With the passage of the American Taxpayer Relief Act of 2012, the provision for Qualified Charitable Contributions (QCD) from an IRA has been extended to the end of calendar year 2013. Great news, right? But what does that mean? Can you make a QCD for 2012? As you know, the QCD provision is limited to taxpayers who are over age 70½ and thus subject to Required Minimum Distributions (RMD). In addition, the QCD must normally be sent directly from your IRA custodian to the qualified charity – it can’t be taken in cash and then sent to the charity. If you qualify and you do the distribution correctly, you will not have to include the distribution on your tax return as income. You also would not count the charitable contribution as an itemized deduction. If you happened to send a distribution directly to a charity from your IRA during 2012, […]
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2013 MAGI Limits for IRAs – Married Filing Jointly or Qualifying Widow(er)
Note: for the purposes of IRA MAGI qualification, a person filing as Married Filing Separately, who did not live with his or her spouse during the tax year, is considered Single and will use the information on that page to determine eligibility. For a Traditional IRA (Filing Status Married Filing Jointly or Qualifying Widow(er)): If you are not covered by a retirement plan at your job and your spouse is not covered by a retirement plan, there is no MAGI limitation on your deductible contributions. If you are covered by a retirement plan at work, and your MAGI is $95,000 or less, there is also no limitation on your deductible contributions to a traditional IRA. If you are covered by a retirement plan at your job and your MAGI is more than $95,000 but less than $115,000, you are entitled to a partial deduction, reduced by 25% for every dollar […]
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2013 MAGI Limits – Single or Head of Household
Note: for the purposes of IRA MAGI qualification, a person filing as Married Filing Separately who did not live with his or her spouse during the tax year, is considered Single and will use the information on this page to determine eligibility. For a Traditional IRA (Filing Status Single or Head of Household): If you are not covered by a retirement plan at your job, there is no MAGI limitation on your deductible contributions. If you are covered by a retirement plan at work, if your MAGI is $59,000 or less, there is also no limitation on your deductible contributions to a traditional IRA. If you are covered by a retirement plan at your job and your MAGI is more than $59,000 but less than $69,000, you are entitled to a partial deduction, reduced by 50% for every dollar over the lower limit (or 60% if over age 50), and […]
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2013 IRA MAGI Limits – Married Filing Separately
Note: for the purposes of IRA MAGI qualification, a person filing as Married Filing Separately, who did not live with his or her spouse during the tax year, is considered Single and will use the information on that page to determine eligibility. For a Traditional IRA (Filing Status Married Filing Separately): If you are not covered by a retirement plan at your job and your spouse is not covered by a retirement plan, there is no MAGI limitation on your deductible contributions. If you are covered by a retirement plan at your job and your MAGI is less than $10,000, you are entitled to a partial deduction, reduced by 50% for every dollar (or 60% if over age 50), and rounded up to the nearest $10. If the amount works out to less than $200, you are allowed to contribute at least $200. If you are covered by a retirement […]
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Review of 2012 Stats
Ed. Note: As in past years, I’m taking a break from my normal business of posting retirement, tax and other personal financial planning topics to report on the blog itself and the statistics we’ve seen in this, the 9th year of publication for this blog. I’ll be back to regular programming with the next entry. – jb Over the past year, this blog has seen continued growth as in years past. This year I released An IRA Owner’s Manual, and many of you have picked up copies, thank you! In addition, this year Sterling Raskie joined the staff here at Blankenship Financial, and he’s been adding content to the blog, giving you an additional perspective on all things financial. In November we launched the first "1% More" initiative, rallying 23 other bloggers to publish articles encouraging Americans to save at least 1% more in the coming year. This was a […]
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IRA Distributions Are Not Subject to the New 3.8% Surtax
