Each year, new legislation is proposed, new regulations are implemented, and new inflation-adjusted limits are set that could affect your finances for the year and could also have long-lasting implications.

The challenge we all face is that these proposals, regulations, and limits are not announced on January 1. This can make planning more challenging but does not make it insurmountable as long as we act on the information as soon as it becomes available.

Do you have all the latest information you need to plan appropriately for 2022 and beyond?

Make sure during this  discussion with Kami Elhert and Tom Gibson, CPA, as they review some of the items that may have an impact on your 2022 finances and how to best position yourself to minimize or take advantage of their effect, including:


Transcript (edited for clarity)

Kami Elhert: Good morning, and thank you for joining us for today’s webinar, What you need to know for 2022.

Each year new legislation is proposed, new regulations are implemented, and new inflation-adjusted limits are set that could affect your finances for the year and could also have long-lasting implications. The challenge we all face is that these proposals, regulations, and limits are not announced on January 1st. This can make planning more challenging but does not make it insurmountable if we act on the information as soon as it becomes available.

Joining us today is Tom Gibson, one of TSP Family Office’s, Tax, and Financial Strategists. Good morning, Tom, and thank you for being here.

Tom Gibson: Good morning, Kami.


Elhert: New legislation has been proposed based on the SECURE Act, cleverly being referred to as the SECURE Act 2.0. Tom, what is being proposed in this legislation, and how may it affect our listeners?

Gibson: The SECURE Act 2.0 is an expansion of the original SECURE Act, which changed about 40 years of retirement planning. This measure passed the House with very broad-based bipartisan support. There is a similar measure in the Senate. I think it’s probably going to pass there as well. So, unlike the Build Back Better Act that we spent most of 2021 talking about, and nothing happened, I actually think this legislation is probably going to pass.

Required Minimum Distributions Penalties

With the SECURE Act there are several provisions, some of which definitely are going to impact our clients, others maybe not so much, but the first one has to do with required minimum distributions (RMD). Required minimum distributions for traditional IRAs, 401(k)s, really any type of pre-tax retirement plan begin at age 70 ½ currently. We’re going to talk about a change coming in that respect as well, but you begin whether you want to or not, whether you need it or not. You must start pulling money out of your pre-tax retirement accounts. That’s called a required minimum distribution. It’s based on life expectancy. And, if you fail to do so, it has one of the stiffest penalties in the Internal Revenue Code. If you don’t take your entire RMD in the required time period, you will get hit with a 50% tax.

So, if your RMD for that year was $100,000 and you didn’t take it out, guess what? You’re going to pay $50,000 in taxes as a result. So the SECURE Act, they’re being too good to us again. They’re going to drop the penalty to only 25% of the RMD. And, if you have a good cause – maybe you were sick, or maybe your financial adviser gave you some bad advice – that penalty can be further reduced to 10%.

We’re going to talk about the landscape of after-tax retirement arrangements, Roth-type arrangements. Just a reminder, one of the benefits of a Roth IRA is that you do not have to take required minimum distributions. And so if you don’t have to do it, then you don’t have to worry about penalty.

Required Minimum Distributions

At age 70 ½, you must start taking RMDs. SECURE Act 2.0 would raise that, and it’s going to raise it over a period of about 10 years. But you could conceivably wait until age 75 before you begin having to take RMDs out of your account. That is going to buy you an extra few years for the money to grow inside the plan tax-free. But on the flip side, remember, it is based on life expectancy. So if you start to take the money out later, the chance is very good that the RMD is going to be larger at that point. But again, I view that as a positive change for folks who do have money in pre-tax accounts.

Auto-Enrollment in Retirement Savings Plans

Next, auto-enrollment in retirement savings plans. All 401(k)s, 403(b), 457 plans have criteria that a person has to meet to be included in the plan. The SECURE Act would make some changes there – it would have an auto-enrollment feature. If you have an employee and who has worked the sufficient amount of time, he or she would automatically be enrolled into a 401(k) plan. Further, the employer would automatically begin to withhold 3% of the salary to go into the 401(k) plan.

