Tax

Tax Treatment of Virtual Currency Transactions

If you’ve invested in Bitcoin and decide to sell you need to consider the impact of virtual currency transactions on your taxes. Here’s what you should know:

Background

Prior to 2014, there was no IRS guidance and many people did not understand that selling virtual currency was a reportable transaction. They may have found themselves with a hefty tax bill – money they were hard-pressed to come up with at tax time. Others were unaware that they needed to report their transactions at all or failed to do so because it seemed too complicated.

In 2018, the IRS announced a Virtual Currency Compliance campaign to address tax noncompliance related to the use of virtual currency through outreach and examinations of taxpayers, and in August 2019, began sending letters to taxpayers with virtual currency transactions that potentially failed to:

• report income and pay the resulting tax from virtual currency transactions; or
• did not report their transactions properly.

More than 10,000 taxpayers received these letters, whose names were obtained through various ongoing IRS compliance efforts. There were three variations of the letter: Letter 6173, Letter 6174 or Letter 6174-A. All three versions strive to help taxpayers understand their tax and filing obligations and how to correct past errors.

In October 2019, the IRS expanded their guidance to include two additional pieces of information that help taxpayers understand their reporting and tax obligations with regard to virtual currency transactions. This expanded guidance includes:

• Answers to common questions by taxpayers regarding the tax treatment of a cryptocurrency hard fork
• FAQs that address virtual currency transactions for those who hold virtual currency as a capital asset

Definitions

Virtual Currency – a digital representation of value, other than a representation of the U.S. dollar or a foreign currency (“real currency”), that functions as a unit of account, a store of value, and a medium of exchange.

Cryptocurrency – a type of virtual currency that uses cryptography to secure transactions that are digitally recorded on a distributed ledger, such as a blockchain.

Hard Fork – when a single cryptocurrency splits in two. This may result in the creation of a new cryptocurrency on a new distributed ledger such as blockchain in addition to the legacy cryptocurrency on the legacy distributed ledger (e.g., blockchain).

Virtual Currency Taxed as Property

Virtual currency, as generally defined, functions in the same manner as a country’s traditional currency and is treated as property for U.S. federal tax purposes. The same general tax principles that apply to property transactions also apply to transactions using virtual currency such as:

• A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property.
• Payments using virtual currency made to independent contractors and other service providers are taxable, and self-employment tax rules generally apply. Normally, payers must issue Form 1099-MISC.
• Wages paid to employees using virtual currency are taxable to the employee, must be reported by an employer on a Form W-2 and are subject to federal income tax withholding and payroll taxes.
• Certain third parties who settle payments made in virtual currency on behalf of merchants that accept virtual currency from their customers are required to report payments to those merchants on Form 1099-K, Payment Card and Third-Party Network Transactions.
• The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.

What to Do if You Failed to Report Transactions

The good news is that if you failed to report income from virtual currency transactions on your income tax return, it’s not too late. Even though the due date for filing your income tax return has passed, taxpayers can still report income by filing Form 1040X, Amended U.S. Individual Income Tax Return within 3 years after the date you filed your original return or within 2 years after the date you paid the tax, whichever is later.

In October 2019, the IRS issued a draft version of Schedule 1 (Form 1040) that includes a question at the top regarding whether the taxpayer has received, sold, sent, or exchanged virtual currency.

Noncompliance

Taxpayers should also be aware that forgetting, not knowing, or generally pleading ignorance about reporting income from these types of transactions on your tax return is not viewed favorably by the IRS. Taxpayers who do not properly report the income tax consequences of virtual currency transactions can be audited for those transactions and, when appropriate, can be liable for penalties and interest.

Taxpayers who did not report transactions involving virtual currency or who reported them incorrectly may, when appropriate, be liable for tax, penalties and interest. In more extreme situations, taxpayers could be subject to criminal prosecution for failing to properly report the income tax consequences of virtual currency transactions. Criminal charges could include tax evasion and filing a false tax return. Anyone convicted of tax evasion is subject to a prison term of up to five years and a fine of up to $250,000. Anyone convicted of filing a false return is subject to a prison term of up to three years and a fine of up to $250,000.

• By Leon Clinton
• November 9, 2019

Year-End Tax Planning Strategies for Businesses

There are a number of end of year tax planning strategies that businesses can use to reduce their tax burden for 2019. Here are a few of them:

Deferring Income

Businesses using the cash method of accounting can defer income into 2020 by delaying end-of-year invoices, so payment is not received until 2020. Businesses using the accrual method can defer income by postponing delivery of goods or services until January 2020.

