IRA and Retirement Plan Limits for 2018

IRA contribution limits
The maximum amount you can contribute to a traditional IRA or a Roth IRA in 2018 is $5,500 (or 100 percent of your earned income, if less), unchanged from 2017. The maximum catch-up contribution for those age 50 or older remains at $1,000. You can contribute to both a traditional IRA and a Roth IRA in 2018, but your total contributions can’t exceed these annual limits.

Traditional IRA income limits
The income limits for determining the deductibility of traditional IRA contributions in 2018 have increased. If your filing status is single or head of household, you can fully deduct your IRA contribution up to $5,500 in 2018 if your modified adjusted gross income (MAGI) is $63,000 or less (up from $62,000 in 2017). If you’re married and filing a joint return, you can fully deduct up to $5,500 in 2018 if your MAGI is $101,000 or less (up from $99,000 in 2017). Note that these figures assume you are covered by a retirement plan at work.

    If your 2018 federal income tax filing status is single or head of household:

    Your IRA deduction is limited if your MAGI is between $63,000 and $73,000.
    Your deduction is eliminated if your MAGI is $73,000 or more.

    If your 2018 federal income tax filing status is married filing jointly or qualifying widow(er):

    Your IRA deduction is limited if your MAGI is between $101,000 and $121,000 (combined).
    Your deduction is eliminated if your MAGI is $121,000 or more (combined).

    If your 2018 federal income tax filing status is married filing separately:

    Your IRA deduction is limited if your MAGI is between $0 and $10,000.
    Your deduction is eliminated if your MAGI is $10,000 or more.

If you’re not covered by an employer plan but your spouse is, and you file a joint return, your deduction is limited if your MAGI is $189,000 to $199,000 (up from $186,000 to $196,000 in 2017), and eliminated if your MAGI exceeds $199,000. Single filers, head-of-household filers, and married joint filers who are not covered by an employer plan can deduct the full amount of their contributions.

Roth IRA income limits
The income limits for determining how much you can contribute to a Roth IRA have also increased for 2018. If your filing status is single or head of household, you can contribute the full $5,500 to a Roth IRA if your MAGI is $120,000 or less (up from $118,000 in 2017). And if you’re married and filing a joint return, you can make a full contribution if your MAGI is $189,000 or less (up from $186,000 in 2017). (Again, contributions can’t exceed 100 percent of your earned income.)

    If your 2018 federal income tax filing status is single or head of household:

    Your Roth IRA contribution is limited if your MAGI is more than $120,000 but under $135,000.
    You cannot contribute to a Roth IRA if your MAGI is $135,000 or more.

    If your 2018 federal income tax filing status is married filing jointly or qualifying widow(er):

    Your Roth IRA contribution is limited if your MAGI is more than $189,000 but under $199,000 (combined).
    You cannot contribute to a Roth IRA if your MAGI is $199,000 or more (combined).

    If your 2018 federal income tax filing status is married filing separately:

    Your Roth IRA contribution is limited if your MAGI is more than $0 but under $10,000.
    Your Roth IRA contribution is eliminated if your MAGI is $10,000 or more.

Employer retirement plans
Most of the significant employer retirement plan limits for 2018 have also increased. The maximum amount you can contribute (your “elective deferrals”) to a 401(k) plan is $18,500, up from $18,000 in 2017. This limit also applies to 403(b) and 457(b) plans, as well as the Federal Thrift Plan. If you’re age 50 or older, you can also make catch-up contributions of up to $6,000 to these plans in 2018. (Special catch-up limits apply to certain participants in 403(b) and 457(b) plans.)

If you participate in more than one retirement plan, your total elective deferrals can’t exceed the annual limit ($18,500 in 2018 plus any applicable catch-up contributions). Deferrals to 401(k) plans, 403(b) plans, and SIMPLE plans are included in this aggregate limit, but deferrals to Section 457(b) plans are not. For example, if you participate in both a 403(b) plan and a 457(b) plan, you can defer the full dollar limit to each plan—a total of $37,000 in 2018 (plus any catch-up contributions).

    The amount you can contribute to a SIMPLE IRA or SIMPLE 401(k) plan remains unchanged at $12,500, and the catch-up limit for those age 50 or older remains at $3,000.

    If your plan type is 401(k), 403(b), governmental 457(b), or Federal Thrift Plan:

    Your annual dollar limit is $18,500.
    Your catch-up limit is $6,000.

    If your plan type is SIMPLE plans:

    Your annual dollar limit is $12,500.
    Your catch-up limit is $3,000.

