Diversified Asset Management, Inc. – 2019 4th Quarter Newsletter
In this quarter’s newsletter, find information regarding conversions into Roth IRA accounts, risk and tax effects of installment sales of a property, the math behind renting out vacation homes, and insight into creating long-lasting financial stability.
A New Risk to Converting to a Roth IRA
Converting to a Roth IRA is appealing if you think Federal taxes will go up, but now carries a new risk. Roth conversion is still a good idea but it's important to understand how the rules changed and could come into play.
Phantom Income. The new risk to converting stems from a change in tax rules and it's probably not going to make you decide against converting a traditional IRA to a Roth, but it is a material new factor in the equation, a risk of being taxed on "phantom income." Roth vs.Traditional IRA. Roth conversions are likely to grow more popular because a Roth is taxed differently from a traditional IRA. You contribute pre-tax dollars to a traditional IRA, which lowers your taxable income each year you contribute. In retirement, you pay taxes on withdrawals to live on. In contrast, a Roth IRA allows you to contribute after-tax dollars and grows tax-free. Withdrawals in retirement are also tax-free. That's why converting to a Roth now looks smart if you think tax rates will be higher in your retirement years.
Five Key Factors In Funding A Child’s Education
The Tax Cuts And Jobs Act (TCJA) changed funding a child's education significantly.
Here are the factors to consider.
You can now pay tuition for kindergarten through 12th grade at private, public or religious schools with money saved in tax-advantaged 529 college savings accounts.
You now can draw up to $10,000 federally tax-free per student from a 529 plan. While contributions are not deductible, earnings grow free of federal income tax on withdrawals used for qualified school expenses.
There are 3 more factors. Please read the enewsletter for the rest of them.
Risk And Tax Effects Of An Installment Sale Of A Home
An installment sale of real estate is a variety of seller financing in which the buyer is borrowing from the seller. Why would a seller want to do this? Isn't it better to get the money up front? No, not always, especially when a sizable real estate capital gain would push you into a higher tax bracket.
An installment plan can give a home-seller a way to unload homes in bad market conditions and enable buyers who otherwise would not qualify for a mortgage to buy a home.
Installment financing is a familiar concept for big-ticket consumer items, like cars and furniture, but handily applies to dwellings.
To read the newsletter, click the link below:
Diversified Asset Management, Inc. - 2018 4th Quarter Newsletter
Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.
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