Purchase New Business Equipment

Section 179 Expensing. Businesses should take advantage of Section 179 expensing this year for a couple of reasons. First, is that in 2019 businesses can elect to expense (deduct immediately) the entire cost of most new equipment up to a maximum of $1.02 million for the first $2.55 million of property placed in service by December 31, 2019. Keep in mind that the Section 179 deduction cannot exceed net taxable business income. The deduction is phased out dollar for dollar on amounts exceeding the $2.55 million threshold and eliminated above amounts exceeding $3.57 million.

The TCJA removed computer or peripheral equipment from the definition of listed property. This change applies to property placed in service after December 31, 2017.

Tax reform legislation also expanded the definition of Section 179 property to allow a taxpayer to elect to include certain improvements made to nonresidential real property after the date when the property was first placed in service (see below). These changes apply to property placed in service in taxable years beginning after December 31, 2017.

1. Qualified improvement property, which means any improvement to a building’s interior. However, improvements do not qualify if they are attributable to:

• the enlargement of the building,
• any elevator or escalator or
• the internal structural framework of the building.

2. Roofs, HVAC, fire protection systems, alarm systems and security systems.

Bonus Depreciation. Businesses are allowed to immediately deduct 100% of the cost of eligible property placed in service after September 27, 2017, and before January 1, 2023, after which it will be phased downward over a four-year period: 80% in 2023, 60% in 2024, 40% in 2025, and 20% in 2026.

Qualified Property

Qualified property is defined as property that you placed in service during the tax year and used predominantly (more than 50 percent) in your trade or business. Property that is placed in service and then disposed of in that same tax year does not qualify, nor does property converted to personal use in the same tax year it is acquired.

Many states have not matched these amounts and, therefore, state tax may not allow for the maximum federal deduction. In this case, two sets of depreciation records will be needed to track the federal and state tax impact.

Please contact the office if you have any questions regarding qualified property.

If you plan to purchase business equipment this year, consider the timing. You might be able to increase your tax benefit if you buy equipment at the right time. Here’s a simplified explanation:

Conventions. The tax rules for depreciation include “conventions” or rules for figuring out how many months of depreciation you can claim. There are three types of conventions. To select the correct convention, you must know the type of property and when you placed the property in service.

1. The half-year convention: This convention applies to all property except residential rental property, nonresidential real property, and railroad gradings and tunnel bores (see mid-month convention below) unless the mid-quarter convention applies. All property that you begin using during the year is treated as “placed in service” (or “disposed of”) at the midpoint of the year. This means that no matter when you begin using (or dispose of) the property, you treat it as if you began using it in the middle of the year.
2. The mid-quarter convention: The mid-quarter convention must be used if the cost of equipment placed in service during the last three months of the tax year is more than 40 percent of the total cost of all property placed in service for the entire year. If the mid-quarter convention applies, the half-year rule does not apply, and you treat all equipment placed in service during the year as if it were placed in service at the midpoint of the quarter in which you began using it.
3. The mid-month convention: This convention applies only to residential rental property, nonresidential real property, and railroad gradings and tunnel bores. It treats all property placed in service (or disposed of) during any month as placed in service (or disposed of) on the midpoint of that month.

If you’re planning on buying equipment for your business, call the office and speak with a tax professional who can help you figure out the best time to buy that equipment and take full advantage of these tax rules.

Other Year-End Moves to Take Advantage Of

Small Business Health Care Tax Credit. Small business employers with 25 or fewer full-time-equivalent employees with average annual wages of $50,000 indexed for inflation (e.g., $53,200 in 2018) may qualify for a tax credit to help pay for employees’ health insurance. The credit is 50 percent (35 percent for non-profits).

Business Energy Investment Tax Credits. Business energy investment tax credits are still available for eligible systems placed in service on or before December 31, 2022, and businesses that want to take advantage of these tax credits can still do so. Business energy credits include geothermal electric, large wind (expires at the end of 2020), and solar energy systems used to generate electricity, to heat, cool, or to provide hot water for use in a structure, or to provide solar process heat. Hybrid solar lighting systems, which use solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight, are eligible; however, passive solar and solar pool-heating systems excluded are excluded. Utilities are allowed to use the credits as well.