At the first blush, this sounds like a forced savings plan. It is not. The employee can opt-out and contribute zero into the 401(k) or anything up to the maximum contribution into the 401(k). They’re not taking away your ability to choose. A lot of folks won’t really think anything about it, and they’ll be automatically enrolled, which of course means if you do a match on the 401(k) plan, those folks who are enrolled automatically would be eligible for whatever the matching policy for your plan is.

There are some carve-outs here. Businesses with fewer than 10 employees, businesses that have been in operation for three years or less, and designated retirement plans for churches and – wait for it – government agencies will be exempt from this. Again, this is just another way to encourage people to save for their own retirement. The thinking behind it probably is most folks will participate and never even notice. They’ll have that first check where they have 3% withheld, and they’ll look at their stuff to see what it was. And then they’ll decide, well, maybe this isn’t such a bad idea and keep contributing to the plan.

One other note, if your 401(k) or 403(b) plan is in place prior to the passage or the potential passage of this act, it would not be affected by this. This is just for new plans going forward, at least at this point.

Incentives for Contributing to a Retirement Account

Another little kind of nothing provision in the SECURE Act 2.0 act is incentives. You can incentivize folks to contribute to the 401(k) plan. Now, the match is the biggest incentive for most folks. If they’re going to get matched on 3% of their salary, then it’s in their best interest to take that free money and put 3% of their own and get the employer match. This is a little different. You can give your employees small incentives like gift cards to encourage them to enroll in the 401(k) plan. Now, I don’t know if a $25 Walmart gift card is going to be the deciding factor for anybody, but you can do it if you think it will help.

Larger Catch-Up Contributions

Another provision, which is a good provision, is larger catch-up contributions for 401(k)s. If you are 50 years old, you’re eligible to make what are called catch-up contributions above the normal 401(k) limits. And so, if you’re in a 401(k) or 403(b) plan, you can put up to $6,500 above the $20,500 maximum deferral amount. And it’s exactly what it sounds like. It’s an opportunity maybe to catch up on some contributions for whatever reason that you didn’t make earlier in your working career.

Under the SECURE Act 2.0, if you are age 62, 63, and 64, you’ll be able to put in even more. If you fall in that age range, you would be able to put in up to an additional $10,000 for 401(k), 403(b), and an additional $5,000 if it’s a simple IRA, and they’re going to index those additional catch-up contributions for inflation. Just like the standard deduction, that’s going to go up every year going forward. And again, that’s definitely a good thing. But an even better thing is if you’re contributing to the Roth side of your retirement plan if you have one available.

Employer Matching Funds for Student Loan Repayments

This next one is one is a little bit controversial – the ability that employers have to match and put money into the 401(k) based on employee student loan payments. Many people have to do a juggling act: Do I want to pay down my student loan debt? Do I want to get that knocked out? Or do I want to put money into the 401(k) plan. Depending on a person’s temperament and on the interest rate on their student loan, they may decide to concentrate on the student loan first. I’m going to get that knocked out, and then I’m going to really start contributing to my pension plan at work.

What they’re missing in those years that they’re not contributing is the tax-free growth on those funds. But because they’re not contributing, they’re also missing the employer match. This provision came out of a 2018 court case. The employer was contributing into the 401(k) plan on behalf of employees, so the employee wasn’t putting in anything. But the plan was doing a match for folks who were paying down their student loans. The IRS says that’s fine. Participation in this is completely voluntary. The employee has to elect to enroll in this arrangement. But again, I can’t imagine a situation in which if somebody’s giving you free money, you would turn it down. So again, another positive development.

Now, overall, and I meant to say this at the outset, overall, this is not a bad bill. I was pleasantly surprised as I started going through it. It’s certainly a much better bill than the SECURE Act 1.0 was because that act took a lot of things away. This act is actually giving some things back.

