March 2019 Newsletter: IRA Contributions & 529 Plan Updates

There’s still time for Business Owners to make a retirement plan contribution for 2018 via a SEP-IRA.

Update on 529 Qualified Tuition / College Saving Plans

There’s still time for Business Owners to set-up and fund a SEP-IRA for 2018

There is still time for Business Owners to make a retirement plan contribution for 2018 via a SEP-IRA. A SEP-IRA is one of the easiest small business retirement plans to set up and maintain. You can make sizable contributions for yourself and any eligible employees. There’s little administration and tax filing isn’t required. And you can vary contributions from year to year – or even skip a year.
For business owners that don’t have a tax-advantaged retirement plan, it’s not too late to establish one.
Contribution deadlines
A SEP-IRA can be opened and contributions made until the employer’s actual tax-filing deadline, including any extensions. That means you can establish a SEP for 2018 in 2019 as long as you do it before your 2018 return filing deadline. In other words, April 15, 2019 or late as October 15, 2019 if you file an extension. You have until the same deadline to make 2018 contributions and still claim a potentially substantial deduction on your 2018 return.
Generally, other types of retirement plans would have to have been established by December 31, 2018, in order for 2018 contributions to be made (though many of these plans do allow 2018 contributions to be made in 2019).
What do you get with a SEP-IRA?

  • Tax-deductible contributions that vest immediately.
  • Tax-deferred earnings.
  • Flexible annual contributions.
  • High contributions for you. You may contribute up to 25% of compensation (20% if you’re self-employed) or $55,000 for 2018 and $56,000 for 2019, whichever is less.
  • A way to contribute to qualified employees’ accounts.

Consult your tax professional or ZRC Wealth Management to learn more.

Update on 529 Qualified Tuition / College Saving Plans

Last week, ZRC’s Director of Financial Planning, Thomas Howard, CFP® traveled to Sacramento along with 31 other members of Financial Planning Association (FPA) Chapters throughout California. There they met with lawmakers and their staffs to be advocates on behalf of FPA Members and our clients. Within California, there are 11 FPA Chapters with more than  3000 members serving 312,000 households. FPA leadership, such as Thomas, seek to be a resource for California’s elected and appointed officials, offering informed and professional perspective on legislative and regulatory issues. The FPA members had appointments all day as they met in teams with the lawmakers and their staff.
Top of mind was bill, AB 211, that would offer a deduction from California gross income of $5,000 for single taxpayer and $10,000 for a married couple for contributions to California’s ScholarShare 529 plan. Thomas met with the staff of state Senator Mike McGuire whose second district includes Santa Rosa. In that meeting they discussed the impact a tax break for investing in children and grandchildren’s education would have on their constituents financial well-being. One member of the staff in attendance had a great deal of college debt so this topic really resonated with her.
California Treasurer Fiona Ma supports the bill and testified in a hearing last week. Members of the FPA met with officials in the Treasurer’s office and indicated that for now they are only going to support the bill that would allow the tax deduction for the California ScholarShare 529 plan. The Treasurer’s office looked at allowing the deduction for other state’s 529 plans and it would simply cost the state too much money. ZRC Wealth Management will continue to monitor this important topic for our clients in the state capital as it develops.
Regardless of whether the Bill passes or not, 529 Plans remain a compelling tax-advantaged college saving, gifting, and estate planning tool. Contact ZRC Wealth Management to learn more.

Sources: Charles Schwab & Co.