Repair Regulations. Where possible, end of year repairs and expenses should be deducted immediately, rather than capitalized and depreciated. Small businesses lacking applicable financial statements (AFS) are able to take advantage of de minimis safe harbor by electing to deduct smaller purchases ($2,500 or less per purchase or per invoice). Businesses with applicable financial statements are able to deduct $5,000. Small businesses with gross receipts of $10 million or less can also take advantage of safe harbor for repairs, maintenance, and improvements to eligible buildings. Please call if you would like more information on this topic.

Qualified Business Income Deduction. Under the Tax Cuts and Jobs Act non-corporations) may be entitled to a deduction of up to 20 percent of their qualified business income (QBI) from a qualified trade or business for tax years 2018 through 2025. To take advantage of the deduction, taxable income must be under $160,700 ($321,400 for joint returns).

The QBI is complex, and tax planning strategies can directly affect the amount of deduction, i.e., increase or reduce the dollar amount. As such it is especially important to speak with a tax professional before year’s end to determine the best way to maximize the deduction.

Depreciation Limitations on Luxury, Passenger Automobiles and Heavy Vehicles. The new law changed depreciation limits for luxury passenger vehicles placed in service after December 31, 2017. If the taxpayer doesn’t claim bonus depreciation, the maximum allowable depreciation deduction is $10,000 for the first year.

For passenger autos eligible for the additional bonus first-year depreciation, the maximum first-year depreciation allowance remains at $8,000. It applies to new and used (“new to you”) vehicles acquired and placed in service after September 27, 2017, and remains in effect for tax years through December 31, 2022. When combined with the increased depreciation allowance above, the deduction amounts to as much as $18,000.

Under tax reform, heavy vehicles including pickup trucks, vans, and SUVs whose gross vehicle weight rating (GVWR) is more than 6,000 pounds are treated as transportation equipment instead of passenger vehicles. As such, heavy vehicles (new or used) placed into service after September 27, 2017, and before January 1, 2023, qualify for a 100 percent first-year bonus depreciation deduction as well.

Deductions are based on a percentage of business use; i.e., a business owner whose business use of the vehicle is 100 percent can take a larger deduction than one whose business use of a car is only 50 percent.

Retirement Plans. Self-employed individuals who have not yet done so should set up self-employed retirement plans before the end of 2019. Call today if you need help setting up a retirement plan.

Dividend Planning. Reduce accumulated corporate profits and earnings by issuing corporate dividends to shareholders.

Year-end tax planning could make a difference in your tax bill.

If you’d like more information, please call to schedule a consultation to discuss your specific tax and financial needs and develop a plan that works for your business.

• By Leon Clinton
• November 6, 2019

Year-End Tax Planning for Individuals

With the end of the year fast approaching, now is the time to take a closer look at tax planning strategies you can use to minimize your tax liability for 2019.

General Tax planning Strategies

General tax planning strategies for individuals include postponing income and accelerating deductions, and careful consideration of timing-related tax planning strategies with regard to investments, charitable gifts, and retirement planning.

For example, taxpayers might consider using one or more of the following:

Investments. Selling any investments on which you have a gain (or loss) this year. For more on this, see Investment Gains and Losses, below.

Year-end bonus. If you anticipate an increase in taxable income this year, in 2019, and are expecting a bonus at year-end, try to get it before December 31. Keep in mind, however, that contractual bonuses are different, in that they are typically not paid out until the first quarter of the following year. Therefore, any taxes owed on a contractual bonus would not be due until you file your 2020 tax return in 2021. Don’t hesitate to call the office if you have any questions about this.

Medical expenses. Medical expenses are deductible only to the extent they exceed a certain percentage of adjusted gross income (AGI), therefore, you might pay medical bills in whichever year they would do you the most tax good. To deduct medical and dental expenses in 2019, these amounts must exceed 10 percent of AGI. By bunching medical expenses into one year, rather than spreading them out over two years, you have a better chance of exceeding the thresholds, thereby maximizing the deduction. Taxpayers should be reminded that the 7.5 percent threshold was only in effect for tax years 2017 and 2018; in 2019, it reverted to 10 percent AGI.

Deductible expenses such as medical expenses and charitable contributions can be prepaid this year using a credit card. This strategy works because deductions may be taken based on when the expense was charged on the credit card, not when the bill was paid. Likewise, with checks. For example, if you charge a medical expense in December but pay the bill in January, assuming it’s an eligible medical expense, it can be taken as a deduction on your 2019 tax return.

