This Year is Different – Revisit Your Withholding Elections Now!

This Year is Different – Revisit Your Withholding Elections Now!


When I got married in 2016, my wife and I updated our paycheck withholding status to “married” and kept our previous withholding allowances the same as part of the flurry of changes that followed. In the past, we generally received a tax refund when filing as single with two allowances. We could now itemize our deductions since we bought a house and had mortgage interest, real estate taxes, sales tax and a small amount of charitable giving. Even with several thousand dollars of deductions above the standard deduction, we’re still going to owe Uncle Sam a meaningful amount. To avoid underwithholding taxes in the future, as well as a penalty, we took the W-4 tables for two earners seriously and chose the proper amount of extra tax withholding from each paycheck going forward. (more…)

What’s Left for Itemized Deductions After the 2017 Tax Cuts and Jobs Act?

What’s Left for Itemized Deductions After the 2017 Tax Cuts and Jobs Act?

With the doubling of the standard deduction and elimination or reduction of several itemized deductions, you might think there aren’t many opportunities left to itemize. That isn’t the case at all, depending on your circumstances. With the recent tax reform, it’s never been a better time to figure out what you can still itemize in 2018 and in future tax years. To keep track of these deductible expenses, it’s important to be organized and maintain a box or folder to store your receipts throughout the year. This level of organization is necessary whether you work with a tax professional or prepare your own taxes.

Deductions fall into these categories:

  • Medical and dental expenses
  • Taxes you paid
  • Interest you paid
  • Gifts to charity
  • Casualty and theft losses
  • Other miscellaneous deductions

Certain categories, including medical and dental expenses, casualty and theft losses, are subject to a floor that only permits you to deduct expenses above certain thresholds, such as 7.5% of your adjusted gross income (AGI – IRS Form 1040, line 38). Your AGI is your total amount of income from all sources after subtracting certain deductions, such as alimony paid, HSA contributions, the deductible part of self-employment taxes, etc. For example, if your AGI is $100,000 and the threshold for medical expenses is 7.5%, then any qualifying expenses above $7,500 can be included and deducted. (more…)

Merriman’s Take on Recent Tax Legislation

Merriman’s Take on Recent Tax Legislation

In December, Congress passed sweeping tax changes, and the President signed them into law. This legislation will impact many tax planning strategies going forward.

This document summarizes some of the major provisions most likely to impact the families we work with. As always, your advisor can answer questions and provide guidance specific to you.

Most of the individual provisions will remain until 2025, after which they are scheduled to expire and revert to current law. Here are some key highlights of the legislation: (more…)

Read This Before You File Your Taxes!

Read This Before You File Your Taxes!


Before filing your tax return, take a few moments to consider the extra ways you can reduce your tax bill and maximize your retirement savings at the same time. Certain retirement account contributions provide tax-deductions or opportunities for future tax planning.

To qualify to contribute to any of the following accounts, you or your spouse must have earned income in 2017. You must open and fund these accounts before the normal tax filing deadline of Monday, April 16, 2018. With one exception, for the SEP IRA, filing for an extension does not extend the time you have to make contributions. (more…)

Taking Control of Your Household Budget

All households, no matter their income, must decide how best to allocate their resources and manage their budgets. These decisions can be difficult as they require balancing immediate desires and short-term needs with savings and long-term investments. But having an intentional conversation about this topic allows you to commit to a plan that can help you achieve your future financial goals and ultimately provide greater control over your resources.

Developing a household budget requires understanding your regular revenues (employment income, investment income, rental income, etc.) and expenses (mortgage, monthly groceries, car payment, etc.). You also need to identify your long-term financial goals and any irregular expenses you expect in the near future, such as a major vacation. With this information in hand, you’re ready to develop a monthly household budget. In the budget, you determine how your revenues should be allocated to the various expenses and other goals. This approach is systematic and allows you to evaluate your spending, saving and investing needs together.

Where to Start?

First, list all your expenses. Start with your fixed costs, which are set amounts paid each month, such as a house mortgage or rent, car payment, cell phone bill, child care costs, etc. Next, list your variable expenses, which are expenses that occur each month, but the dollar amount varies, such as groceries, gas, entertainment, etc. Utilities may be variable or fixed, depending on the utility, but be sure to include them.

You should also brainstorm items that occur inconsistently throughout the year, but where saving each month would be helpful, such as travel, home improvement, clothing, etc. If you’re planning to save more for retirement, make note of that as well so you remember to plan for that monthly contribution. (more…)

Mega Backdoor Roth IRA Explained!

Most employees are aware they can contribute to their employer’s retirement plan through pre-tax and Roth contributions. Employees can contribute up to $18,500 a year ($24,500 if age 50 or older) from their paychecks. What people are less aware of is whether their retirement plan allows for additional after-tax contributions beyond this limit.

It turns out that many retirement plans permit you to contribute an additional $20,000 after-tax a year to the plan, which can be converted tax-free to Roth at your convenience. This more than doubles what most individuals can contribute to their retirement plan to $38,500, which goes much further in working toward replacing your income in retirement. This benefit is even greater when both spouses have this option available. (more…)