Finding Old 401(k)s

Another provision is to set up a nationwide database to allow you to find old 401(k), 403(b), 457 money that you may have forgotten about. That happens sometimes: You’re with an employer, you sign up for 401(k), and you leave a year later. You don’t roll it out into an IRA, and then you forget about it or lose track of it. This provision would set up a nationwide database that would allow you to locate those funds. Many of you are aware that most states have a website for unclaimed property, and I’m sure this would work in a very similar fashion. And again, it’s not a bad thing at all. So another positive part of this legislation.

Qualified Charitable Distributions

Another enhancement to the proposal is the qualified charitable distribution rules. We talked about this a little bit earlier. When you are at the stage when you are required to take RMDs, the qualified charitable distribution rule is kind of a workaround for folks. They must take money out. They don’t really need it. And if they are charitably inclined, they can transfer up to $100,000 tax-free out of their traditional IRA to the charitable organization of their choice. Now, the money must be transferred directly to the charitable organization. You can’t pull it out and then give it to the charitable organization. That would just be a normal charitable gift. This takes the place of your RMD. So, if your RMD is $100,000 per year or less and you would prefer to give that money to charity, this enables you to do that. Again, the transfer needs to go directly to a charitable organization. You can’t transfer to a donor-advised fund, to a charitable gift annuity, or to a charitable remainder trust. It must go straight to the Red Cross or the University of Tennessee or whomever you want to gift.

Roth Contributions

This next provision is one that I find extremely helpful: The ability to make Roth contributions to various types of pension plans is going to be expanded significantly if this measure passes. At this point, any 401(k) plan can have a Roth side of the plan. For those of you who have been clients for a while, one of the things we asked for early on is a copy of your plan documents for your 401(k) plan. We have often found that there’s already a Roth side of the plan, but nobody knew it existed. It’s in the plan documents. In other cases, any 401(k) plan can be amended to allow for after-tax or Roth contributions and to allow for what are called in-plan conversions. You can simply move money from the pre-tax side of the plan over to the after-tax side of the plan. And it makes it very easy to accomplish the Roth conversion strategy.

This new legislation is going to allow you to put the catch-up contributions that we talked about just a moment ago into the Roth side of the plan directly. It allows the employers to begin to match on the Roth contributions. A lot of times, the employee match on a 401(k) is only on the traditional side of the plan. And you’ve heard me give that advice. If the employer is going to give you free money, get the free money, and we’ll figure out how to get it into a Roth environment a little bit later.

This is a big improvement, and it gives me hope because right now. As most of you know, we’re kind of under a deadline for Roth conversions without regard to income. At this point, those provisions are going to sunset at the end of 2025. Here we are looking at the expansion of the ability to do Roth conversions, and even beyond that, an expansion that would allow 403(b), 457(b)s to have a Roth side of the plan. I don’t really think Roth conversions are going anywhere. I would love to see something added onto this bill that would take away that 2025 deadline, but this is very encouraging. You’ve heard us preach ad infinitum on the advantages of Roths over the long term. And I’m not seeing anything in this legislation that leads me to believe they’re going to scale back on that. Hopefully, they’ll knock out that 2025 deadline. And we’re not going to change anything if we’re in the midst of doing a Roth conversion with you until the law changes. We need to assume that we’re not going to be able to do this after 2025 if you have some pre-tax money that we’re trying to convert. But as I said, any plan can be modified, and you can start contributing to the Roth side of your existing pension plan. Right now, there’s nothing that’s keeping you from doing that other than the plan not allowing it.

Part-Time Workers’ Retirement Plan Eligibility

Another feature has to do with part-time workers. And this is a pretty large change. Normally, the requirement for participating in a retirement plan is 1,000 hours or, really, 500 hours for two out of three years or up to three consecutive years. If you work 500 hours for three consecutive years, you can enroll in the 401(k) plan. The SECURE Act is going to drop that back to two years. And again, the idea is to get more people putting aside more of their own money toward retirement, which, of course, is in their best interest.