Note: Contributions can’t exceed 100 percent of your income.

The maximum amount that can be allocated to your account in a defined contribution plan (for example, a 401(k) plan or profit-sharing plan) in 2018 is $55,000, up from $54,000 in 2017, plus age 50 catch-up contributions. (This includes both your contributions and your employer’s contributions. Special rules apply if your employer sponsors more than one retirement plan.)

Finally, the maximum amount of compensation that can be taken into account in determining benefits for most plans in 2018 is $275,000 (up from $270,000 in 2017), and the dollar threshold for determining highly compensated employees (when 2018 is the look-back year) remains unchanged at $120,000.

—Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2017.

Broadridge Investor Communication SolutionsIRA and Retirement Plan Limits for 2018
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Will I have to pay tax on my investment income?

Answer:
The taxation of your investment income depends on several factors, including the type of investment income you have (e.g., tax exempt, ordinary, capital gain, or tax deferred).

If you have municipal bonds, the interest they generate is typically exempt from federal taxation and state taxation in the state the bonds are issued. The interest may or may not be subject to state income tax in the state of your residence, if different from the state of issue. U.S. Treasury bills and certain types of government savings bonds generate interest that is typically subject to federal tax, but not state tax.

Of course, not all investments are tax exempt. Investment income is generated by either the income it produces during the ownership of the investment (e.g., interest, dividends, or rent) or the gain it produces when the investment is sold at an appreciated value. Investment income such as interest and rent is considered ordinary income and will generally be taxed according to your ordinary income tax rate. If you have investment income from the sale of a capital asset that is held for more than one year (e.g., stock or investment property), the income is generally considered capital gain and is taxed at long-term capital gains rates. Qualifying dividends are also taxed at long-term capital gains rates (dividends that don’t qualify for long-term capital gains rates are taxed at ordinary income tax rates).

Finally, you should know that tax-deferred investments (such as 401(k) plans) produce earnings and gains that are not taxed until later, when the money is distributed to you.

For more information, consult a tax professional.

Note: For tax years beginning after 2012, a 3.8 percent unearned income Medicare contribution tax may also be imposed on interest, dividends, capital gains and other investment income for individuals making more than $200,000 ($250,000, if married filing jointly).

—Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2017

Broadridge Investor Communication SolutionsWill I have to pay tax on my investment income?
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Meet Mary Carlson

Mary Carlson is a senior administrative associate who works primarily with personal trusts. She also is a huge sports fan and makes a fabulous Christmas Eve Lasagna.

Below she shares a few things about herself—and her recipe!

Tell us about yourself.
I was born in Thief River Falls, Minnesota, but moved to Fargo when I was 4 years old and have been a “north sider” ever since. I have two daughters: Jenna, who is 26, and Liz, who just turned 20. I am a member of First Lutheran Church, Fargo, where I most recently served as secretary/treasurer of its foundation.

What do you like to do in your spare time?
I enjoy sports of all kinds and love attending any local games played by the Fargo North Spartans, the Bison, and the Fargo Force. I also like to cheer on our closest professional teams, the Minnesota Wild, Vikings, and Timberwolves! Even though my average is not very good, I enjoy bowling and am on a league. I also enjoy scrapbooking, reading, being at the lake, and spending time with family and friends.

How long have you been at Heartland Trust Company?
I began working at Heartland Trust Company in April of 2012. Prior to joining HTC, I was employed with Wells Fargo Bank for 30 years, where I held positions in the trust department, ag/business banking, and administration. In my position at HTC, I work primarily with the administration of personal trust, agency and IRA accounts, along with foundation accounts, some conservatorships, and estates.

What is your favorite part about working for Heartland Trust Company?

I am thankful to be part of a company that truly cares about doing the right thing for its clients and helps them reach their goals. We have a great team of employees who work hard but still have fun, which makes it a great place to work.

CHRISTMAS EVE LASAGNA
Brown 1 pound ground beef and one finely chopped onion (or minced onion equivalent).
Add:
14-½ ounce can stewed tomatoes
6 ounce can tomato paste
1 cup water
2 tablespoons parsley flakes
1 teaspoon basil

Seasoned Cottage Cheese Filling:
2-2/3 cup cottage cheese
4 ounces parmesan cheese
1 tablespoon parsley flakes
1 teaspoon oregano

8 ounces lasagna noodles (uncooked)
8 ounces mozzarella cheese

Grease or add nonstick spray to a 9×13 pan. Layer ingredients as follows: ½ sauce and meat mixture, ½ of the noodles, all of the cottage cheese filling, remaining noodles, remaining sauce and meat mixture. Top with mozzarella cheese.
Bake covered at 350 degrees for one hour. Remove covering and bake for 15 minutes longer.

