Khaas Baat : A Publication for Indian Americans in Florida


For College Savings, 529 Plans Are Hard to Beat


Raising kids is hard enough, so why not make things easier for yourself when it comes to saving for college? Ideally, you want a savings vehicle that doesn't impose arbitrary income limits on eligibility; lets you contribute a little or a lot, depending on what else happens to be going on financially in your life at the moment; lets you set up automatic, recurring contributions from your checking account so you can put your savings effort on autopilot; and offers the potential to stay ahead of college inflation, which has been averaging 3 to 4 percent per year. (1) Oh, and some tax benefits would be really nice, too, so all your available dollars can go to college and not Uncle Sam. Can you find all of these things in one college savings option? Yes, you can: in a 529 plan.

529 college savings plans offer a unique combination of features that are hard to beat when it comes to saving for college, so it's no surprise why assets in these plans have grown steadily since their creation over 20 years ago.

Eligibility. People of all income levels can contribute to a 529 plan — there are no restrictions based on income (unlike Coverdell accounts, U.S. savings bonds, and Roth IRAs).

Ease of opening and managing account. It's relatively easy to open a 529 account, set up automatic monthly contributions, and manage your account online. For example, you can increase or decrease the amount and frequency of your contributions (e.g., monthly, quarterly), change the beneficiary, change your investment options, and track your investment returns and overall progress online with the click of a mouse.

Contributions. 529 plans have high lifetime contribution limits, generally $350,000 and up. (529 plans are offered by individual states, and the exact limit depends on the state.) Also, 529 plans offer a unique gifting feature that allows lump-sum gifts up to five times the annual gift tax exclusion — in 2020, this amount is up to $75,000 for individual gifts and up to $150,000 for joint gifts — with the potential to avoid gift tax if certain requirements are met. This can be a very useful estate planning tool for grandparents who want to help pay for their grandchildren's college education in a tax-efficient manner.

Tax benefits. The main benefit of 529 plans is the tax treatment of contributions. First, as you save money in a 529 college savings plan (hopefully every month!), any earnings are tax deferred, which means you don't pay taxes on the earnings each year as you would with a regular investment account. Then, at college time, any funds used to pay the beneficiary's qualified education expenses — including tuition, fees, room, board, books, and a computer — are completely tax-free at the federal level. This means every dollar is available for college. States generally follow this tax treatment, and many states also offer an income tax deduction for 529 plan contributions.

But 529 plans have some potential drawbacks.

Tax implications for funds not used for qualified expenses. If you use 529 plans funds for any reason other than the beneficiary's qualified education expenses, earnings are subject to income tax (at your rate) and a 10 percent federal penalty tax.

Restricted ability to change investment options on existing contributions. When you open a 529 college savings plan account, you're limited to the investment options offered by the plan. Most plans offer a range of static and age-based portfolios (where the underlying investments automatically become more conservative as the beneficiary gets closer to college) with different levels of risk, fees, and management objectives. If you're unhappy with the market performance of the option(s) you've chosen, you can generally change the investment options for your future contributions at any time. But under federal law, you can change the options for your existing contributions only twice per year. This rule may restrict your ability to respond to changing market conditions, so you'll need to consider any investment changes carefully.

Getting started
529 college savings plans are offered by individual states (but managed by financial institutions selected by the state), and you can join any state's plan. To open an account, select a plan and complete an application, where you will name an account owner (typically a parent or grandparent) and beneficiary (there can be only one); choose your investment options; and set up automatic contributions if you choose. You are then ready to go. It's common to open an account with your own state's 529 plan, but there may be reasons to consider another state's plan; for example, the reputation of the financial institution managing the plan, the plan's investment options, historical investment performance, fees, customer service, website usability, and so on. You can research state plans at https://plans.collegesavings.org/planComparisonState.aspx

(1) College Board, Trends in College Pricing, 2014-2018

Securities and Investment Advisory services offered through SagePoint Financial, Inc., member FINRA/SIPC and a registered investment advisor. Fixed and/or Traditional Insurance Services may be offered through Capital Insurance & Asset Protection LLC, which is not affiliated with SagePoint Financial or registered as a broker-dealer or investment advisor.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

Haren Mehta, managing partner of Capital Insurance & Asset Protection in Tampa, can be reached at (813) 679-5204 or email haren@mycapitalinsurance.com


It’s Not About The Destination

Karyn Mathura-Arthur

By Dr. Karyn

“For lack of guidance a nation falls, but victory is won through many advisers” (Proverbs 11:14). Being a leader is not just about enjoying a privileged position. Leadership comes with many challenges, responsibilities, and even sacrifices. “In order to get where I am today, I had to work hard and keep focused on my goals,” said Minesh B. Patel, international business development consultant, founding group representative and director for a private multinational group. From politics to business, to art, sports, and everything in between, being a leader in your field is about the journey and not the destination.