I wish something like this had existed when FICA came into the code during the Roosevelt administration. If you had enforced savings and an employer match and that had been invested with any type of return, folks would be a lot better off in terms of their retirement savings. So again, not a bad thing at all. 403(b) plans, which are predominantly nonprofit and governmental plans, are going to have some enhanced investment options. Again, we think this is a very positive result.

Small Business Tax Credits

There are also small business tax credits. These are some small provisions. Mainly, they are an effort to incentivize companies to set up 401(k) plans for their employees. There’s a credit employers with up to 50 workers can use to offset part of the cost of establishing a 401(k) plan. So again, all of these are very positive developments. Nothing wrong, really, with any of them. And they’re not really taking very much away here. Plus it’s opening up possibilities, particularly in the Roth area.


Elhert: Thank you, Tom. Next time, can you talk a little bit about the SALT cap?

Gibson: SALT stands for state and local taxes. The Tax Cuts and Jobs Act, which passed at the end of 2017, placed a $10,000 cap on how much you could deduct in state and local taxes. If you live in Florida or Tennessee, that probably didn’t hurt you too badly if you live somewhere where there’s no state income tax. If you live in one of the Northeastern states or California, for example, you were paying significantly more than $10,000 in state and local taxes. As a result of that, a lot of those states got together and filed suit to try to overturn the $10,000 cap. It wound its way through the federal court system. It got all the way to the Supreme Court, and the Supreme Court declined to hear the case. So the SALT cap, again, like so many provisions in The Tax Cuts and Jobs Act, is going to be around at least until the end of 2025.

Cryptocurrency Tax

Elhert: Tom, a lot of people are interested in cryptocurrencies. What changes are being proposed or have been implemented with respect to cryptocurrencies?

Gibson: It’s really not so much changes because the IRS treats cryptocurrency as property. So the taxation on cryptocurrency is not terribly different than the taxation on stocks or precious metals or anything like that. If you hold the investment for less than a year and you sell it and have a gain, that would be a short-term capital gain. It would be taxed at ordinary income rates. If you hold it for more than 12 months, it would be considered a long-term capital gain and, for most of our clients, it would be taxed at the 20% top rate. Now, there is the net investment income tax, or what a lot of folks refer to as the Obamacare tax, on top of that. But just in terms of the raw federal tax rates, it’s going to be your marginal tax rate, or it’s going to be 20%. That is how it will be taxed when you sell out of it.

Opportunity Zones

A question that came up with a client that had to do with the opportunity zone strategy that we’ve talked to a number of you about. Opportunity zones, again a Tax Cuts and Jobs Act addition to the code, allow you to defer paying the tax on capital gains. It can be a long-term capital gain. It can be a short-term capital gain. It doesn’t matter.

The opportunity zone was an effort to encourage investment into areas that were considered to be economically disadvantaged. That sounds like you’re investing into a slum area, but at least for the projects that our clients have participated, that’s not the case at all. The big payoff for this strategy is not deferring paying the tax. In fact, depending on what the tax rates do, that’s something that adds a little element of uncertainty into this because if the long-term capital gains rate is 20% today and I defer paying that tax for seven years, I’m going to pay the tax at that point, at whatever the long-term capital gains rate is then. So if it goes up to 25%, seven years down the road, that’s what I’m going to pay in terms of the tax bill at that point. Same thing for short-term gains, which would be taxed at ordinary income rates. So there’s a little bit of uncertainty.

If the opportunity zones were only about kicking the can down the road for seven years, I would probably say it’s just not worth it. However, there is a second feature of the opportunity zone. If you make a sale this year, invest the gain, not the total proceeds, but invest the gain into an opportunity zone, the gain comes off of your return for the current year. Seven years down the road, you pay the tax at whatever the tax rates are at that point. If you hold that investment for 10 years and then sell out of it, all of the capital gains on that second sale are completely tax-free. And that’s the big payoff. You all have heard me say this about the real estate investments that have the potential for going into conservation. It must make sense as business proposal. Double that for the opportunity zones. It has to be something that you think there will be the potential for a significant gain 10 years down the road because, if there is a gain, you’re going to get all of that again, completely tax-free.

