In 2018, various retirement plan contribution limits have changed. Here are the new limits for amounts and income levels for the following: Traditional IRAs: The maximum contribution for 2018 stays at $5,500.00 if you are under age 50. The catch-up contribution for those who are 50 or older also stays at $1,000.00. If you are in a qualified plan, the maximum income you can make if single and still make a full traditional IRA contribution starts at $63,000.00 Adjusted Gross Income (AGI) and phases out the contribution if you make over $73,000.00. If you are married filing jointly, the phaseout starts at AGI of $101,000.00 and phases out at $121,000.00. If you file married separately, the contribution starts phasing out immediately and at $10,000.00 AGI the contribution is phased out entirely (Boo!) Roth IRAs: The maximum contribution for 2018 stays at $5,500.00 if you are under age 50. The catch-up contribution for those who are 50 or older also stays at $1,000.00. You have an income limitation to contribute to a Roth IRA, whether or not you are in a qualified plan at work. The maximum income you can make if single and still make a full Roth IRA contribution starts at [...]
Tax Musings of a Burbank CPA: Tax Reform Allows Bigger, Faster Business Car Deductions
(Copyright 2018, Bradford Tax Institute – thanks for the article on new automobile deductions in 2018.) Finally, lawmakers did the right thing by increasing the luxury auto depreciation limits on business cars. The old luxury limits were unrealistic, punitive, unfair, and discriminatory against any car that cost more than $15,800. The new limits don’t create parity in all respects, but they are a big improvement. If you bought a car in 2017 and paid more than $15,800, you were driving a luxury car that lawmakers punished you for by putting a lid on your depreciation. For example, say in 2017 you bought a $40,000 car and drove it 100 percent for business. Your maximum depreciation deductions for the first five years would total only $15,060. To fully depreciate this car under the old rules would have taken 19 years. It was ridiculous to take 19 years to depreciate that $40,000 car. And now, finally, lawmakers have fixed a big part of what the tax code calls luxury automobile limits. Under the new law, this $40,000 vehicle is fully depreciated in six years. Think about that. Old law: 19 years. New law: six years. Essentially, the new law sets the so-called [...]
Tax Musings of a Burbank CPA: Do You Really Like Loaning the Government Money?
This is a reprint of a blog I wrote over three years ago, but it still makes sense today. So, you have filed your income tax return with the IRS and your state, and are now waiting for the refund the government(s) owe you. You are thinking of all the things you can do with that money when you get it. Here are some things to think about as you wait: 1. These refunds are in effect interest-free loans you have made the government(s) over the year through excess withholding. They are just paying you back the money you earned over the previous year that won’t even earn interest unless you file an extension and wait even longer for your money. This is even worse than that bet that your buddy owes you because at least you know where to find him if he doesn’t pay you right away. With our government you call on the phone and wait an hour for them to tell you that the refund is being processed or go on their website and find out there is a problem and you have to call anyway! 2. You could be earning some income on this refund [...]