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Are You Retired? Have You Seen These Six Tax Changes that could Affect You?

April 22, 2019 By Jeremy Jones, CFA

By fizkes @ Shutterstock.com

At The Wall Street Journal, Anne Tergesen explains six changes to the tax code in the 2017 tax reform law that could especially affect retirees. She writes (much abridged):

1. Higher standard deduction:

Many retirees, especially those who have paid off mortgages, take the standard deduction. For them, one positive change is the near-doubling of this deduction, or the amount taxpayers can subtract from their adjusted gross income if they don’t itemize deductible expenses including state taxes and charitable donations.

2. A tax break for charitable contributions:

Retirees who take the standard deduction can still claim a tax benefit for donating to charity.

3. More options for 529 donors:

The new law allows taxpayers to withdraw up to $10,000 a year from a tax-advantaged 529 college savings account to pay a child’s private-school tuition bills from kindergarten to 12th grade.

4. Higher gift-tax exemption:

The tax overhaul includes a sweet deal for ultrawealthy families.

For the next seven years, the gift-tax exemption for individuals is an inflation-adjusted $11.4 million, up from $11.18 million in 2018 and $5.49 million in 2017. For couples, it is $22.8 million, up from $22.36 million in 2018 and $10.98 million in 2017.

5. Less generous medical-expense deduction:

For 2018, taxpayers can deduct eligible medical expenses that exceed 7.5% of adjusted gross income. That means for someone with a $100,000 income and $50,000 of medical or nursing-home bills, $7,500 is not deductible.

6. Goodbye to Roth re-characterizations:

The legislation ended the ability of savers to “undo” Roth IRA conversions, which had been used to nullify certain IRA-related tax bills.

Read more here.

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Jeremy Jones, CFA
Jeremy Jones, CFA, CFP® is the Director of Research at Young Research & Publishing Inc., and the Chief Investment Officer at Richard C. Young & Co., Ltd. Richard C. Young & Co., Ltd. was ranked #10 in CNBC's 2019 Financial Advisor Top 100. Jeremy is also a contributing editor of youngresearch.com.
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