Electric Vehicle Tax Credits

Elhert: Thank you. Another big topic today is the environment, and we’ve entered this green era. What is happening with electric vehicle credits?

Gibson: Electric vehicle credits have been a part of the tax code for a number of years. People are purchasing more electric vehicles. 3.47% of the new vehicle registrations in 2021 were electric vehicles. California has the highest percentage. About 35% of the new registrations in California were electric vehicles. Unsurprisingly, the luxury brands are the lion share of these new registrations. So Teslas, BMWs, Audis, Mercedes, things like that. Currently, there are about 10 million, or at least in 2021, there were about 10 million electric vehicles on the road. So there’s definitely been a push.

If you’ve been a client for any length of time, you’ve heard me say the Internal Revenue Code is not simply about collecting revenue. It’s about incentivizing and disincentivizing certain types of economic behavior. And one of the incentives to get folks to consider purchasing electric vehicles is that $7,500 credit that you could potentially be eligible for. I’ve also said more than once, don’t look for logic in the annals of the Internal Revenue Code because the same tax code that incentivizes electric vehicles also incentivizes passenger diesel or gas-powered vehicles that weigh more than 6,000 pounds. And so, you’ve got these dueling parts of the code.

Now, there is one thing you must watch out for a little bit. And at this point, the requirements are pretty much met. The vehicle must be purchased after December 31st, 2009. That’s how long this has been in the code. It needs to have a traction battery. The battery needs to have at least a four-kilowatt-hour capacity. It needs to use an external plug-in recharging system, needs to have a weight rating of up to 14,000 pounds because electric vehicles obviously are a lot heavier because of the batteries. And it needs to meet emission standards, which is probably pretty easy in an electric vehicle. Just a reminder, a lease will not qualify you for the credit. It must be a purchase. Also, the credits tare given out or doled out by the manufacturer. A lot of clients are really interested in the Teslas. Tesla has been out of credits since last year. Chevrolet, interestingly, in a different price point in the EV market, is out of credits.

But the credit, again, can be up to $7,500 for a new vehicle. I don’t really see the electric vehicle credit going anywhere regardless of what happens in midterms, regardless of what happens in the next presidential election. It’s just kind of a fixture in the code at this point.

Health Savings Accounts (HSAs)

Elhert: Thank you. How about changes to HSAs?

Gibson: We’re big fans of HSAs. If you can have a health savings account, there have been no major changes in the deductibles and out-of-pocket limits that you must have in the plan for it to be considered HSA insurance. You must have a certain type of health insurance. It’s called a high deductible plan. And they really didn’t make a lot of changes from 2021 to 2022 on those limits. I think the maximum out-of-pocket limit went up $50 for folks who have a single plan. It went up $100 if it’s a family plan, but again, not a very significant change. But the limits that you can contribute to the plan did go up. Again, not a huge change: $50 for an individual, so we went from $3,600 if you’re a single person, up to $3,650 for this year and if it is a family plan, it went from $7,200 up to $7,300.

But there are advantages of the health savings account versus, say, a flexible spending account, which is what a lot of folks have, and is just a part of their Section 125 of their Cafeteria plan at work. A flexible spending account, just as a reminder, is a use it or lose it proposition. You’re able to put money into the plan in pre-tax dollars, and then you’re able to pay for prescriptions, eyeglasses, co-pays, and deductibles out of the flexible spending account. But if you leave money in the flexible spending account at the end of the year, it reverts to the employer. With a health savings account, that’s your money, and it moves with you when you change jobs.

The other benefit, if you don’t have high healthcare costs for that year, any money that’s left in the plan just rolls forward to the next year. And ultimately, as we get older, our healthcare costs do tend to go up. And so, setting aside money over time, knowing that that money is going to be available in retirement, is an excellent idea. And with an HSA, of course, you get a deduction for funding.

Elhert: Tom, quick question for you on the HSA. If, for example, you are a family filing jointly and you can put away $7,300 this year, if you have already rolled over $3,000 so you’re starting the year with $3,000, does that mean you can only put in $4,300, or can you put in the full $7,300?

