- Keep in mind that the maximum annual 401(k) contribution for 2017 is $18,000. However, people age 50 and older can contribute an additional $6,000 in “catch-up contributions,” for a total of $24,000. Annual contributions to a traditional IRA or Roth IRA remain at $5,500 — or $6,500 for those age 50 and older. There are certain income phase-out levels for deductibility. IRA contributions for a given year can be made until April 15 of the following year. The SIMPLE plan annual contribution limit is $12,500 — with an extra $3,000 in catch-up contributions for people age 50 and older (if permitted by the plan).
- If you are approaching retirement, be sure to visit the Social Security website and use the online calculator to estimate your benefits. If you are a few years away from retirement, you can use the calculator to estimate benefits using various earnings scenarios. As you approach age 62, you have the option of taking reduced Social Security benefits with some stringent earned income limitations. At your full retirement age, you become eligible for your full benefits with no earned income restrictions. If you would like to continue working, you can delay your Social Security benefits until age 70. If you decide to delay your retirement, the benefit amount increases 8% per year between the ages of 66 and 70. The Social Security wage base for 2017 is $127,200 and is expected to rise to more than $130,000 in 2018. Before retiring, be sure to research all of your options.
- Before gifting money, make sure you understand the tax ramifications of doing so. The annual gift tax exclusion remains at $14,000. Any taxpayer can gift up to this amount to any individual. A taxpayer can gift this amount to all members of a family. For example, a taxpayer and spouse could each gift up to $14,000 to a child, the child’s spouse, and each of their grandchildren. This does not decrease a taxpayer’s lifetime gift exclusion and is not taxable to the person giving the gift or the person receiving the gift. However, gift tax returns are required when joint gifts of more than $14,000 are given to any one individual.
- As you plan your estate, keep in mind that your heirs may not be subject to federal estate taxes if your estate will be worth more than $5.45 million (or $10.9 million for a married couple). However, individual estates worth more than $4 million are taxable in Illinois.
Tax laws are complex. So, please contact us before initiating any transactions based on the above information. As always, planning is critical. We would be glad to schedule a meeting with you to discuss the opportunities and challenges presented by tax laws.