Heartland TrustMeet Mary Carlson
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Tax Moves to Review Before Ringing in the New Year

Here are 10 things to consider as you weigh potential tax moves between now and the end of the year.

1. Reserve time to plan.
Effective planning requires that you have a good understanding of your current tax situation, as well as a reasonable estimate of how your circumstances might change next year. There’s a real opportunity for tax savings if you’ll be paying taxes at a lower rate in one year than in the other. However, the window for most tax-saving moves closes on December 31, so don’t procrastinate.

2. Defer income to next year.
Consider opportunities to defer income to 2018, particularly if you think you may be in a lower tax bracket then. For example, you may be able to defer a year-end bonus or delay the collection of business debts, rents, and payments for services. Doing so may enable you to postpone payment of tax on the income until next year.

3. Accelerate deductions.
You might also look for opportunities to accelerate deductions into the current tax year. If you itemize deductions, making payments for deductible expenses such as medical expenses, qualifying interest, and state taxes before the end of the year, instead of paying them in early 2018, could make a difference on your 2017 return.

4. Factor in the AMT.
If you’re subject to the alternative minimum tax (AMT), traditional year-end maneuvers such as deferring income and accelerating deductions can have a negative effect. Essentially a separate federal income tax system with its own rates and rules, the AMT effectively disallows a number of itemized deductions. For example, if you’re subject to the AMT in 2017, prepaying 2018 state and local taxes probably won’t help your 2017 tax situation, but could hurt your 2018 bottom line. Taking the time to determine whether you may be subject to the AMT before you make any year-end moves could help save you from making a costly mistake.

5. Bump up withholding to cover a tax shortfall.
If it looks as though you’re going to owe federal income tax for the year, especially if you think you may be subject to an estimated tax penalty, consider asking your employer (via Form W-4) to increase your withholding for the remainder of the year to cover the shortfall. The biggest advantage in doing so is that withholding is considered as having been paid evenly through the year instead of when the dollars are actually taken from your paycheck. This strategy can also be used to make up for low or missing quarterly estimated tax payments.

6. Maximize retirement savings.
Deductible contributions to a traditional IRA and pre-tax contributions to an employer-sponsored retirement plan such as a 401(k) can reduce your 2017 taxable income. If you haven’t already contributed up to the maximum amount allowed, consider doing so by year-end.

7. Take any required distributions
Once you reach age 70½, you generally must start taking required minimum distributions (RMDs) from traditional IRAs and employer-sponsored retirement plans (an exception may apply if you’re still working for the employer sponsoring the plan). Take any distributions by the date required—the end of the year for most individuals. The penalty for failing to do so is substantial: 50 percent of any amount that you failed to distribute as required.

8. Weigh year-end investment moves.
You shouldn’t let tax considerations drive your investment decisions. However, it’s worth considering the tax implications of any year-end investment moves that you make. For example, if you have realized net capital gains from selling securities at a profit, you might avoid being taxed on some or all of those gains by selling losing positions. Any losses over and above the amount of your gains can be used to offset up to $3,000 of ordinary income ($1,500 if your filing status is married filing separately) or carried forward to reduce your taxes in future years.

9. Beware the net investment income tax.
Don’t forget to account for the 3.8 percent net investment income tax. This additional tax may apply to some or all of your net investment income if your modified AGI exceeds $200,000 ($250,000 if married filing jointly, $125,000 if married filing separately, $200,000 if head of household).

10. Get help if you need it.
There’s a lot to think about when it comes to tax planning. That’s why it often makes sense to talk to a tax professional who is able to evaluate your situation and help you determine if any year-end moves make sense for you.

—Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2017.

Broadridge Investor Communication SolutionsTax Moves to Review Before Ringing in the New Year
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We Strive to Serve You Well

In an effort to stay engaged with those we serve, we are excited to launch our new company newsletter. We hope we can provide some insightful information to simplify your life, whether you’re tapping into your IRA accounts, administering a 401(k) plan, being named the beneficiary of a trust, or thinking about how to pass on the farmland to your kids.