Stock options. If your company grants stock options, then you may want to exercise the option or sell stock acquired by exercising an option this year. Use this strategy if you think your tax bracket will be higher in 2020. Generally, exercising this option is a taxable event; sale of the stock is almost always a taxable event.

Invoices. If you’re self-employed, send invoices or bills to clients or customers this year to be paid in full by the end of December; however, make sure you keep an eye on estimated tax requirements.

Withholding. If you know you have a set amount of income coming in this year that is not covered by withholding taxes, there is still time to increase your withholding before year-end and avoid or reduce any estimated tax penalty that might otherwise be due. On the other hand, the penalty could be avoided by covering the extra tax in your final estimated tax payment and computing the penalty using the annualized income method.

Accelerating Income and Deductions

Accelerating income and deductions are two strategies that are commonly used to help taxpayers minimize their tax liability. Most taxpayers anticipate increased earnings from year to year, whether it’s from a job or investments, so this strategy works well. On the flip side, however, if you anticipate a lower income next year or know you will have significant medical bills, you might want to consider deferring income and expenses to the following year.

In cases where tax benefits are phased out over a certain adjusted gross income (AGI) amount, a strategy of accelerating income and deductions might allow you to claim larger deductions, credits, and other tax breaks for 2019, depending on your situation. Roth IRA contributions, conversions of regular IRAs to Roth IRAs, child tax credits, higher education tax credits, and deductions for student loan interest are examples of these types of tax benefits.

Accelerating income into 2019 is also a good idea if you anticipate being in a higher tax bracket next year. This is especially true for taxpayers whose earnings are close to threshold amounts ($200,000 for single filers and $250,000 for married filing jointly) that make them liable for additional Medicare Tax or Net Investment Income Tax (more about this topic below).

Taxpayers close to threshold amounts for the Net Investment Income Tax (3.8 percent of net investment income) should pay close attention to “one-time” income spikes such as those associated with Roth conversions, sale of a home or any other large asset that may be subject to tax.

Examples of accelerating income include:

• Paying an estimated state tax installment in December instead of at the January due date. However, make sure the payment is based on a reasonable estimate of your state tax.
• Paying your entire property tax bill, including installments due in 2020, by year-end. This does not apply to mortgage escrow accounts.
• Paying 2020 tuition in 2019 to take full advantage of the American Opportunity Tax Credit, an above-the-line tax credit worth up to $2,500 per student that helps cover the cost of tuition, fees and course materials paid during the taxable year. Forty percent of the credit (up to $1,000) is refundable, which means you can get it even if you owe no tax.

Additional Medicare Tax

Taxpayers whose income exceeds certain threshold amounts ($200,000 single filers and $250,000 married filing jointly) are liable for an additional Medicare tax of 0.9 percent on their tax returns but may request that their employers withhold additional income tax from their pay to be applied against their tax liability when filing their 2019 tax return next April.

As such, high net worth individuals should consider contributing to Roth IRAs and 401(k) because distributions are not subject to the Medicare Tax. In addition, if you’re a taxpayer who is close to the threshold for the Medicare Tax, it might make sense to switch Roth retirement contributions to a traditional IRA plan, thereby avoiding the 3.8 percent Net Investment Income Tax (NIIT) as well (more about the NIIT below).

Alternate Minimum Tax

The alternative minimum tax (AMT) applies to high-income taxpayers that take advantage of deductions and credits to reduce their taxable income. The AMT ensures that those taxpayers pay at least a minimum amount of tax and was made permanent under the American Taxpayer Relief Act (ATRA) of 2012 and exemption amounts increased significantly under the Tax Cuts and Jobs Act of 2017 (TCJA). As such, the AMT is not expected to affect as many taxpayers. Furthermore, the phaseout threshold increases to $510,300 ($1,020,600 for married filing jointly). Both the exemption and threshold amounts are indexed for inflation.

AMT exemption amounts for 2019 are as follows:

• $71,700 for single and head of household filers,
• $111,700 for married people filing jointly and for qualifying widows or widowers,
• $55,850 for married people filing separately.

Charitable Contributions

Property, as well as money, can be donated to a charity. You can generally take a deduction for the fair market value of the property; however, for certain property, the deduction is limited to your cost basis. While you can also donate your services to charity, you may not deduct the value of these services. You may also be able to deduct charity-related travel expenses and some out-of-pocket expenses, however.