Gibson: You can fund the full amount every year. You don’t have to, but you can fund up to $7,300. So if you had a year where you had no healthcare expenses, which is pretty unlikely, but if you did, you would roll into the end of the year with $10,300 in your HSA.

Elhert: So it really offers the opportunity to build up a savings that can be used solely for your healthcare as you get older.

Gibson: Absolutely.

The Billionaire Tax

Elhert: Another tax that has been proposed that I know many of our clients are curious about is the Billionaire Tax.

Gibson: Yes, the Billionaire Tax. This keeps coming up over and over again. And as confident as I am that the SECURE Act 2.0 is probably going to pass, I’m equally confident that this isn’t. Even Democrats outside of the administration are having a hard time getting a lot of backing for this.

I’m going to give a quick history lesson at the outset because this is being sold as a billionaires’ tax. If we go back to 1969, when I was six, the Treasury Secretary was testifying before Congress that there were 155 families in the United States that had $200,000 of income and they didn’t pay any federal income tax. Well, we’ve got to do something because $200,000 in 1969 was the equivalent of about $1.170 million in current dollars. So they passed a measure called the Alternative Minimum Tax (AMT), and it was an effort to make sure that people paid their fair share. Initially, the AMT, I guess, applied to 155 families. Over time, however, the AMT began to apply to more and more and more people. And it really is an alternative minimum tax. The AMT computation begins with your taxable income under the ordinary tax system, and then you begin to add back what are called preference items that can be certain types of accelerated depreciation. There are several preference items. Interestingly enough, going back to state-level taxes that we were talking about a minute ago, the biggest single preference item that was pushing a lot of the clients that I was working with in New York and California into AMT again was the ability to deduct those $70, $80, $90 thousand state and local tax bills because you had to add that back for the alternative minimum tax computation. So initially, what was touted as only applying to the super-wealthy, over time, began to apply to a number of other folks that it was never Congress’s intent, I don’t think originally, to have it applied to. I said all that to say saying this is only going to affect the super-rich is, I think, at best a gross simplification of what this would do over time.

First, this is not an income tax, although it includes taxable income as one component. We talked about this under the Build Back Better ad infinitum webinars that we did. There is a move to tax folks on their unrealized capital gains. Last year, the stock market was doing okay. If you had more than $100 million of net worth, that’s where this kicks in. You would pay a 20% tax, minimum 20% tax, and they would compute that tax taking into account paper gains that you had on stocks. There’s a lot of other things that enter into it. This is long on rhetoric, but it’s kind of short on specifics as to how this would actually be applied.

So let’s say that you own a business, and you going to need to get an evaluation of the business every year for the purposes of this. Or things like what if I’m up this year and we go from 2021 to 2022 in terms of what the stock market is doing, do I get credit for the fact that my net worth has dropped this year? Well, they do have a provision in there but again, the devil with tax legislation, more often than not, is in the details because Congress passes laws. The Treasury Department actually is the one who comes up with regulations on how the laws apply. So not a lot of clarity here. But as I said earlier, mercifully, I don’t really think this is going anywhere at all.

Elhert: Tom, it also raises another question for me. You said that it’s based on your net worth. Your net worth is not necessarily liquid.

Gibson: That’s right.

Elhert: So you may be subject to this tax, but not have the liquidity to actually pay the tax, which would require sale of stock.

Gibson: Assets. Exactly. I think that is as much political theater as anything else. Elon Musk paid the largest tax bill in the history of the United States. And if you look at who’s actually paying the taxes in this country, last year, about 60% of Americans did not pay any federal income tax. It’s obviously weighted towards the top-end of the economic spectrum because we have progressive system – and I mean progressive in the terms we have a graduated tax system so that folks making less are typically paying a smaller percentage of the income. But as I said, I don’t really think much is going to come with this, although I continue to worry about the mischief that could occur in what I expect will be a lame-duck session of Congress after the congressional elections in November. Because if I had just lost my spot in the House of Representatives, in the Senate, what do I care? I’ve already lost. I can vote for anything I want to at this point.

