferrals to 401(k), 403(b), 457(b)(2) and 457(c)(1) plans: $19,000 (up from $18,500)
Contributions to defined contribution plans: $56,000 (up from $55,000)
Contributions to SIMPLEs: $13,000 (up from $12,500)
Contributions to IRAs: $6,000 (up from $5,500)
One exception is catch-up contributions for taxpayers age 50 or older, which remain at the same levels as for 2018:
Catch-up contributions to 401(k), 403(b), 457(b)(2) and 457(c)(1) plans: $6,000
Catch-up contributions to SIMPLEs: $3,000
Catch-up contributions to IRAs: $1,000
Keep in mind that additional factors may affect how much you’re allowed to contribute (or how much your employer can contribute on your behalf). For example, income-based limits may reduce or eliminate your ability to make Roth IRA contributions or to make deductible traditional IRA contributions.
If you’re like many Americans, letters from your favorite charities have been appearing in your mailbox in recent weeks acknowledging your 2018 year-end donations. But what happens if you haven’t received such a letter — can you still claim an itemized deduction for the gift on your 2018 income tax return? It depends.
While the Tax Cuts and Jobs Act (TCJA) generally reduced individual tax rates for 2018 through 2025, some taxpayers could see their taxes go up due to reductions or eliminations of certain tax breaks — and, in some cases, due to their filing status. But some may see additional tax savings due to their filing status.