Keep in mind that a written record of your charitable contributions – including travel expenses such as mileage – is required in order to qualify for a deduction. A donor may not claim a deduction for any contribution of cash, a check or other monetary gift unless the donor maintains a record of the contribution in the form of either a bank record (such as a canceled check) or written communication from the charity (such as a receipt or a letter) showing the name of the charity, the date of the contribution, and the amount of the contribution.

Contributions of appreciated property (i.e. stock) provide an additional benefit because you avoid paying capital gains on any profit.

Taxpayers age 70 or older can reduce income tax owed on required minimum distributions (RMDs) from IRA accounts by donating them to a charitable organization(s) instead.

Investment Gains and Losses

Investment decisions are often more about managing capital gains than about minimizing taxes. For example, taxpayers below threshold amounts in 2019 might want to take gains; whereas taxpayers above threshold amounts might want to take losses.

Fluctuations in the stock market are commonplace; don’t assume that a down market means investment losses as your cost basis may be low if you’ve held the stock for a long time.

Minimize taxes on investments by judicious matching of gains and losses. Where appropriate, try to avoid short-term capital gains, which are taxed as ordinary income (i.e., the rate is the same as your tax bracket).

In 2019 tax rates on capital gains and dividends remain the same as 2018 rates (0%, 15%, and a top rate of 20%); however, threshold amounts have been adjusted for inflation as follows:

• 0% – Maximum capital gains tax rate for taxpayers with income up to $39,375 for single filers, $78,750 for married filing jointly.
• 15% – Capital gains tax rate for taxpayers with income from $39,375 to $434,550 for single filers, $78,750 to $488,850 for married filing jointly.
• 20% – Capital gains tax rate for taxpayers with income above $434,550 for single filers, $488,850 for married filing jointly.

Where feasible, reduce all capital gains and generate short-term capital losses up to $3,000. As a general rule, if you have a large capital gain this year, consider selling an investment on which you have an accumulated loss. Capital losses up to the amount of your capital gains plus $3,000 per year ($1,500 if married filing separately) can be claimed as a deduction against income.

Wash Sale Rule. After selling a securities investment to generate a capital loss, you can repurchase it after 30 days. This is known as the “Wash Rule Sale.” If you buy it back within 30 days, the loss will be disallowed. Or you can immediately repurchase a similar (but not the same) investment, e.g., and ETF or another mutual fund with the same objectives as the one you sold.

If you have losses, you might consider selling securities at a gain and then immediately repurchasing them, since the 30-day rule does not apply to gains. That way, your gain will be tax-free; your original investment is restored, and you have a higher cost basis for your new investment (i.e., any future gain will be lower).

Net Investment Income Tax (NIIT)

The Net Investment Income Tax, which went into effect in 2013, is a 3.8 percent tax that is applied to investment income such as long-term capital gains for earners above a certain threshold amount ($200,000 for single filers and $250,000 for married taxpayers filing jointly). Short-term capital gains are subject to ordinary income tax rates as well as the 3.8 percent NIIT. This information is something to think about as you plan your long-term investments. Business income is not considered subject to the NIIT provided the individual business owner materially participates in the business.

Mutual Fund Investments

Before investing in a mutual fund, ask whether a dividend is paid at the end of the year or whether a dividend will be paid early in the following year but be deemed paid this year. The year-end dividend could make a substantial difference in the tax you pay.

Action: You invest $20,000 in a mutual fund in 2019. You opt for automatic reinvestment of dividends, and in late December of 2019, the fund pays a $1,000 dividend on the shares you bought. The $1,000 is automatically reinvested.

Result: You must pay tax on the $1,000 dividend. You will have to take funds from another source to pay that tax because of the automatic reinvestment feature. The mutual fund’s long-term capital gains pass through to you as capital gains dividends taxed at long-term rates, however long or short your holding period.

The mutual fund’s distributions to you of dividends it receives generally qualify for the same tax relief as long-term capital gains. If the mutual fund passes through its short-term capital gains, these will be reported to you as “ordinary dividends” that don’t qualify for relief.

Depending on your financial circumstances, it may or may not be a good idea to buy shares right before the fund goes ex-dividend. For instance, the distribution could be relatively small, with only minor tax consequences. Or the market could be moving up, with share prices expected to be higher after the ex-dividend date. To find out a fund’s ex-dividend date, call the fund directly.