The most important part is – the journey never stops. Inspirational leaders are the ones who have the ability to stay humble, in spite of all of their success. They still “get their hands dirty” and aren’t afraid to reinvent themselves, channel their ideas, and even question them, if they think that something better has the potential to be more successful.

Taking risks is one of the best ways to continue with a growth mindset, even if at times, this might mean putting your own success at risk. Some people might think that “they’ve arrived” once they reach that particular position in their jobs or when they have that CEO title. However, the irony is that settling into your role and avoiding risk … is the riskiest thing that you could possibly do!

When a leader fails to take chances, they might end up losing that spark that made them successful in the first place. From tech revolutionaries to business gurus, and star entrepreneurs, they pretty much all have one thing in common: people told them that they’d never amount to anything. However, these people kept going against the grain. Many others would have been afraid of the negative feedback and scared off from pursuing through with their actual vision. These remarkable people kept going. They took a risk, and reaped the rewards.

I am willing to bet that there are very few articles out there relating to leadership and business that don’t at least touch on Steve Jobs as a very inspirational leader and here is no exception. As someone who literally started one of the world’s most successful companies in his parents’ garage, this entrepreneur is a great example of risk-taking. Even after he became very successful with Apple, Jobs took yet another risk, by leaving the company to focus on another project he believed in: Pixar. People raised a lot of eyebrows, but Pixar was eventually acquired by Disney, and it has become a household name. The bottom line is – Steve Jobs didn’t stop challenging himself, and never tried to replicate the success he had with Apple with his second major endeavor.

Steve jobs believed that: “Innovation distinguishes between a leader and a follower.” This is a powerful lesson for any leader because leadership is not like a lake. It’s like a stream, with currents pulling us on forward. Instead of trying to resist, it is important to flow with it, and accept that life, just as a business, is filled with challenges and unexpected direction. Being adaptable and taking risks is the best way for any leader to remain a leader, and become a true role model for those around him/her and beyond!

If you are interested in continuing as a leader, I encourage you to mentor others. TiE Tampa Bay and many of our universities have opportunities and need mentors, so please help contribute to our future leaders by offering your time and insights.

Dr. Karyn Mathura-Arthur is an agile implementation leader with experience in Operational Excellence, Continuous Process Improvement, Business Transformation, Process Engineering and Organizational Change Management across multiple industries (banking, insurance, healthcare, telecom, government, retail, etc.). For comments and suggestions, email editor@khaasbaat.com




As the New Year begins, it is a good time to think of planning moves that will help lower your tax bill for 2019 and possibly 2020. Year-end planning for 2019 takes place against the backdrop of recent major changes in the rules for individuals and businesses. For individuals, these changes include lower income tax rates, a boosted standard deduction, severely limited itemized deductions, no personal exemptions, an increased child tax credit and a watered-down alternative minimum tax (AMT). For businesses, the corporate tax rate has been reduced to 21 percent, there is no corporate AMT, there are limits on business interest deductions, and generous expensing and depreciation rules. And non-corporate taxpayers with qualified business income from pass-through entities may be entitled to a special deduction.

Despite these major changes, the time-tested approach of deferring income and accelerating deductions to minimize taxes still works for many taxpayers, along with the tactic of bunching expenses into this year or the next to get around deduction restrictions.

We have compiled a list of actions based on current tax rules that may help you save tax dollars if you act before year-end. Not all actions will apply in your particular situation, but you (or a family member) will likely benefit from many of them.
Year-End Tax Planning Moves for Individuals

* Higher-income earners must be wary of the 3.8 percent surtax on certain unearned income. The surtax is 3.8 percent of the lesser of: (1) net investment income (NII), or (2) the excess of modified adjusted gross income (MAGI) over a threshold amount ($250,000 for joint filers or surviving spouses, $125,000 for a married individual filing a separate return, and $200,000 in any other case).

