Archives For Retirement

Beginning Jan. 1, 2014 the Affordable Care Act (ACA) will come into full effect. While parts of the law are already in place, 2014 will bring in a whole new set of changes, including dozens of tax provisions, that can be difficult to understand. Thanks to the folks at Block Talk, we’re posting a series of infographics that make it easier to understand the 1,000-plus page ACA.

Below you’ll find a graphic summary of changes to Medicare D, the government’s prescription drug benefit program. This infographic explains the coverage gap closure, which became effective in 2011:

Continue Reading...

And the winner is… Bridgeport, Connecticut! Surprised?

The following infographic ranks America’s highest taxed local municipalities (in this study, only the biggest city in each state was tested) for a family of three with an annual income of $50,000. It’s no shocker that cities like LA and Boston top the list, but others like Louisville and Bridgeport probably weren’t your first guess.

Continue Reading...

Although the Internal Revenue Service had to omit some major tax provisions from its inflation adjustment announcement last week, around two dozen items had their amounts bumped up for next year.

Here are some of the more widely used individual tax provision amounts that will change in 2013.

Kiddie tax: Although this moniker may sound like it’s a tax break for youngsters, sort of the child’s menu of the tax code if you will, the kiddie tax actually could cost you more.

Officially known as the Unearned Income of Minor Children Taxed as if Parent’s Income Tax, it requires, as per its name, that a child’s investment earnings exceeding a certain amount be taxed at their parents’ usually higher tax rate.

The kiddie tax was created in 1986 to prevent parents from putting money into investment accounts held in the names of their lower-taxed children.

Basically, a portion of the kids’ earnings remain tax free, with another chunk of investment income being taxed at the kiddies’ tax rate.

But when the earnings exceed the combination of the tax-free and low-tax amounts, then their parents’ tax rate kicks in. The earnings affected by the kiddie tax are reviewed each year for possible inflation bumps.

For 2013, parents will have to deal with the kiddie tax when a youngster’s investment earnings exceed $2,000. That’s $1,000 tax-free for your little angel and $1,000 at the youth’s tax rate. The 2013 amount is $50 more than the $950 allowed for both a child’s unearned income categories this year.

Gift tax exclusion: A simple way to reduce an estate’s taxable value is to give some of it away before you pass away.

Not only will this assist you in getting your estate below the taxable threshold, which is still up in the air for next year since the current estate tax law expires on Dec. 31 and Congress could make changes before or by (or even after) then, but this exclusion also allows you to receive the thanks of your grateful recipients. Double win!

In 2012 you can give up to $13,000 to as many separate individuals — and they don’t have to be your family (hint, hint) — as you want without any tax implications for you or the people to whom you give the money.

In 2013, you’ll be able to reduce your taxable estate by giving away $14,000 per person.

Deductible long-term care premiums: In 2013, you’ll need more medical expenses — 10 percent of your adjusted gross income instead of the current 7.5 percent — before you can claim them on Schedule A.

To help you reach the medical deductions threshold, you can include the deductible portion of eligible long-term-care insurance premiums. These amounts are based on your age and are adjusted annually for inflation. For 2013 they are:

Age Before the End of the Tax Year Limitation on Premiums
40 or younger $360
Older than 40 but not more than 50 $680
Older than 50 but not more than 60 $1,360
Older than 60 but not more than 70 $3,640
Older than 70 $4,550

Foreign tax provisions: Several inflation-affected tax areas involve foreign considerations. They include:

  • The amount of foreign earned income that taxpayers working abroad can exclude increases from $95,100 in 2012 to $97,600 in 2013.
  • The first $143,000 of gifts in 2013 to a spouse who is not a U.S. citizen will not be included in taxable gifts. That’s $4,000 more than allowed this year.
  • A U.S. person receiving aggregate foreign gifts exceeding $15,102 in 2013 will be required to file an information return. That’s $379 than in 2012.

Tax expatriates also will see some inflation adjustments in 2013.

An individual next year is treated as leaving the United States primarily to avoid tax if his or her “average annual net income tax” is more than $155,000 for the five taxable years ending before the date that person gives up U.S. citizenship.

Expatriates also face an exit tax when they give up their citizenship. In 2012, that tax can be avoided if the person’s deemed sale asset value is less than $651,000. In 2013, that value to avoid the expatriation tax goes to $668,000.

You can check out the other tax laws with 2013 inflation adjustments in Rev. Proc. 2012-41. And stay tuned for the IRS’ final word on the areas where it’s waiting for Congressional action.

JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.

The expiration of the $5.12 million gift tax exemption is set for the end of 2012. As a result, wealthy families are seeking to centralize the management of their real estate and other assets by creating a family limited partnership. However, not all wealthy families should rush to set up partnerships because they can be egregious ventures as well.

Let’s take a look at what family partnerships do and what they try to accomplish. They are entities that are designed to hold family assets like marketable securities, real estate, and operating businesses. The Partnership Agreement can be drafted for lifetime transfers of Partnership interests in addition to transfers upon an individual’s death to his/her descendants. Perhaps the most attractive part of family partnerships is the ability to discount the value of assets put into the partnership because the shares distributed are less liquid considering only a family member can buy them.

This is a great method for those families who know what they are doing. Where this business formation could go wrong is by aggressively putting in and discounting monies and securities in the partnership. Many families may try to put all their assets into the family partnership and not worry about taxes, however the IRS can easily catch on.

“The I.R.S. has been very selective in litigating only the most egregious scenarios,” Jason Cain of Credit Suisse Private Bank said. “They have gone after $6 million families that put all of their assets into a family partnership and then treated it as their checking account.”

The primary purpose of a family partnership is to have a legitimate business run by legitimate family members. Many cases seen by the IRS are related to families who have set up partnerships to avoid estate taxes.

A successful example is with the Rice family in Texas. Brown Rice, a businessman, said he has reaped extraordinary financial benefits from a financial limited partnership that his father created in 1992. According to Rice, from May 1992 to May 2011, the entity has paid out distributions worth 166% of what was originally put into it and 82% of the principal remaining. Most importantly the partnership’s function is not purely for tax purposes – it has a series of business interests including mineral rights, real estate, and royalties from oil and gas. It also functions as an investment vehicle into small companies.

Family partnerships can be a great tool to centralize a family’s wealth and get minor tax breaks. However, they should be used responsibly and within the confines of the legal system as to ensure the family’s financial security from generation to generation.

JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.

Start Saving Yesterday

June 29, 2012 — 1 Comment


Five ways to convince yourself to increase your retirement savings.

The last few years have been rough to say the least for anyone saving for retirement with investments in the stock market. The Recession and continued gloomy outlooks in the media have investors second-guessing their plans to save for the future. Maybe it’s better to spend more money now and avoid the Wall Street industry, which seems to be designed to benefit institutional investors and their own shareholders.

If you ever intend on leaving your day-to-day work behind in favor of spending years without trading your time and effort for income, retirement saving should still be a priority. Put the negativity aside and use this as an opportunity to move forward towards financial independence.

1.    Buying stocks when most people are avoiding them could be good timing. Yes, it’s dangerous to think you can time the market. Don’t aim for investing at the market’s bottom, hoping to take advantage of the next bubble, but take a look at stocks when your friends and co-workers are too scared to add to their 401(k) plans. When others are avoiding risk, it’s time to increase your exposure.

The stock market only appears safer once people have seen the stock market indices increase for some time. By then it’s too late to take advantage of the biggest returns — and if you want to approach the fabled 8 to 10 percent long-term returns of the stock market, you need to be invested when those big increase following declines come around.

2.    Any investment is an investment in time. You may be able to make more money, but you can’t make more time. Time is a significant financial advantage. The math behind the concept of compounding returns plays out in such a way that a small investment early in life, invested properly, will grow to a larger value than a larger investment later in life.

3.   Your actions now will prevent you from being a burden on others in the future. In past centuries, families were often larger. Elderly relatives lived with their children and perhaps their grandchildren, who supported their needs. Today, Social Security and Medicare exist to help the elderly manage their increasing expenses, but the future of government programs that benefit society are uncertain. If you don’t want to be a burden on your children, the best way to prevent needing support later in life is to save as much as possible, as soon as possible, for as long as possible.

4.   It’s not possible to save too much for retirement. However, there is need for a balance in how much is saved and how much is spent.  Embedded in the financial media, there is a strong focus on retirement investing. The focus is so strong that many people can easily forget that life is something to live, not to wait for. You can live your life while saving for retirement, however. So once again, there’s a balance you need to find, but retirement saving needs to be made a priority in order to have a comfortable life when and if you decide to stop working. The question of whether you are saving too much is a luxury you can consider once you’ve saved enough.

