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Money February 2017

Dollar Sense

Potpourri: Miscellaneous Stuff You Should Know about Money and Taxes

By Teresa Ambord

It’s the Retirement Savings Contributions Credit, more commonly called the Saver’s Credit. It’s intended to provide lower income individuals with an incentive to save for retirement security.

A Credit to Help Low Income Retirement Savers

If you (or your adult children) are on the lower end of the income spectrum and have an IRA or other retirement plan, there might be a special income tax credit available. But to get it, you must claim it. It’s the Retirement Savings Contributions Credit, more commonly called the Saver’s Credit. It’s intended to provide lower income individuals with an incentive to save for retirement security.

To be eligible, you must be at least 18, not a full-time student, and not be a dependent on someone else’s tax return. And, you must have filed a Form 104 or 1040NR, not a 1040EZ.
The amount you qualify for depends on your filing status and your income, and is a percentage of the amount you contributed to your retirement plan.

The maximum credit you can receive on your 2016 return (and 2017) is $1,000 if you file a single return, or $2,000 if your file a married joint return. If you meet the qualifications and limits (listed below) you will need to file IRS Form 8880.


For married taxpayers filing joint return:

  • For adjusted gross income (AGI) of $37,000 or less, the credit is 50% of your qualified contributions.
  • At AGI exceeding $62,000, the credit is completely phased out.


Head of household filers:

  • AGI of $27,750 or less brings a credit of 50%.
  • AGI exceeding $46,500, the credit is completely phased out.


All other filers:

  • AGI of $18,500 or less, the credit is 50%.
  • At AGI exceeding $31,000, the credit completely phases out.

For elective contributions to retirement plans under 401(k) or 403(b) you would’ve had to complete them by December 31. However, the Saver's Credit and contributions to a new or existing IRA will be permitted until the filing date for your 2016 tax return (April 18, 2017).

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Trust Issues: What Should Beneficiaries Know?

If you have your money in a trust, should you let your beneficiaries know? Some states allow residents to have quiet or silent trusts. That means you can leave your money to your heirs without them knowing about it.

Why would you do this? Some parents don’t want their kids to know how much they might inherit, for fear they will live irresponsibly. Some advisors warn against a silent trust because children have ways of finding out how much you’re worth, and then they live irresponsibly anyway.

Also, there might be an increased risk of litigation with a quiet trust. The trustee must act in the best interest of the beneficiaries. When the children ultimately become aware of the trust, they may seek to challenge any past decisions the trustee made.

Better approach, incentivize responsible behavior with a different trust. It’s actually called an incentive trust, and provides opportunities for you or the trustee to shape the future behavior of your heirs. An incentive trust provide positive reinforcement by communicating terms of the trust, let beneficiaries know what they must do to receive their rewards, and provide them the help they need to succeed.


Older Americans Burdened by Student Loan Debt?

If you think student loan debt is mostly the territory of young people and/or their parents, think again. In the last decade, the number of us age 60 and older with this type of debt has quadrupled, said the Consumer Financial Protection Bureau. And the average amount they owe has skyrocketed.

Why? Part of it is, they just never paid it off in their earlier years. But more and more seniors are helping finance college for their kids and grandkids. If you’re considering taking on student loan debt, first look at the full picture.

How much debt are we talking? From 2005 to 2015, the average amount of student loan debt among borrowers age 60 and up increased from $12,100 to $23,500. Only 27% of those borrowers reported that the debt was for their own or their spouse’s education (from a survey in 2014).

A growing number of older borrowers are falling into default on their student loan obligations. That means that in 2015, about 40,000 borrowers had their Social Security benefits offset to repay those loans. With 69% of Social Security recipients having no other regular retirement income, an offset may create serious financial hardship for many affected seniors.


Donald Trump on Caregiving

What might be coming for caregivers? In his campaign, Donald Trump spoke of a tax deduction to help people offset the out-of-pocket cost for elder care. If passed as proposed, working-family caregivers could deduct up to $5,000 each year for senior care costs that are needed to let caregivers continue to work outside the home.

Here’s what President-elect Trump’s platform website said: “Our aging population must have access to safe and affordable care. Because most seniors desire to age at home, we will make home care a priority in public policy and will implement programs to protect against elder abuse.”

The proposal includes allowing eligible people to open tax-protected dependent care savings accounts to put away money for either child care or care for the elderly. The funds could be used for in-home-care, long-term care in a facility, or adult day care. Also proposed is a federal match of up to $500 per year contributed by low-income families.

Keep in mind, this is only a proposal at this point and may never materialize.


Teresa Ambord is a former accountant and Enrolled Agent with the IRS. Now she writes full time from her home, mostly for business, and about family when the inspiration strikes.

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