As we start a new year, the following are some tax considerations for your review:
Old North State Trust, LLC (ONST) periodically produces publications as a service to clients and friends. The information contained in these publications is intended to provide general information about issues related to trust, investment and estate related topics. Readers should be aware that the facts may vary depending upon individual circumstances. The information contained in these publications is intended solely for informational purposes, is proprietary to ONST and is not guaranteed to be accurate, complete or timely.
Susan Willett is the director of trust services and oversees all aspects of trust administration for Old North State Trust, LLC. Old North State Trust, a North Carolina chartered trust company, provides: asset management services; income, estate and trust tax consulting; retirement planning and administration; and trustee and estate services to both individuals and businesses. Old North State Trust professionals have many years of experience and for over a decade have assisted clients in identifying and reaching their financial goals. For more information, visit www.oldnorthstatetrust.com or call
- The charitable donation from IRAs to charities rule has been extended for 2016. If you are over 70 1/2, you can distribute up to $100,000 to qualified charities on a tax-free basis.
- There will be no increase in the Social Security wage base for 2016. It will remain at $118,500 and the tax rate will stay at 6.2 percent.
- The limitations on 401(k) contributions will not change this year. It remains $18,000, unless you were born before 1967, then you can pay in an extra $6,000. The limit for IRAs, including Roths is $5,500 with an extra $1,000 for those 50 years old and older. The deduction for IRAs also remains the same for married couples with adjusted gross incomes of $98,000 to $118,000 and singles with AGIs of $61,000 to $71,000.
- Remember that the annual gift tax exclusion can be used to reduce the size of your taxable estate. For 2016, the amount is $14,000 per person, but gifts can be split between spouses for a total of $28,000. Of course, if payments are made directly to an educational or medical institution, it bypasses the gift rule and you can still use your gift exemption amount!
- Use appreciated stock to make charitable gifts. This gets the appreciated asset out of your estate and allows you the joy of seeing your wealth used to benefit an organization close to your heart. You may also want to use the benefits of a charitable remainder trust. That way you get to enjoy the tax advantages of a deduction, income now or later, depending on the type of trust you establish, and the knowledge that you have benefited your favorite charity or charities. It’s a win, win, win situation!
- Be mindful of the 3.8 percent net investment income tax. This applies to singles with AGIs over $200,000 and married couples with AGIs of over $250,000. Use capital losses to your advantage to offset gains to reduce exposure to this tax.
- Use 529 plans to pay for qualified education expenses tax-free. This can include tuition, books, supplies and mandatory fees. Even room and board qualify, if the student is enrolled at least half-time.
- The mileage reimbursement rate is decreasing for 2016, from 57.5 cents to 54 cents for business mileage, 19 cents per mile driven for medical or moving purposes, and 14 cents per mile driven for charitable purposes.