Cannabis Taxes

Elhert: Another hot topic right now, similar to cryptocurrencies, is cannabis.

Gibson: Yes, cannabis is one of those weird ones. We have clients who are invested – I can’t think of any of my clients who actually are involved in a cannabis farming operation – but they’re invested in funds that own cannabis farming operations. I’ve got a couple of clients who have hemp farming operations. And cannabis is one of those weird things in the tax code. It is legal in a number of states, certainly for medicinal use. Some states below a certain amount for recreational use. But it is not legal at this point at the federal level. And if you want to find out what happens, even if you’re engaged in a legal activity – illegal because it’s not legalized at the federal level – you still must pay federal income tax on it. If you don’t, if he was still alive, you could check with Al Capone and see what happens. For those of you who have seen The Untouchables, Capone didn’t go to jail because of the St. Valentine’s Day Massacre, because of the prostitution operations he was involved in, all the other stuff. He went to jail because he didn’t pay federal income tax. That’s what they actually got him on. So Congress, even though they have not shown any significant move to make cannabis legal at the federal level, nevertheless, they’re finding additional ways to tax it. There’s a new excise tax that’s on the table right now. It has not been passed, but it would be an additional tax on cannabis farming operations, primarily on the manufacturer side of things, but just another tax.

Elhert: I do have a couple that have come through. First, earlier, Tom, when you were talking about the qualified charitable donations, and you mentioned that the donation needs to be made directly to the charitable organization. Are you then able to still claim a tax deduction based on that donation?

Gibson: Now that’s an excellent, excellent question. The money that you distribute to the charitable organization is in lieu of your RMD. So if your required minimum distribution is $100,000 or less, conceivably, you could route $100,000 to a charitable organization. It counts as having fulfilled your RMD requirements, so no associated penalties from that. But you can’t double-dip. It’s one or the other. If you’re giving it to the charitable organization, you cannot then turn around to take $100,000 charitable gift because you’ve excluded $100,000 of what would have otherwise been income by doing this. So it’s one of the other, not both together.

Elhert: Thank you. And one more question. We’ve all been watching the stock market go down, down, down. It continues to go down. What are the opportunities to either take advantage or to safeguard ourselves against that drop? Can we sell and take a loss on that investment?

Gibson: I’m going to give you the perspective of a CPA, not somebody who has Series 7 license. This is not to be construed as investment advice, but from a tax standpoint, remember, capital losses are deductible to the extent of capital gains, or if your capital losses exceed your capital gains, you get to deduct the princely sum of $3,000 per year. I saw a tax return the other day where they had this very large long-term capital loss that they are deducting at $3,000 a year. Now, if they have some capital gains later on down the road, well, obviously, they can offset those with those capital losses that they’re carrying forward. But I think the worst thing that you can do in this environment is to panic and sell if you have the ability to ride this out. I think over the long term – I’m not sure exactly what the long term means precisely – but the best thing you can do is just not to make any rash decisions when the market is as volatile as it has been.

The other thing to keep in mind is when the market is down, there is a lot of herd mentality in the stock market. And so, when the market is really doing great, everybody thinks I need to get in on that, and they start buying in as the market is going up. When the market starts going down, oh, gosh, I need to get out, and folks start doing that. One of the methods that’s been around forever and that makes an awful lot of sense, is called dollar-cost averaging. A lot of folks do this with their investments. If they’re setting aside a specific amount of money every month and they’re putting that into the market, they do that every month. They’re not trying to time the market. They know sometimes it’s going to be up. Sometimes it’s going to be down and buying in the dips. If it’s a sound, solid company, that’s not such a bad thing either. So as is the case most of the time, even with the situation that we’re looking at now there are some buying opportunities out there if you have the ability to wait this out.

Elhert: Those are all the questions that we have for today. Tom, thank you for joining us. And thank you to our listeners.

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