The years have passed quickly but it is always fun for me to take a look back. In 1990, we opened our doors with two people; today we have grown to a staff of 20. The staff has evolved into areas of specialty that include investments, charitable planning, retirement planning, tax management, 401(k) administration, real estate management, and, of course, trust administration. Today our business is divided into three categories: wealth management (IRAs and investment accounts), trust administration, and 401(k) administration.

We continue to emphasize “being passionate and getting involved,” whether it is at the local or national level. Many of our team members volunteer their time on boards of non-profits or on community commissions. Recently, Brian Halverson, Vice President, was elected to the national board of directors of the Association of Trust Organizations at their annual meeting in Washington, D.C.

As our business evolves and our team grows, the dominant theme that drives our daily activity is Clients First. Our business is one of being a fiduciary. This means that all of our actions and decisions are focused on how they will benefit our clients, not ourselves. Being a “fee only” independent financial services provider helps us eliminate conflicts of interest brought on by commission-based products or pressure from a parent company. Therefore, the decisions we make daily are only influenced by working toward achieving our clients’ goals.

I am eternally grateful for the clients who have been willing to come on this journey with us. From the beginning, we knew that we had an uphill battle to be successful. We have never been part of a bigger organization that could help us grow, nor have we acquired any other businesses. We are proud to have built honest, long-standing relationships based on trust, one client at a time.

As we continue to grow and look into the future, our values (service, character, togetherness, respect, integrity) will provide the foundation for how we serve our clients, community, and team members.

Steve HalversonWe Strive to Serve You Well
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More Than a Trust Company

Before I joined Heartland Trust Company, I knew about its great reputation in our community and throughout the region. I admired this award-winning organization and its dedicated people, but like many others, I also thought the company only managed trusts. After all, the name is Heartland TRUST Company.

That said, managing trusts is only one part of what HTC does each and every day to serve and advocate for the clients entrusted to our care.

Investment accounts

A significant part of our business is devoted to investment accounts like the ones people might have with Fidelity, Edward Jones, Merrill Lynch, Ameriprise, or Wells Fargo Investments. Like these companies, we manage portfolios of stocks, bonds, and more for your retirement, education, and/or other purposes.

But unlike all of those other companies, we choose to adopt the trust fiduciary standard. This means we apply the industry’s highest financial, ethical, and legal standards to all of the services we provide for our clients. We always act in our client’s best interest, even on non-trust investment accounts.

According to a national survey, over 85 percent of investors believe their broker or advisory is a fiduciary who is required to act in a client’s best interest. Truth is, less than 6 percent are.

Because we are a fiduciary, our clients can have peace of mind and confidence knowing that they will have the opportunity to experience better outcomes. Why? We avoid inherent conflicts of interest by not accepting commissions from mutual funds, banks, and insurance companies that negatively impact clients return. We do not have any hidden fees and are independent. As a result, we offer our clients the best products and services in the industry without compromise.

401(k) rollovers

Another part of our business comes from 401(k) rollovers. Retirement planning and saving are among the top priorities for our clients. Why leave your retirement accounts, ESOP, 403(b), or pensions with an organization once you have left its employment?

Employer-sponsored retirement plans are very beneficial to building up your retirement assets, but almost all employer-sponsored retirement plans have limited options available. They do not provide the local, holistic planning, care, and services that HTC provides every day.

Many people also struggle to effectively manage different retirement accounts. We can help you consolidate your balances for easier management, enable clearer understand of account holdings, and facilitate better overall planning.

Small business 401(k) plans

Small business 401(k) plans represent another of segment of our business. One phone call to an HTC retirement plan expert is all it takes to answer your questions.

We manage everything from employee meetings to portfolio offerings, IRS filings and asset transfers, so you can focus your time and energy on growing the business. With our 401(k) expertise and our comprehensive management of 401(k) rollovers, we know all the ins and outs and are truly retirement experts.

Trusts

And, of course, we are honored to provide the most trusted and highest level of financial and ethical care when we manage trusts for the benefit of our clients and their families. We take the worry out of caring for loved ones who are in need of financial assistance. This allows family, friends, and others to focus on what is truly important, caring for their loved one.

We provide transparent, expert guidance and hands-on experience to do what is right. We follow the wishes and honor the legacy of our clients by always striving to keep families and finances together. We work closely with families to ensure we are there when we are needed the most.

To our current clients, thank you for the trust and confidence you have placed in us. It is a responsibility we take very seriously and one we are honored to have earned. If you are not a client yet, why not?

If you know of someone who could use the personal care and expertise of HTC, please let us know. We are always available to help family, friends, and loved ones.

Jon BensonMore Than a Trust Company
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