While you might be ready to ring in 2021 after this most unusual year, we would like to provide you with a checklist to review before the 2020 tax year comes to an end. Rather than touch on all aspects of your financial planning you might revisit annually, this checklist will focus on income tax and health care planning items that are time-sensitive due to their December 31 or April 15 deadlines. Between the SECURE Act passed in December 2019 and the CARES Act passed in March 2020, you have most likely been in touch with your CPA this year. We suggest continuing to work with your CPA before making any significant changes to your strategy.
Consider your year-to-date realized capital gains in your taxable accounts. Are you close to the thresholds described below? Or, has your CPA advised you to limit gains from your investment portfolio due to other income incurred this year?
|Long-Term Capital Gains Rate Brackets|
|Married Filing Jointly||0% – up to $80,000
15% – up to $496,600
20% – $496,601 and above
|Single||0% – up to $40,000
15% – up to $441,450
20% – $441,450 and above
|These brackets are based on your taxable income*** (after deductions are applied).|
If you are a Bragg client, we have an Investment Policy Statement for you on file, where we discussed and decided upon an annual realized capital gain tolerance. Your portfolio manager watches this amount and works to stay below it all year. Mutual funds often make capital gain distributions in the fourth quarter. If you would like to know where your portfolio stands and what to expect, please don’t hesitate to call us to discuss. And, if you are not a client of Bragg, we recommend that you ask your Investment Advisor if they have a target on file for you and share this with your CPA.
|Medicare Part B Costs|
|Individual tax return||File joint tax return||You pay each month (in 2020)|
|$87,000 or less||$174,000 or less||$144.60|
|above $87,000 up to $109,000||above $174,000 up to $218,000||$202.40|
|above $109,000 up to $136,000||above $218,000 up to $272,000||$289.20|
|above $136,000 up to $163,000||above $272,000 up to $326,000||$376.00|
|above $163,000 and less than $500,000||above $326,000 and less than $750,000||$462.70|
|$500,000 or above||$750,000 and above||$491.60|
As we mentioned, this is not meant to be an exhaustive list of all items to consider, yet a list of the most common tax items (and a few health care items) that may be within your control. Please reach out to us at Bragg with any questions or if you would like to discuss further. We also advise that you work with your CPA to run tax projections before implementing any significant changes. If you would like a more comprehensive list of questions to consider regarding your overall financial health and planning, please see the article Financial Planning 101.
*AGI (line 8b on your 2019 Form 1040) is gross income less certain adjustments. AGI includes all taxable income, including wages, bonuses, self-employment income, taxable interest, dividends, capital gains, retirement distributions, annuities, rents and royalties, taxable social security income, alimony received (with agreement prior to 2019), etc. The most common adjustments that reduce your AGI include one half of self-employment tax paid, alimony paid (with agreements prior to 2019), pre-tax retirement/HSA plan contributions, student loan interest, and certain losses. Back to top
**MAGI then adds back to your AGI certain deductions from above. Back to top
***Taxable Income (line 11b on your 2019 Form 1040) is AGI less Deductions (Standard or Itemized). Back to top
Disclaimer: We are happy to share these ideas with you. Please know we do not practice law and we are not attorneys. We are happy to partner with you and your attorneys to help you accomplish your goals.