As you may be well aware, beginning in 2013 there will be a brand spanking new tax added to unearned income if your Modified Adjusted Gross Income is greater than $200,000 for Singles, and $250,000 for Married Filing Jointly. Married folks filing separately are affected above a $125,000 threshold. This surtax is to help bolster the Medicare system, and it applies specifically to unearned income. What’s important to know is that IRA distributions (among other things) are not included as impacted by this new surtax. This means that when you make significant IRA distributions (beginning in 2013), such as to convert to a Roth IRA, this surtax will not be applied to your distribution. Other types of unearned income that are specifically exempted from this surtax includes tax-free interest and other payouts from retirement plans such as 401(k) plans, deferred compensation plans, and pension plans. Income that is subject to […]
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An Unexpected Result From Roth Conversion – Increased Medicare Premiums
Many folks took advantage of the one-time opportunity in 2010 to convert funds from traditional IRAs to Roth IRAs and subsequently spread the tax over the following two years, 2011 and 2012. This was a very good option for some folks who wanted to do the conversion and reduce future tax costs. However (and there’s always a however in life!), with the coming of 2013, many of these same folks are experiencing an unexpected result of the conversions: a significant increase in Medicare Part B premiums. Beginning after 2003, Medicare Part B premiums have been partly determined by income – primarily higher income. For 2013, the increased Part B premium begins for single folks with incomes above $85,000, married couples above $170,000. The income used to calculate the Part B premium is always based on the most recent tax return, which in this case would be the 2011 tax return. […]
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Are You Leaving Social Security Money on the Table? You Might Be, If You Don’t Understand and Use This One Rule
Note: with the passage of the Bipartisan Budget Bill of 2015 into law, File & Suspend and Restricted Application have been effectively eliminated for anyone born in 1954 or later. If born before 1954 there are some options still available, but these are limited as well. Please see the article The Death of File & Suspend and Restricted Application for more details. Many couples that have done some planning with regard to filing for Social Security retirement benefits have figured out how to coordinate between the higher wage earner’s benefit and the lower wage earner’s benefit. Often it makes the most sense to file for the lower wage earner’s benefit early, at or sometime near age 62, while delaying the higher wage earner’s benefit out to as late as age 70. This method allows for a maximization of those two benefits. If you’re really astute, you probably picked up on […]
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IRS Sets 2013 Standard Mileage Rates
For several different categories of deductions, there are standard rates set by the IRS for mileage. The deductions are for business-oriented mileage, both for your own business and for miles driven on behalf of an employer (if deductible), as well as for medical purposes, deductible moving costs, and for charitable activities. These rates are set on a “per mile” basis. The IRS calculates the applicable costs associated with driving these miles on an annual basis, which includes the cost of fuel, maintenance, insurance, taxes, and the purchase price of the vehicle (or rather, depreciation). This allows for a much more simple method of deducting these costs rather than adding up all of the costs of a vehicle and then allocating an appropriate portion to the deductible use. You can choose between using the mileage rate or adding up all of the costs for your vehicle use, but once you’ve started […]
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Holiday Spending
Now that the Holiday season is coming into full swing, I thought I spend a little bit of time talking about keeping your budget and money in control when it comes to the giving of gifts, the getting of gifts and some ideas to make your thought count without breaking the bank (or bending your credit card). The Holidays are a time of year where we can reflect on the people in our lives that we love, miss and want to give back to for all they have done for us throughout the years. It’s natural that we want to give as much as we can and often what we want to give may not equal what we can afford. In some cases, the number of people we want to give to exceeds our budget as well. This is where we can get into trouble. After the initial hype and […]
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Social Security Bend Points in 2013
