Retirement Planning:  Should You Pay Off Your Mortgage Or Contribute More To Pre-Tax Retirement Funds?

A significant part of estate and tax planning analyzes different retirement financial planning strategies.  As more retirees enter retirement with large amounts of mortgage debt, financial planners are often suggesting that clients reaching retirement age should be paying off mortgage debt vs making larger contributions to pre-tax qualified plans. As in all planning matters, it’s a case-by-case analysis. Nonetheless, the blog post “Pay off the mortgage or add to the 401(k)” offers some interesting points to consider. 

Yet More Reasons To Consider Estate Planning!

Unfortunately, estate planning tends to be placed at the bottom of the “bucket list” for a good portion of the general public.  As many of you are aware, I have written extensively on the need for estate planning.  ALL people need to plan for the future to some degree, not just those who have assets in excess of the federal (and, if applicable, state) estate tax exemption amounts.  I encourage those without any estate planning to read the following article:  No Tax on Your Estate? You Still Need A Plan.  The author of this article highlights several of the struggles that estate planners attempt to address in helping people see the value in the estate planning process.

Avoid Paying Penalties To The IRS!

Today marks the extension deadline for 2014 partnership and calendar-year corporate returns.  Before it’s too late, now is a good time to remember October 15, which is the extension deadline for personal returns.  If you timely filed an extension for your 2014 personal tax filing, make sure you file your return on or before October 15.

Around the April 15 deadline, the following press release was issued regarding the extent to which penalties may be assessed for federal income tax that’s not paid by April 15:  Tax Attorney Advice on Avoiding Interest and Penalties for Outstanding Tax Liabilities.  It may be worthwhile to review your particular tax situation so that you can avoid paying unnecessary penalties and interest in the future!

Estate Planning Starts Now!

As many of you are aware, I concentrate a portion of my law practice on estate planning.  Personally, I find it interesting in helping clients discern the best course of action with respect to the various components that comprise the estate planning process.  Unfortunately, a majority of the population does not value the process or simply procrastinates to the point when it becomes too late to plan.  A few months ago, I published this article:  Estate Planning: Do I Need It?.  I invite you to revisit some of the ideas expressed in this article and determine what, if anything, needs to be addressed in your estate plan.

Connect and Follow!

Thanks to all who have visited and followed Planning Your Future!  Continue to “stay tuned” for relevant information pertinent to income tax and estate planning.

For more information about Christopher Floss, the originator of this blog, see Christopher’s LinkedIn Profile.  Additionally, Christopher has previously published tax and estate planning articles on various platforms, including Medium.  Feel free to connect and follow!

Win Big In Vegas? Uncle Sam Does Too!!!

If you’ve ever been to Las Vegas, you know first-hand the allure of the gambling scene. Rows of card game tables, flashing lights on the slot machines and the shouts of joy as fellow gamblers strike it big—these are the sights and sounds that entice casino patrons to place the wager on the line. If you’re fortunate to come out ahead of the game, you may not be the only one winning. Gambling winnings are subject to income tax.

The Internal Revenue Code (“Code”) defines gross income as “. . . all income from whatever source derived . . .”[1] While this Code section lists various types of income that fit into this definition, the Regulations provide that gross income “. . . is not limited to the items so enumerated.”[2]

Internal Revenue Service Publication 525 provides that gambling winnings are to be included in line 21 of the taxpayer’s Form 1040.[3]

Furthermore, the IRS requires the payer of gambling winnings to report any winnings that meet the following criteria: (1) the winnings are $1,200 or more from bingo or slot machines, (2) the winnings are $1,500 (reduced by the wager) or more from a keno game, (3) the winnings are more than $5,000 (reduced by the wager or buy-in) from a poker tournament, (4) the winnings, reduced by the wager, are $600 or more and 300 times the amount of the wager, or (5) the winnings are subject to federal income tax withholding.[4] So, if your winnings meet any of these criteria, you will receive a Form W2-G listing your winnings and any income tax withheld.

For most infrequent gambling patrons, this question is more pertinent: are gambling losses deductible? The answer: it depends. The Code provides that wagering losses are deductible to the extent of gains derived from such transactions.[5] Additionally, the Code categorizes wagering losses as miscellaneous itemized deductions subject to the two percent limitation.[6] As a result, in order to be able to deduct any portion of incurred gambling losses, the taxpayer must (a) itemize his or her deductions for the applicable tax year and (b) incur expenses categorized as miscellaneous itemized deductions in excess of two percent of the taxpayer’s adjusted gross income.[7] Any portion of miscellaneous itemized deductions that exceeds the two percent limitation may be deducted on Schedule A.

Separate rules apply to “professional gamblers,” which are beyond the scope of this brief explanation.

[1] IRC § 61(a).

[2] Treas. Reg. § 1.61(a)

[3] IRS Pub. 525.

[4] IRS Instructions for Forms W2-G and 5754.

[5] IRC § 165(d).

[6] Id. at § 67(b)(3).

[7] For further discussion on itemizing expenses, see “Can I Write That Off?