5.   Write down the expenses you’ll have during retirement. If you’re able to retire young, you’ll want to have money available to find activities to replace your job and enjoy the time you have when you’re still healthy. Only delay what you need to delay, as you age, your health may deteriorate, as well. Think about the expenses you’ll have when and if you need long-term health care services.

Living — and dying, not to be morbid — is expensive. When you think about those expenses and write them down, the numbers become real. Once you’ve written them down, add 3% for every year between now and your planned retirement date to account for inflation. These are going to be big numbers, and perhaps they will be scary enough to motivate you into saving for retirement immediately.

Your biggest ally in building wealth is time, and time is the one thing you can’t control. You can’t buy more time. You can’t trade time with your friends. The best chance you’ve had at increasing wealth is to start planning for the future yesterday, but since that’s no longer an option, you need to start today. If you’ve already begin saving, the best time to increase your savings plan, giving you the boost you may need to become financially independent, is right now

JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.


Election season is under way; one issue that is at the forefront of both Mitt Romney and President Obama’s campaign is how to manage the end of the Bush tax cuts.  It’s also no secret that potentially bigger tax bills for the wealthy is the sticking point in the current national battle over what’s to become of U.S. individual rates in 2013.

The Institute on Taxation and Economic Policy (ITEP) and Citizens for Tax Justice (CTJ) looked at the Republicans’ and Obama’s plans for the Bush tax cuts, the moniker that’s still sticking to the variety of tax reductions enacted by President Bush in 2001 and 2003 that had been extended by Obama extended in 2010 through the end of this year.

Essentially, the GOP wants to keep everything as is. Obama would continue some of the cuts, but wants the income tax rate to be higher for married couples making $250,000 a year ($200,000 annually for single filers).

Tax cut plans’ state-by-state effects: In addition to coming up with the 1.9 percent national average of folks who would see higher tax bills under the Obama plan, the two Washington, D.C.-based tax policy research groups also analyzed the effects on taxpayers in every state and the nation’s capital.

Taking the biggest tax cut hits: Which states’ taxpayers would see the biggest tax bills under Obama’s plan? As expected, that would happen in states with large higher income populations, but the order of the locales might surprise you.

The states in which more than 1.9 percent of their residents would lose some of their current tax cuts are:

  • District of Columbia, 4 percent
  • Connecticut, 3.6 percent
  • New Jersey, 3.2 percent
  • Massachusetts, 2.8 percent
  • New York, 2.6 percent
  • Illinois, 2.4 percent
  • New Hampshire, 2.4 percent
  • Virginia, 2.4 percent
  • California, 2.3 percent
  • Maryland, 2.3 percent
  • Washington, 2.3 percent
  • Texas, 2.3 percent
  • Colorado, 2.2 percent
  • Florida, 2.2 percent
  • Alaska, 2.0 percent
  • Nevada, 2.0 percent
  • Wyoming, 2.0 percent

And the states where residents wouldn’t see that much difference in the two tax plans? Only 0.9 percent of West Virginians and just 0.8 percent of Mississippi residents would lose any tax breaks under Obama.

Check out how you and your neighbors would fare under each scenario at CTJ’s interactive tax plan comparison map.

JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.

Southern and western cities are listed on Forbes as the best places to retire in 2012. Why? Perhaps it is the combination of the pleasant weather, low taxes, and healthy lifestyle that these cities offer. Among the top cities are Austin, Texas, Florida’s Cape Coral, and Asheville, North Carolina. Cities like Albuquerque, New Mexico and Phoenix, Arizona made the list as well.

One of the main criteria for selecting these cities was the impact of taxes on the local economy. There are nine states that have no income tax – Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Tennessee, Washington, and Wyoming.  Of these states, some offer tax breaks to retirees as well which provides plenty of financial incentive to spend the rest of one’s days there.

Another parameter used by Forbes to determine the best retiree cities was the local job economy. This is primarily for retirees who wish to work part-time. Many of the states listed have unemployment rates at least two points below the national unemployment rate. If you are considering retiring in the next 5 to 10 years, start thinking about where you would like to live now. An important factor that must be considered is family. There are plenty of retirees who will not move because they want to be close to family and friends. This is a decision that can be quite strenuous, however, start planning ahead now and the transition may not be as difficult.

JDKatz, P.C. is a full-service law firm focused on tax law and estate planning.  We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.