When the Social Security Administration announced the Cost of Living Adjustment (COLA) for 2013, this also allowed for calculation of the bend points for 2013. Bend points are the portions of your average income (Average Indexed Monthly Earnings – AIME) in specific dollar amounts that are indexed each year, based upon an obscure table called the Average Wage Index (AWI) Series. They’re called bend points because they represent points on a graph of your AIME graphed by inclusion in calculating the PIA. If you’re interested in how Bend Points are used, you can see the article on Primary Insurance Amount, or PIA. Here, however, we’ll go over how Bend Points are calculated each year. To understand this calculation, you need to go back to 1979, the year of the Three Mile Island disaster, the introduction of the compact disc and the Iranian hostage crisis. According to the AWI Series, in […]
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Retirement Plan Contribution Limits for 2013
The IRS recently published the new contribution limits for various retirement plans for 2013. These limits are indexed to inflation, and as such sometimes they do not increase much year over year, and sometimes they don’t increase at all. This year we saw across-the-board increases for most all contribution amounts, and as usual the income limits increased as well. This provides increased opportunity for savings via these tax-preferred vehicles. IRAs The annual contribution limit for IRAs (both traditional and Roth) increased from $5,000 in 2012 to $5,500 in 2013. The “catch up” amount, for folks age 50 or over, remains at $1,000. The income limits for traditional (deductible) IRAs increased slightly from last year: for singles covered by a retirement plan, your Adjusted Gross Income (AGI) must be less than $59,000 for a full deduction; phased deduction is allowed up to an AGI of $69,000. This is an increase of […]
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2013 COLA for Social Security is Set
The increase to Social Security retirement benefits for calendar year 2013 has been announced at 1.7%. Much ballyhoo has been made about the fact that this is one of the smallest increases in history, following the 3.6% increase at the beginning of 2012. This is actually an increase of more than the average that was received with the most recent increase, since there was no increase at all between from the beginning of 2009 until the beginning of 2012. So the average increase over the past three years was 1.2%. Inflation has been extremely low over period, so this small increase is not unexpected. Medicare premiums are also expected to increase, which likely will wipe out approximately half of the Cost-of-Living Adjustment.
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The “Fiscal Cliff”
What is the “fiscal cliff”? It’s the term being used by many to describe the unique combination of tax increases and spending cuts scheduled to go into effect on January 1, 2013. The ominous term reflects the belief by some that, taken together, higher taxes and decreased spending at the levels prescribed have the potential to derail the economy. Whether we do indeed step off the cliff at the end of the year, and what exactly that will mean for the economy, depends on several factors. Will expiring tax breaks be extended? With the “Bush tax cuts” (extended for an additional two years by legislation passed in 2010) set to sunset at the end of 2012, federal income tax rates will jump up in 2013. We’ll go from six federal tax brackets (10%, 15%, 25%, 28%, 33%, and 35%) to five (15%, 28%, 31%, 36%, and 39.6%). The maximum rate […]
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Increase Your Social Security Benefit After You’ve Filed: File and Suspend Doesn’t Have to Be All at Once
Note: with the passage of the Bipartisan Budget Act of 2015 into law, File & Suspend and Restricted Application have been effectively eliminated for anyone born in 1954 or later. If born before 1954 there are some options still available, but these are limited as well. Please see the article The Death of File & Suspend and Restricted Application for more details. We’ve discussed the File and Suspend activity many times on this blog, but most of the time we refer to the activity as happening all at the same time. This is because very often we’re talking about one spouse setting the table for the other spouse to begin receiving Spousal Benefits. There is another situation where File and Suspend could be used – you could earn delayed retirement credits after you had already started receiving your retirement benefits by suspending your benefit. You must be at least Full […]
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Guidance on Qualified Charitable Contributions From Your IRA For 2012
