Chris Archambault 1/1/19 Chris Archambault 1/1/19

Breaking the Code: Three Documents Your 18-Year-Old Needs

By: Jeffrey Krueger, CPA, MSA, CFP®

As the New Year sets in, a number of young adults will be ending their winter break and getting ready for the new school semester to start. Many parents may view their sons’ and daughters’ college years as a gradual transition from dependent childhood to independent adulthood. However, there are some areas where college students are considered adults under the law and parents’ rights to information can be restricted.

In my college years, a friend of mine was in the middle of her sophomore year at one of the nearby colleges. She woke up with a severe chest pain and ended up being rushed to the hospital. Her roommate had notified the girl’s parents of the situation. Scared for their daughter, the parents called the hospital asking for details. The parents were rebuffed by the nurses under the Health Insurance Portability and Accountability Act (HIPAA) that protects the privacy of patients and their medical records. Even though the daughter was still under the parent’s health insurance, as soon as she turned 18, the parents were no longer allowed access to their daughter’s medical information without her permission. While my friend did not intend to keep her parents in the dark during her emergency, she was in too much pain to give authorization.

What could have been done?

There are various documents that can help alleviate a situation such as this:

HIPAA Authorization: This form allows a healthcare provider to disclose your health information to anyone you specify. Note that this document does not have to be all or nothing, and young adults can specify which information is disclosed. This document alone would have enabled my friend’s parents to get information from the hospital.

Healthcare Proxy/Medical Power of Attorney: This form appoints an “agent” to make medical decisions on your behalf in case you are incapacitated and cannot make decisions for yourself.

Durable Power of Attorney: While not specific to healthcare decisions, a durable general power of attorney appoints an “agent” the ability to act on your behalf in a broad range of matters. Whether you become incapacitated or are simply studying abroad for a semester, the agent would be able to sign a tax return, complete financial transactions, or sign legal documents. Note that the durable power of attorney can also be limited in scope.

While an attorney is not required to get these forms in order, their involvement can benefit in making sure you are using the right form, explaining it, and advocating on your behalf in case something goes wrong.

As for my friend, she is fully recovered and healthy with a new set of legal documents, should an emergency ever arise again.

To ensure compliance with the requirements imposed on us by IRS Circular 230, we inform you that any tax advice contained in this communication (including any attachments) is not intended to and cannot be used for the purpose of: (i) avoiding tax-related penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any tax-related matter(s) addressed herein.

Chris Archambault 12/1/18 Chris Archambault 12/1/18

Breaking the Code: Charitable Contributions

By: Christopher Archambault, MBA, CFP®

As the year-end approaches, many clients revisit charitable contributions and giving for the year. With the changes to the tax code that are in effect for 2018, it may change how many taxpayers approach giving from a tax planning standpoint.

With the increased standard deduction ($12,000 single; $24,000 married filing jointly), charitable contributions may not have a tax benefit for as many taxpayers as a result of the limitations on certain itemized deductions (primarily state & local taxes paid). Generally speaking, the following deductions are the most common in determining whether or not a taxpayer will itemize: state & local taxes paid (capped at $10,000); qualified mortgage interest; charitable contributions; and medical expenses (above a certain “floor” based on income for that tax year).

There are a number of strategies to ensure that your charitable deductions still have some tax benefit:

“Bunching” Charitable Donations:
Taxpayers who are on the cusp of itemizing deductions may consider making a couple years’ worth of charitable deductions in one year to put them over the itemized threshold and in subsequent year(s) elect to take the standard deduction.

Use of Donor Advised Funds:
In combination with the “bunching strategy”, taxpayers may utilize a donor advised fund to efficiently facilitate charitable giving. A donor advised fund (DAF) is a general charitable account that you fund with either cash or stock (and is a qualified charitable organization itself). The tax deduction occurs when you fund the DAF; after funding, the donor is able to instruct the custodian to disperse the funds to specific public charities which they would like to support. Typically, these disbursements can occur over a number of years. One of the greatest advantages to a DAF is funding with appreciated stock. The IRS allows a taxpayer to donate appreciated stock to a DAF without realizing the capital gain and also benefiting from the full tax deduction based on the fair market value of the stock. For the appreciated security to qualify for the full fair market value, it must be held by the taxpayer for more than one year.

Qualified Charitable Distribution (IRA):
If you are over 70 ½ years old and have an IRA account, you can elect to make a distribution from your IRA directly to charity (up to $100,000 per year). This has multiple benefits: it counts toward your current year’s Required Minimum Distribution (RMD) and is also not included in your taxable income. The exclusion from taxable income is especially beneficial to those who may not be itemizing deductions and otherwise would have no tax benefit for charitable contributions. In addition, this method also reduces adjusted gross income, which may be beneficial in the deductibility of medical expenses, taxability of social security, and net investment income tax thresholds. Depending on the state, some allow for this exclusion as well, which is an added benefit.

Chris Archambault 12/1/18 Chris Archambault 12/1/18

Santa is coming to town!

The Krueger kids (Emma & James) met Santa over the weekend - with neither seeming too thrilled about it! Emma asked Santa for a kitchen toy set, while James is hoping for some toy cars. Santa may gift them a 529 college savings plan too, if they’re on the nice list!

Chris Archambault 11/1/18 Chris Archambault 11/1/18

Our Team is Growing!

We've added a new member to the Seaport Family - Tony & Ashley Khalife welcomed Joelle (JoJo) Marie Khalife on July 14, 2018 at 2:23 P.M. She came in at a healthy 6 lbs, 3 oz and 19 3/4 inches.

Chris Archambault 11/1/18 Chris Archambault 11/1/18

Breaking the Code: Section 199A

By: Antony T. Khalife, CPA, MST, CFP®

On August 8, 2018, the IRS issued proposed regulations under the new IRC Section 199A - more commonly referred to as the 20 percent pass-through deduction. Of the 184-page document, we wanted to highlight some of the major points.

Who does this deduction apply to?
Code. Sec. 199A provides up to a 20% deduction on net business income from Self-Employment, Rental Real Estate, Trusts/Estates, Partnerships, and S-Corporations. C-Corporations are not entitled to this new deduction. For example, you are self-employed and generate $100,000 of net qualified business income (after expenses) during calendar year 2018. You would be entitled to a Sec. 199A deduction of approximately 20%, or $20,000, subject to certain limitations.

What’s the catch?
The deduction is subject to some limitations based upon taxable income and also limited for certain industries and professionals, referred to as “Specified Service Trade or Business” (SSTB).

For single taxpayers, you may not benefit from the full deduction with taxable income above $157,500; for taxpayers filing a joint return, the taxable income threshold is $315,000. If you are not a SSTB but exceed the taxable income thresholds, there are a number of steps and factors involved to calculate your specific pass-through deduction. If you exceed these taxable income thresholds and are one of the SSTBs, then you will not be eligible to claim this deduction.

What is a Specified Service Trade or Business (SSTB)?
The following services and fields have been specifically identified for purposes of this Code Section:

accounting;
actuarial science;
athletics;
brokerage services;
consulting;
dealing in securities, partnership interests, or commodities; or
financial services;
health;
investing and investment management;
law;
performing arts;
trading;
any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners (for example, endorsing products or services; licensing or receiving income for an individual’s image or likeness; receiving appearance fees or income).

Taxpayers may rely on the “proposed” regulations pending the issuance of the final regulations. IRC Section 199A is one of the most significant provisions of The Tax Cuts and Jobs Act of 2017 (TCJA), which was signed into law on December 22, 2017. Though the deduction is not available for tax year 2017, it provides noteworthy planning opportunities for 2018 and beyond.