Caring is Sharing

June 7, 2012 — 3 Comments

As parents get older, there is an increased reliability on adult children to look after them. Through parental care, there are several ways tax laws can reduce your financial burden. By claiming your parent(s) as a dependent, the IRS can come of great assistance. To claim a parent is a little tricky and you must consider the following:

  • Mom or Dad’s income, including Social Security.
  • How much support you provide for living expenses.
  • How much you contribute to a parent’s residential costs.
  • How much of your parent’s medical bills you pay.
  • Combined help of all siblings.

By claiming your parent, you will have an additional exemption on your income tax return. In addition, if you paid medical bills for your dependent parent, it is possible to deduct some of these costs. Further, by hiring a caregiver or a nurse, you can deduct those expenses and relieve your tax bill a little more.

Even if you meet many of the criteria listed, there are still some obstacles that could prevent claiming your parent as a dependent. The biggest obstacle is based upon how much your parent earns. The dependent parent may not make more than the exemption amount. According to John W. Roth, senior federal tax analyst, the income barrier represents taxable income. Much of the baby boomer generation has invested in stocks, bonds, and savings accounts, which can add up and potentially disqualify parents to be claimed as dependents.

“Social Security normally is excludable, but if they have other income, which in many cases means interest and dividends, some is taxable, Roth says.”So you want to start with that first in determining if the parent meets the income test.”

Another way to determine if you can claim your parent as a dependent is if you pay for more than half their living costs. When calculating how much you have supported your parents, take into account the fair-market room rental, food, medicine, and other support items. If your parents are using Social Security to pay for a portion of these expenses, it could limit how much you actually spend on your parents. However, your parents do not necessarily have to live with you in order to claim the exemptions. As long as you provide more than half support of their living, it is acceptable to put them down on your income tax return.

The medical costs incurred by your parents that you paid for can be itemized deductions on your income tax return as well. Medical costs must exceed 7.5% of your adjusted gross income before claiming them, however your parents’ medical bills can help meet the requirements. Even if your parents are ineligible to be claimed as dependents, you can still use their medical costs that you paid for as deductions on your own income tax return.

By splitting the costs of supporting your parents with your siblings a major financial burden could be avoided. For example, if Social Security is covering 40% of mom’s expenses, then you and your two siblings can split the rest of the costs at 20% a piece. This way more than half the support comes from her kids. Although, only one child can claim their mom as a dependent so the choice must be made between the siblings. Once mom is claimed by a single child, that child must fill out Form 2120 (Multiple Support Declaration) with their tax return. This will allow the child to claim mom as an exemption. As a provision, the child should get signed waivers from his/her siblings if the IRS ever questions the exemption or medical deduction claims. The multiple support agreement is not permanent either. It can be rotated from year to year so each sibling can share the deductions.

JDKatz, P.C. is a full-service law firm focused on tax law and estate planning.  We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.

Accessible Maryland Elder Law Attorney located in Bethesda, Montgomery County, MD
Helping Seniors with Their Legal Needs

JDKatz has provided personal attention to assisted seniors and their families with their unique legal issues in the following areas, including:

Medicaid eligibility
Appeals of adverse Medicaid rulings
Guardianship and alternatives
Medicare issues
Powers of attorney
Medical directives and living wills
Nursing home and assisted living care


JDKatz guides many of our clients through the long-term care maze. At JDKatz we can help determine how you or a family member can pay for the cost of long term care, whether in a nursing home, assisted living or at home.

Costs Associated with Care

Nursing care is expensive, with nursing home care costing as much as $10,000 a month and assisted living more than $5,000 a month. When considering whether to apply for Maryland Medical Assistance Long Term Care, JDKatz attorneys will analyze all available payment options, including private pay, long-term care insurance, reverse mortgages, Veteran’s benefits, Medicare, and Medicaid. Where appropriate we will map out a financial strategy in Excel, and model financial spend downs using sophisticated computer software, to make your decisions easier.

We can provide options to protect assets, even if long-term care is imminent, especially where one spouse needs care and the other spouse remains independent. These are typically the most difficult cases to plan and reach an approval from Medicaid. Jeffrey D. Katz, lead Medicad can lead you though the complicated and ever-changing eligibility rules to qualify for Medicaid and help you to successfully apply for Medicaid.

What happens if my Medicaid application is denied?

A person who has denied Medicaid eligibility or is otherwise unhappy with how benefits were calculated can appeal the decision. We have successfully represented many applicants who have filed such appeals.

Useful Links:
Medicaid Wiki
Medicare WIKI
JDKatz Elder Care