* The 0.9 percent additional Medicare tax also may require higher-income earners to take year-end actions. It applies to individuals for whom the sum of their wages received with respect to employment and their self-employment income is in excess of a threshold amount ($250,000 for joint filers, $125,000 for married couples filing separately, and $200,000 in any other case). Employers must withhold the additional Medicare tax from wages in excess of $200,000 regardless of filing status or other income.

* Long-term capital gain from sales of assets held for over one year is taxed at 0, 15 or 20 percent, depending on the taxpayer's taxable income. The 0 percent rate generally applies to the excess of long-term capital gain over any short-term capital loss to the extent that it, when added to regular taxable income, is not more than the maximum zero rate amount (e.g., $78,750 for a married couple). If the 0 percent rate applies to long-term capital gains you took earlier this year, for example, you are a joint filer who made a profit of $5,000 on the sale of stock bought in 2009, and other taxable income for 2019 is $70,000 then before year-end, try not to sell assets yielding a capital loss because the first $5,000 of such losses won't yield a benefit this year. And if you hold long-term appreciated-in-value assets, consider selling enough of them to generate long-term capital gains sheltered by the 0 percent rate.

* Postpone income until 2020 and accelerate deductions into 2019 if doing so will enable you to claim larger deductions, credits, and other tax breaks for 2019 that are phased out over varying levels of adjusted gross income (AGI).

* If you believe a Roth IRA is better than a traditional IRA, consider converting traditional-IRA money invested in beaten-down stocks (or mutual funds) into a Roth IRA in 2019 if eligible to do so. Keep in mind, however, that such a conversion will increase your AGI for 2019, and possibly reduce tax breaks geared to AGI (or modified AGI).

* Consider using a credit card to pay deductible expenses before the end of the year. Doing so will increase your 2019 deductions even if you don't pay your credit card bill until after the end of the year.

* If you expect to owe state and local income taxes when you file your return next year and you will be itemizing in 2019, consider asking your employer to increase withholding of state and local taxes (or pay estimated tax payments of state and local taxes) before year-end to pull the deduction of those taxes into 2019. But remember that state and local tax deductions are limited to $10,000 per year, so this strategy is not a good one to the extent it causes your 2019 state and local tax payments to exceed $10,000.

* If you are age 70½ or older by the end of 2019, have traditional IRAs, and particularly if you can't itemize your deductions, consider making 2019 charitable donations via qualified charitable distributions from your IRAs. Such distributions are made directly to charities from your IRAs, and the amount of the contribution is neither included in your gross income nor deductible on Schedule A, Form 1040. But the amount of the qualified charitable distribution reduces the amount of your required minimum distribution, which can result in tax savings.

* If you become eligible in December of 2019 to make health savings account (HSA) contributions, you can make a full year's worth of deductible HSA contributions for 2019.

Congress passes extender legislation – On Dec. 19, the Senate passed the Taxpayer Certainty and Disaster Tax Relief Act of 2019.
a. Exclusion from gross income of discharge of qualified principal residence indebtedness up to a $2 million limit ($1 million for married individuals filing separately) extends this exclusion for two years, i.e., for discharges of indebtedness before Jan. 1, 2021
b. Treatment of mortgage insurance premiums as qualified residence interest extends this treatment through 2020 for amounts paid or incurred after Dec. 31, 2017.
c. Reduction in medical expense deduction floor extends this threshold of 7.5 percent for tax years beginning after Dec. 31, 2018 and before Jan. 1, 2021.d. Deduction of qualified tuition and related expenses. The code provides an above-the-line deduction for qualified tuition and related expenses for higher education. The deduction is capped at $4,000 for an individual whose AGI does not exceed $65,000 ($130,000 for joint filers) or $2,000 for an individual whose AGI does not exceed $80,000 ($160,000 for joint filers). The Disaster Act extends this deduction through 2020.

Sanjay Gupta, CPA, FCA, who has 28 years of experience in accounting, tax (both domestic and international), is based in Plantation. He can be reached at sanjayg@sanjayguptacpa.com or visit www.sanjayguptacpa.com

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