Permanent Value

Week in Review 12/28/2016

Bruce Doole
December 28th, 2016

9 Ways to Save on Taxes in Retirement (3/9)

While you probably won’t have to worry about the federal estate tax — unless, that is, you have more than $5.49 million to pass to your heirs in 2017 (married couples can pass on double that amount) — you still might want to use the annual gift tax exclusion, especially if it looks as if you could get stuck for that estate tax.
The gift tax exclusion lets you give up to $14,000 every year to as many people as you want without having to pay gift tax on it.
So if you need to get money out of your estate, and, say, you have three married children, each with two kids, you could give away 12 times $14,000 in 2016 and 2017 — for a total of $168,000 — and never even have to file a gift tax return.
If you’re married, your spouse can do the same, and the money given under the protection of the exclusion can’t be taxed as part of your estate after your death.

For the profit from the sale of a home to be tax free (up to $250,000 in profit tax free; $500,000 if married and filing jointly), it must be your principal residence and you must have owned and lived in it for at least two of the five years leading up to the sale.
But if you’ve sold your principal residence and moved into a vacation home you’ve owned for years, as long as that vacation home becomes your principal residence for at least two years, part of the profit on the sale will be tax free.
Kiplinger said in the report, “To determine what portion of the profit qualifies as tax free, you need to compare the amount of time you owned the property before 2009 and after you converted it to your principal residence to the amount of time, starting in 2009, that it was used as a vacation home or rental unit.
“Assume you bought a vacation home in 1998, convert it to your principal residence in 2015 and sell it in 2018. The post-2008 vacation-home use is seven of the 20 years you owned the property. So, 35% (7 ÷ 20) of the profit would be taxable at capital gains rates; the other 65% would qualify for the $250,000/$500,000 exclusion.”

Yes, you read that right — when you turn 65 the IRS increases the amount of the standard deduction you’re entitled to.
While a single 64-year-old in 2016 is entitled to claim a standard deduction of $6,300 (in 2017 it will be $6,350), a 65-year-old gets $7,850 (which increases to $7,900 in 2017).
If that extra $1,550 puts you into the range of taking the standard deduction instead of itemizing, and if you’re in the 25% bracket, that larger deduction will save you almost $400.
Couples get bigger deductions, too, if one or both spouses are age 65 or older. For instance, if both spouses are 65 or older, the standard deduction on 2016 joint returns is $15,100, going to $15,200 for 2017.
Source: Marlene Y. Satter


  • Germany PPI finally moved back into positive territory with a stronger-than-expected 0.3% monthly rise in November.
  • Switzerland Merchandise Trade was 3.64 billion in November, up from a marginally smaller revised 2.66 billion in October.
  • France PPI continued to rise in November with a 0.8% monthly increase.
  • U.S. Existing Home Sales rose by 0.7% in November to a 5.61 annualized rate, which is a cycle high.
  • U.S. GDP rose to an inflation-adjusted 3.5% annualized rate for the best showing in two years.
  • U.S. Jobless Claims rose 21,000 in the Dec 17 week to a much higher-than-expected level of 275,000.

Source: Ivy Weekly