Mr. Losavio is giving a workshop at Amber Terrace Assisted Living Tuesday January 12, 2016 at 4:00pm and 6:30pm and Thursday January 14,2016 at 4:00pm an 6:30pm. Amber Terrace Assisted Living is located at 8585 Summa Ave., Baton Rouge, LA 70809. Seating is limited so call ahead and reserve your seat 1-800-426-6104.
Currently there are 31 states* where Medicaid treats a community spouse’s IRA account as a countable resource. Thus, before an institutionalized spouse can qualify for Medicaid benefits, the community spouse’s IRA account must be either protected or spent-down.
Protecting the Community Spouse’s IRA
The best way to protect the community spouse’s IRA account is to make it part of his or her community spouse resource allowance (CSRA). In 2015, with the maximum CSRA being $119,220, if a couple had total countable resources of $275,000 ($175,000 of which was in the community spouse’s IRA account) the community spouse would be advised to leave $119,220 in the IRA account. As for the balance of $55,780, the community spouse would further be advised to invest the amount into a tax-qualified DRA compliant immediate annuity (Tax-Qualified Annuity, or TQA).
Taxation and the Community Spouse’s IRA
The $119,220 remaining in community spouse’s IRA account would not be subject to income taxation. As for the funding of the TQA – which was accomplished by an IRA Direct Transfer (preferred method) or a 60-day IRA Rollover** – the funding transaction would not be subject to income taxation. However, as the community spouse receives the monthly payments from the TQA, he or she would be taxed on the payments received in the given year.
Eliminating the Remaining Spend-Down
As for the remaining spend-down of $100,000, the community spouse would be advised to invest the amount into a DRA compliant immediate annuity (DCIA). Since a DCIA involves after-tax dollars, unlike the TQA, which involves pre-tax dollars, only a small portion of each payment is subject to income taxation in the year of receipt.
One Annuity versus Two Annuities
For purposes of simplicity, some clients have requested to use only one annuity rather than the two detailed above. However, because the Internal Revenue Code does not allow qualified funds (pre-tax) to be mixed with non-qualified funds (post-tax), two annuity contracts are required.
At Krause Financial Services, we understand that Medicaid planning with IRAs is complicated. However, between our unique annuity product line and vast state-specific Medicaid knowledge, we are more than equipped to handle your most challenging cases. So, if you have a case involving a countable IRA, please do not hesitate to get in touch with us. We look forward to it!
The holiday season often prompts people to give money or property to charity. If you plan to give and want to claim a tax deduction, there are a few tips you should know before you give. For instance, you must itemize your deductions. Here are six more tips that you should keep in mind:
1. Give to qualified charities. You can only deduct gifts you give to a qualified charity. Use the IRS Select Check tool to see if the group you give to is qualified. You can deduct gifts to churches, synagogues, temples, mosques and government agencies. This is true even if Select Check does not list them in its database.
2. Keep a record of all cash gifts. Gifts of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. You must have a bank record or a written statement from the charity to deduct any gift of money on your tax return. This is true regardless of the amount of the gift. The statement must show the name of the charity and the date and amount of the contribution. Bank records include canceled checks, or bank, credit union and credit card statements. If you give by payroll deductions, you should retain a pay stub, a Form W-2 wage statement or other document from your employer. It must show the total amount withheld for charity, along with the pledge card showing the name of the charity.
3. Household goods must be in good condition. Household items include furniture, furnishings, electronics, appliances and linens. These items must be in at least good-used condition to claim on your taxes. A deduction claimed of over $500 does not have to meet this standard if you include a qualified appraisal of the item with your tax return.
4. Additional records required. You must get an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. Additional rules apply to the statement for gifts of that amount. This statement is in addition to the records required for deducting cash gifts. However, one statement with all of the required information may meet both requirements.
5. Year-end gifts. Deduct contributions in the year you make them. If you charge your gift to a credit card before the end of the year it will count for 2015. This is true even if you don’t pay the credit card bill until 2016. Also, a check will count for 2015 as long as you mail it in 2015.
6. Special rules. Special rules apply if you give a car, boat or airplane to charity. If you claim a deduction of more than $500 for a noncash contribution, you will need to file another form with your tax return. Use Form 8283, Noncash Charitable Contributions to report these gifts. For more on these rules, visit IRS.gov.
Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.
Mr. Peter. J. Losavio, Jr. is giving a workshop “Don’t Go Broke in a Nursing Home” on Thrusday November 12th , 2015 at 4:00 and 6:00 pm at Sunrise of Baton Rouge 8502 Jefferson Hwy., Baton Rouge, LA 70810. To attend please call 1-800-426-6104 to reserve your spot.
Mr. Peter J. Losavio, Jr. will be giving a seminar at the Zachary Branch Library Conference Room Tuesday October 20th @ 4:00pm and 6:00pm and Tuesday October 27th at 4:00pm and 6:00pm. To attend this seminar call 1-800-426-6104 to reserve your seat.
