SHOW NOTES: 2018-12-06 MiM

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Last Week’s Question of the Week: According to, what rate/percentage is a 30-year mortgage rate currently at?

ANSWER: 30-year mortgage rate is around 5.10 %.

HOST: Before we get into our main topic, it sounds like you have some simple rules to implement with regards to investing?

KLAAS FINANCIAL: Yes, once in a while we like to remind listeners about. These are our 7 Simple Rules to implement when investing:

  1. Simpler is better, if it sounds too good to be true and it’s hard to understand.
  2. Fees Matter — Watch your fees!
  3. Start saving early, compound interest is powerful
  4. Seek professional guidance
  6. Don’t try to time the market
  7. Never pass up a corporate retirement plan / match opportunity

HOST: As we discuss saving for our retirements, what should we know about gifting?

KLAAS FINANCIAL: Great question! This is a good time of the year to discuss this. Always confer with your accountant when you decide to gift, but we are very familiar with such topics.

First, let’s define what is considered a gift. 
The IRS considers any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money’s worth) is not received in return. Gift Tax Exclusion for federal gift tax purposes will remain at $15,000 in 2019. That means that you can gift $15,000 per person to as many people as you want with no federal gift tax consequences in 2019; if you split gifts with your spouse, that total is $30,000 per person. In your lifetime, (as of 2019) the max you can give is $11.4 million to heirs — same figure as the Federal Estate Tax Exemption — or $22.8 million per couple in 2019.

Please note, there is NO tax savings for giver, and USUALLY no taxes to be paid the recipient. A common question is if you can deduct gifts on your income tax return. Making a gift or leaving your estate to your heirs does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make, other than gifts that are deductible charitable contributions.

HOST: So, if I gift money to someone, will I have to PAY a gift tax?

KLAAS FINANCIAL:  The donor is generally responsible for paying the gift tax, if there is one. Under special arrangements the donee may agree to pay the tax instead. Please visit with your tax professional if you are considering this type of arrangement.

The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts are not taxable gifts.

  • Gifts that are not more than the annual exclusion for the calendar year ($15k per individual)
  • Tuition or medical expenses you pay for someone (the educational and medical exclusions)
  • Gifts to your spouse (if they are a U.S. citizen)
  • Gifts to a political organization for its use
  • In addition, gifts to qualifying charities are deductible from the value of the gift(s) made

HOST: Do I have any limits in charitable giving?

KLAAS FINANCIAL:  You can gift as much as you would like, but the IRS does have Limitations on Deductions. In general, contributions to charitable organizations may be deducted up to 50 % of adjusted gross income. Contributions to certain private foundations, veterans organizations, fraternal societies, and cemetery organizations are limited to 30% adjusted gross income. Again, you would want to consult with your accountant.

Some people ask about giving their RMDs to charity. Just a reminder, if you’re age 70½ or older, you generally must withdraw a minimum amount each year from your traditional IRAs (Roth IRAs are excluded) and employer-sponsored retirement plans. The money you’re required to withdraw gets added to your taxable income. Failure to take your RMD by year-end could result in a stiff IRS penalty, up to 50% of the amount you should have withdrawn. Learn more about RMDs.

Also keep in mind the QCD Rule (Qualified Charitable Distribution). Beginning at age 70½, you can have all or part of your distribution made directly from your IRA to a qualified charity — up to $100,000 per taxpayer, per year. Unlike conventional RMDs, QCDs aren’t subject to ordinary federal income taxes. With a QCD, you’ll have satisfied your distribution requirement and you won’t have to pay income taxes on that money. That’s a win-win.

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Catch C.J. Klaas and Maleeah Cuevas on Money in Motion every Thursday on Madison's 1310 WIBA from 8:05-8:35am.