Please call if you’d like more information on how dividends paid out by mutual funds affect your taxes this year and next.

Year-End Giving To Reduce Your Potential Estate Tax

The federal gift and estate tax exemption is currently set at $11.40 million but is projected to increase to $11.58 million in 2020. The maximum estate tax rate is set at 40 percent.

Gift Tax. Sound estate planning often begins with lifetime gifts to family members. In other words, gifts that reduce the donor’s assets subject to future estate tax. Such gifts are often made at year-end, during the holiday season, in ways that qualify for exemption from federal gift tax.

Gifts to a donee are exempt from the gift tax for amounts up to $15,000 a year per donee in 2019 and are expected to remain the same in 2020.

An unused annual exemption doesn’t carry over to later years. To make use of the exemption for 2019, you must make your gift by December 31.

Husband-wife joint gifts to any third person are exempt from gift tax for amounts up to $30,000 ($15,000 each). Though what’s given may come from either you or your spouse or both of you, both of you must consent to such “split gifts.”

Gifts of “future interests,” assets that the donee can only enjoy at some future time such as certain gifts in trust, generally don’t qualify for exemption; however, gifts for the benefit of a minor child can be made to qualify.

If you’re considering adopting a plan of lifetime giving to reduce future estate tax, don’t hesitate to call the office for assistance.

Cash or publicly traded securities raise the fewest problems. You may choose to give property you expect to increase substantially in value later. Shifting future appreciation to your heirs keeps that value out of your estate. But this can trigger IRS questions about the gift’s true value when given.

You may choose to give property that has already appreciated. The idea here is that the donee, not you, will realize and pay income tax on future earnings and built-in gain on the sale.

Gift tax returns for 2019 are due the same date as your income tax return (April 15, 2020). Returns are required for gifts over $15,000 (including husband-wife split gifts totaling more than $15,000) and gifts of future interests. Though you are not required to file if your gifts do not exceed $15,000, you might consider filing anyway as a tactical move to block a future IRS challenge about gifts not “adequately disclosed.” Please call the office if you’re considering making a gift of property whose value isn’t unquestionably less than $15,000.

New Tax Rate Structure for the Kiddie Tax

The kiddie tax rules changed under the TCJA. For tax years 2018 through 2025, unearned income exceeding $2,200 is taxed at the rates paid by trusts and estates. For ordinary income (amounts over $12,750), the maximum rate is 37 percent. For long-term capital gains and qualified dividends, the maximum rate is 20 percent.

Other Year-End Moves

Maximize Retirement Plan Contributions. If you own an incorporated or unincorporated business, consider setting up a retirement plan if you don’t already have one. It doesn’t actually need to be funded until you pay your taxes, but allowable contributions will be deductible on this year’s return.

If you are an employee and your employer has a 401(k), contribute the maximum amount ($19,000 for 2019), plus an additional catch-up contribution of $6,000 if age 50 or over, assuming the plan allows this, and income restrictions don’t apply.

If you are employed or self-employed with no retirement plan, you can make a deductible contribution of up to $6,000 a year to a traditional IRA (deduction is sometimes allowed even if you have a plan). Further, there is also an additional catch-up contribution of $1,000 if age 50 or over.

Health Savings Accounts. Consider setting up a health savings account (HSA). You can deduct contributions to the account, investment earnings are tax-deferred until withdrawn, and amounts you withdraw are tax-free when used to pay medical bills.

In effect, medical expenses paid from the account are deductible from the first dollar (unlike the usual rule limiting such deductions to the amount of excess over 10 percent of AGI). For amounts withdrawn at age 65 or later that are not used for medical bills, the HSA functions much like an IRA.

To be eligible, you must have a high-deductible health plan (HDHP), and only such insurance, subject to numerous exceptions, and must not be enrolled in Medicare. For 2019, to qualify for the HSA, your minimum deductible in your HDHP must be at least $1,350 for single coverage or $2,700 for a family.

529 Education Plans. Maximize contributions to 529 plans, which starting in 2019, can be used for elementary and secondary school tuition as well as college or vocational school.

Don’t Miss Out.

Many of the strategies discussed here must be implemented before the end of the year. Please contact the office for assistance with implementing these and other year-end planning strategies that might be suitable for your particular situation.

• By Leon Clinton
• November 3, 2019