Medicare Annual Enrollment Period (AEP)
As you may know, the Annual Enrollment Period for Medicare beneficiaries will be October 15 through December 7. This is the period during which you may make certain changes in the way you want to receive your Medicare benefits in 2016, including the following:
- A beneficiary enrolled in Original Medicare (Parts A and B) may enroll in any Medicare Advantage Plan or stand-alone Part D Prescription Drug Plan offered in the service area – with no medical underwriting.
- A beneficiary enrolled in a Medicare Advantage plan may choose a different plan or return to Original Medicare.
- A beneficiary enrolled in a Medicare Part D Prescription Drug Plan may choose a different plan.
Note: The Annual Enrollment Period does not apply to Medicare Supplement policies, which are usually renewed on the anniversary date of the beginning of coverage. Open enrollment in such coverage applies only when a beneficiary first enrolls in Medicare Part B. Guaranteed issue (without medical underwriting) applies only at that time and when a beneficiary qualifies for a Special Enrollment Period, e.g., upon the loss of employment-based coverage.
Any beneficiary currently enrolled in a Medicare Advantage plan or Part D Prescription Drug Plan should have already received information from the current plan about any changes to be effective January 1. No action is needed if the beneficiary is satisfied with the current plan and the scheduled changes.
Effects of provisions of the Affordable Care Act (ACA) continue to impact health insurers who offer Medicare Advantage and Prescription Drug Plans and, in turn, the Medicare beneficiaries enrolled in such plans. In response to changes in reimbursement from the Centers for Medicare and Medicaid Services (CMS) and benefits costs, most insurers are implementing changes effective January 2016. Such changes may be in the form of premiums, out-of-pocket costs or both.
The purpose of this notice is only to remind you of your annual options and is not a recommendation that you make any changes. However, this is a good time to review alternative plans, particularly if your prescription drugs have changed. If you are affected by Medicare plan changes announced for 2016, you should review them carefully – first of all to ensure you understand them, and then to decide whether you are satisfied with the changes or whether you should consider an alternative plan for 2016.
Even with any changes announced for next year, your current plan may still be the right one for you.
Factors to Consider in Evaluating a Medicare Advantage or Prescription Drug Plan
- Amount of monthly premium
- Out-of-pocket costs for services you anticipate receiving
- Participation of your physicians and other health care providers in plan networks
- Inclusion of your prescription drugs in Part D plans’ formularies and the tiers/copays to which your products are assigned
- Your experience with plan administration and customer service
- CMS Star Rating
Although the Centers for Medicare and Medicaid Services (CMS) has not yet announced changes for 2016, the following might be expected, based on preliminary information released:
Monthly Medicare premium – The standard Part B premium of $104.90, which has not changed the past three years, is likely to increase in January 2016 for many beneficiaries. It is still possible for the Secretary of the U.S Department of Health and Human Services to intervene to temper the increases. If that does not happen, Medicare premiums could look like this, based on current reports:
- Beneficiaries receiving Social Security retirement benefits – $104.90 (no change, since retirement benefits are projected to include no cost-of-living increase).
- Beneficiaries not receiving Social Security retirement benefits and with Modified Adjusted Gross Income (MAGI) below $85,000 for single tax filers and below $170,000 for joint filers – $159.30, a 52% increase.
- Beneficiaries with MAGI above these thresholds – between $233.00 and $509.80, including Income-Related Monthly Adjustment Amount (IRMAA), compared to a range of $146.90 to $335.70 in 2015. There could also be increases in the IRMAA for Part D.
Part B deductible – Also unchanged the past three years, the current deductible of $147 may increase, but no announcement has been made. Of course, beneficiaries enrolled in Medicare Advantage and many Medicare Supplement plans would not be subject to payment of this amount. However, it would undoubtedly be reflected in increased Medicare Supplement premium rates upon renewal.
Part A out-of-pocket costs for inpatient care – These costs – currently $1,260 per stay of 1-60 days, $315 per day for days 61-90, and $630 per day for each of 30 lifetime reserve days – typically rise by modest amounts each year and will likely increase in 2016.
Part D coverage gap – The amount of drug cost that sends a beneficiary into the coverage gap and the amount of out-of-pocket cost at which the beneficiary leaves the gap will both rise in 2016. The percentage of the cost of generics while in the gap will slightly decrease, and the copay amounts paid for both brands and generics once out of the gap will slightly increase.
You are allowed a premium tax credit only for health insurance coverage you purchase through the Marketplace for yourself or other members of your tax family. However, to be eligible for the premium tax credit, your household income must be at least 100, but no more than 400 percent of the federal poverty line for your family size. An individual who meets these income requirements must also meet other eligibility criteria.
The amount of the premium tax credit is based on a sliding scale, with greater credit amounts available to those with lower incomes. Based on the estimate from the Marketplace, you can choose to have all, some, or none of your estimated credit paid in advance directly to your insurance company on your behalf to lower what you pay out-of-pocket for your monthly premiums. These payments are called advance payments of the premium tax credit. If you do not get advance credit payments, you will be responsible for paying the full monthly premium.
