Jim Niedelman:
It’s time for this week’s 4 Your Money. We’re joined by Nate Kreinbrink of NelsonCorp Wealth Management. Great to see you, Nate.
Nate Kreinbrink:
Great. I appreciate you having me again.
Jim Niedelman:
So it’s been a very different year on the tax front to say the least. Now that the delayed tax season finally behind us, what should people watching think about now, if they want to start planning for the rest of the year and actually into 2021?
Nate Kreinbrink:
Right. It’s definitely been a unique year. And with the delayed tax season over, there’s still some changes that are still taking into effect where some planning, especially from the tax perspective, I think is going to have some impact on people.
Nate Kreinbrink:
And one of those is just simply, if there’s been some employment changes due to the pandemic, if we’ve had a loss of jobs, if we switched jobs, there’s some changes with some hardship withdrawals from a 401k, IRA account. And then also some increased unemployment benefits that they want to make sure that they take a look at. We also want to look at some medical expenses.
Nate Kreinbrink:
Now, medical expenses are generally deductible above a certain tier. So if someone’s become sick and those medical expenses are a little higher so far this year, that may come into effect from a tax perspective. Another one is just simply, if people have switched where they live at. Maybe they’ve had a family member move in with them, or maybe they’ve moved in with a family member. Or if individuals have switched and move states. If they moved from Iowa to Illinois, or vice versa. Again, all those things potentially could have a change with your tax situation.
Nate Kreinbrink:
And then lastly, looking at maybe some larger changes or fluctuations to an investment account, so if you’ve had some gains or you’ve had some losses, again, all of these provide opportunities that we want to take a look at.
Jim Niedelman:
So it sounds like a lot of people could fit into one or more of these categories, if that’s the case, what should they have on their radar?
Nate Kreinbrink:
Right. And I think one thing is it just mentioned is simply just gain, or loss harvesting with those investment accounts. So if we have some losses, we may want to look to capture them, to be able to offset some gains further on down the road. However, it’s important to look at when we see with this tax last harvesting, that this only applies to taxable accounts. Now, if we do have some sizeable losses inside of IRA accounts, or inside of traditional 401k accounts, this is where we want to possibly look at doing some Roth conversions.
Nate Kreinbrink:
So we’re basically willingly paying taxes on those funds that are in those tax deferred accounts, like the traditional IRAs, the traditional 401ks, and converting it over to a tax-free environment in a Roth account. Now, if we have less income, if potentially we had been laid off or whatever, and we have less income so far this year, being able to convert some of that money and paying taxes on it now is not going to push us up to a higher tax bracket and likely if we’ve had some losses inside of those IRA or 401k accounts, being able to convert it over, and hopefully what it gains back in a tax-free environment is definitely going to help us.
Nate Kreinbrink:
We also want to look at family loans, this could come into play. And this deals with the low interest rate environment that we currently are in. And then lastly, as part of the CARES Act, is if you are able to, and you are required to take your required minimum distribution in 2020, we wanted to see if you’re not needing that, we can avoid taking that. And again, this would be less income that would come into there. And again, utilize that moving forward.
Jim Niedelman:
Nate Kreinbrink, thanks for the advice. Thanks for being here.
Nate Kreinbrink:
Appreciate you having me again.
Jim Niedelman:
Absolutely. If you missed any of this discussion. We have that available for you on OurQuadCities.com.