January 1, 2013 update: Passage of the American Taxpayer Relief Act of 2012 has extended the QCD through the end of 2013. See this article for more details. In past tax years (through the end of 2011) there was a provision available that allowed taxpayers who were at least age 70½ years of age to make distributions from their IRAs directly to a qualified charity, bypassing the need to include the distribution as income. The law allowed the taxpayer to use a distribution of this nature to satisfy Required Minimum Distributions (RMDs) where applicable. This law expired at the end of 2011, but in years past Congress has acted very late in the year and retroactively reinstated this provision. For more detail on how this provision (if not reinstated) can impact your taxes, see the article Charitable Contributions From Your IRA – 2012 and Beyond. Guidance For 2012 If you […]
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Annual Gift Tax Exclusion Increases in 2013
All individuals have the opportunity to give gifts annually to any person without having to file a gift tax return. For 2012, the amount of the annual exclusion is $13,000. This means that anyone can give a gift of up to $13,000 to any person for any reason without worrying about possible gift tax implications. A married couple can double this amount to $26,000. In 2013, this annual exclusion amount will increase to $14,000 ($28,000 for couples). For amounts given in excess of the annual exclusion amount, every individual has a lifetime exclusion amount, against which the excess gifts are credited. For 2012, the lifetime exclusion amount is $5,120,000. This lifetime exclusion amount is one of the tax law provisions that is set to expire at the end of 2012, along with the other “Bush Tax Laws”. If allowed to expire, the lifetime gift tax exclusion amount will revert to […]
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IRS Cracking Down on IRA Rules
It seems that some of the rules the IRS has put in place with regard to IRAs have not always been watched very closely – and the IRS is stepping up efforts to resolve some of this. According to the article in the WSJ, IRA Rules Get Trickier, an estimated $286 million in penalties and fees were uncollected for 2006 and 2007 tax years’ missed distributions, over-contributions, and the like. The title of the article is a bit misleading, because the rules are not changing or getting “trickier”, the IRS is just going to be paying closer attention to what you’re doing with your account. This is set to begin by the end of this year, after the IRS delivers their report to the Treasury on how to go about enforcing the rules more closely. The first rule being monitored more closely is the contribution rule – for 2012, you’re […]
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A Few Upcoming Tax Changes to Keep in Mind
As 2013 draws ever nearer, we need to keep a few potential tax changes in mind. These items are subject to change – they’ve changed in the past at the last minute, so there’s no reason to believe they won’t change again – but if they don’t we should be planning ahead. Flex-Spending Health Accounts If your employer provides you with a Flex-Spending Account for healthcare expenses, there will be some changes coming up in 2013. This is the kind of account where you set aside a sum of money each payday, pre-tax, that can be used throughout the year on deductibles, non-covered medical expenses, and co-pays. Beginning in 2013, these plans will be limited to a total of $2,500 per year in salary deferral. This comes about as a part of the Obama-care legislation. Currently there is no cap on contributions to these plans, although some employers place a […]
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Health Savings Account Limits for 2013 Published
The IRS recently distributed information about the adjustments to Health Savings Accounts (HSAs) for 2013. These limits adjust annually based upon inflation calculations (if inflation is present). For 2013, the annual contribution limit for self-only coverage is $3,250, which is an increase of $150 over the figure for 2012. For an individual with family coverage, the limit in 2013 is increased by $200 to $6,450. The deductibles for HSA accounts are also increased in 2013: $1,250 for self-only coverage, and $2,500 for family coverage. This is an increase of $50 and $100 for each deductible, respectively. Lastly, the out-of-pocket expense limit for self-only coverage is $6,250 in 2013, an increase of $200. Family coverage out-of-pocket maximum is $12,500 (up from $12,100 in 2012). This limit is for deductibles, co-payments, and other amounts, but not premiums.
Sterling Raskie, MSFS, CFP®, ChFC®
The latest in our Owner’s Manual series, A 401(k) Owner’s Manual, was published in January 2020 and is available on 
A Medicare Owner’s Manual, is updated with 2020 facts and figures. This manual is available on 
Social Security for the Suddenly Single can be found on Amazon at 
Sterling’s first book, Lose Weight Save Money, can be 
An IRA Owner’s Manual, 2nd Edition is available for purchase on Amazon. Click the link to choose the 
Jim’s book – A Social Security Owner’s Manual, is now available on Amazon. Click this link for the 
And if you’ve come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed “advisor’s advisor”.