If the advance credit payments are more than the allowed premium tax credit, you will have to repay some or all the excess. If your projected household income is close to the 400 percent upper limit, be sure to consider the amount of advance credit payments you choose to have paid on your behalf. You want to consider this carefully because if your household income on your tax return is 400 percent or more of the federal poverty line for your family size, you will have to repay all of the advance credit payments made on behalf of you and your family members.
For purposes of claiming the premium tax credit for 2014 for residents of the 48 contiguous states or Washington, D.C., the following table outlines household income that is at least 100 percent but no more than 400 percent of the federal poverty line:
|Federal Poverty Line for 2014 Returns|
|100% of FPL||.||400% of FPL|
|One Individual||$11,490||up to||$45,960|
|Family of two||$15,510||up to||$62,040|
|Family of four||$23,550||up to||$94,200|
The Department of Health and Human Services provides three federal poverty guidelines: one for residents of the 48 contiguous states and Washington D.C., one for Alaska residents and one for Hawaii residents. For purposes of the premium tax credit, eligibility for a certain year is based on the most recently published set of poverty guidelines at the time of the first day of the annual open enrollment period for coverage for that year. As a result, the premium tax credit for 2014 is based on the guidelines published in 2013. The premium tax credit for coverage in 2015 is based on the 2014 guidelines. You can find all of this information on the HHS website.
Use our Interactive Tax Assistant tool to find out if you are eligible for the premium tax credit. For more information, see the instructions to Form 8962 and the Questions and Answers on the Premium Tax Credit on IRS.gov/aca.
I’ve had numerous conversations with entrepreneurs lately who have come to the conclusion that they need to start diversifying their business profits into more than just a savings account. If this is you – pay close attention.
Being a real estate investor isn’t always glamorous but it is one of the best ways to build wealth over the long-haul, especially for the entrepreneurial-minded. Here are six reasons why you should consider investing in rental properties.
1. Cash flow.
Many people invest in rental properties simply because of the cash flow – the extra money that is left after all the bills have been paid. The cash flow can provide ongoing, monthly income that is mostly passive, allowing you to spend your time building a business, traveling or reinvesting in more real estate.
Cash flow from real estate is stable and far more predictable than most other businesses. That’s great for entrepreneurs enduring the ups and downs of start-up life. The cash flow can help float you though the bad times and live well during the good times.
2. Tax benefits.
Let me ask you a quick question: if you earn $100,000 at your own business and I earn $100,000 through rental properties, who get’s to keep more?
That’s right: I do. Because the government rewards rental property owners.
Not only is the cash flow received from your rentals not subject to self-employment tax, the government offers tax benefits including depreciation and significantly lower tax-rates for long-term profits.
3. The loan pay down.
When you buy a rental property using a mortgage, your tenant is actually the one paying the mortgage payment, thus increasing your net worth each month. Because of the loan pay down a rental property is essentially a savings account that grows automatically, without you depositing money each month.
Today you might owe $200,000 on a rental property, but next year you might only owe $195,000 because the tenant is making the payment for you, making you $5,000 richer. Thirty years down the road, or whatever the term of your loan, it’s paid down to $0. You own a significant asset that you can sell or continue renting, all thanks to your tenant paying the mortgage.
While the loan is being paid down the value of real estate, generally, goes up. Yes, I know, recessions do happen. Values do go up and down. People buy at the wrong time of the market. I get it.
Over time, values do climb higher and higher. That’s why I’m not in this real estate game just for a year or even a decade. I’m in this for life. I know my properties will continue to climb so that 30 years from now, everything will be worth far more than I’m paying for it today.
5. A hedge against inflation.
Can you imagine paying ten dollars for a gallon of milk? Or five dollars for a candy bar? While those prices seem exorbitant to you, this is the future because of inflation. Inflation is the process by which prices increase due to the value of money decreasing.
While most people fear inflation, as a rental property owner, I look forward to it!
When the price of a gallon of milk hits ten bucks a gallon, guess what else is going to shoot through the roof? Everything, including rents and property values! The one thing that won’t increase, however, is my fixed-rate mortgage payment. As inflation pushes the cost of living higher and higher, my cash flow will only increase. This is why real estate is often called “a hedge against inflation.” When inflation hits – I’m ready!
I don’t like my destiny tied to a board room on Wall Street or a nervous CEO in Silicon Valley.
This is why I choose to invest most of my income in real estate, knowing that I am the one who is responsible for my success or failure.
- If I want a better deal, I need to hustle to find it.
- If the rental market gets more competitive, I can compensate by increasing my advertising.
- If values drop, I can choose to wait it out or improve the property to drive the value back up.
In other words, I get to control the situation, and my financial future, with my own two hands. And that suits me just fine.
Don’t think that just by owning some rentals you are instantly going to begin building wealth. Real estate is powerful – but only if you work it right.
You must learn how to find great deals, how to evaluate a real estate investment, and how to finance any properties you want to buy. Additionally, you must treat it like a business and nurture it as it matures. It’s likely not going to be totally passive up front, but as millions of individuals throughout history have discovered, the payoff is well worth the journey.