2019 Federal Income Tax Rates for Individuals

Here is the 2019 Federal Income Tax Rates for individuals who are unmarried and married filing jointly. Included with this year's rates is a 2018 summary for comparison purposes. In addition, the 2019 and 2018 standard deductions are provided.  It is important to note that income ranges have widened in each bracket and the standard deductions have increased. I encourage you to take the time to read this information to determine your potential tax bracket for this year.

If you have any questions, feel free to contact the office at 252-515-0242 or matthewdressel.ifsg@gmail.com.

This posting is for informational purposes only.  It is not to be construed as tax advice.

Unmarried Individuals

Rate	Lower Income Range	Upper Income Range	2018 Income Range
10.00%	$0.00	$9,700.00	$0.00-$9,525.00
12.00%	$9,700.00	$39,475.00	$9,525-$38,700
22.00%	$39,475.00	$84,200.00	$38,700-$82,500
24.00%	$84,200.00	$160,725.00	$82,500-$157,500
32.00%	$160,725.00	$204,100.00	$157,500-$200,000
35.00%	$204,100.00	$510,300.00	$200,000-$500,000
37.00%	$510,300.00		$500,000-

2019 Standard Deduction: 2018 Standard Deduction:

Under Age 65         $12,200.00 Under Age 65         $12,000.00

Age 65 and Over $13,850.00 Age 65 and Over $13,600.00

Married Filing Jointly

Rate	Lower Income Range	Upper Income Range	2018 Income Range
10.00%	$0.00	$19,400.00	$0.00-$19,050
12.00%	$19,400.00	$78,950.00	$19,050-$77,400
22.00%	$78,950.00	$168,400.00	$77,400-$165,000
24.00%	$168,400.00	$321,450.00	$165,000-$315,000
32.00%	$321,450.00	$408,200.00	$315,000-$400,000
35.00%	$408,200.00	$612,350.00	$400,000-$600,000
37.00%	$612,350.00		$600,000-

2019 Standard Deduction:
Under Age 65 $24,400.00
If One Spouse is Over Age 65 $25,700.00
If Both Spouses are Over Age 65 $27,000.00

2018 Standard Deduction:
Under Age 65 $24,000.00
If One Spouse is Over Age 65 $25,300.00
If Both Spouses are Over Age 65 $26,600.00

Control Your Taxable Income by Diversifying Your Investments

One of the keys to successful investing is diversification.  This strategy involves building a portfolio of stocks and bonds with the purpose of minimizing risk while minimizing declines and maximizing gains.  For years this time-proven method of asset allocation has been the cornerstone of investing.  However, there is also another type of diversification that needs to be employed at the same time.  It is tax diversification.  Tax diversification involves building a portfolio of investments and accounts that are taxed differently.  The purpose is to minimize tax risk by preventing an investor from paying too much much in taxes and thus keep more of their income. 

Investments and Accounts can potentially produce three types of income.  These types are ordinary income, capital gains income, and tax-free income.  The first two are taxed differently depending on your federal income tax bracket; they will influence how much tax-free income you will need to offset your ordinary income tax and capital gains tax.  Tax diversification is often overlooked but in this political atmosphere in which some government officials wish to raise taxes, it is more important to understand how to spread out your income.

Ordinary Income taxes are the most common type.  Anyone who earns a salary or wage pays ordinary income taxes.  However, your investments and accounts also pay ordinary income which is taxed at your federal and state income tax rate.  One source of ordinary income is distributions from retirement accounts.  When a retiree reaches age 70 ½ he/she is required to begin taking required minimum distributions (RMD).  These distributions and only these distributions are taxed.  Another source of ordinary income is the dividends produced by investments inside a brokerage account or a non-qualified annuity with a life insurance company.  In addition, interest-paying bank accounts and certificate of deposits are taxed as ordinary income. 

Capital Gains are another type of taxable investment income.  The most common capital gains occur when an investment or property is sold at a profit.  Capital Gains are taxed at a lower rate than ordinary income and in some instances, depending on your salary, are not taxed at all.  Other types of income taxed in this manner are mutual fund capital gains and stock dividends from company stocks held more than 60 days prior to the ex-dividend date.  

Tax-Free Investment Income is the favorite of most.  Investments that pay income which is not taxed allows the payee to keep all of it.  Distributions from retirement accounts such as the Roth IRA and Roth 401(k) are tax-free as long as the account has been open more than five years.  In addition, distributions from 529 College Savings Plans are tax-free.  Interest paid by municipal bond from your home state is also tax-exempt. Dividends from tax-exempt bond funds and ETFs fall into this category as well.  Finally, the cash value inside permanent life insurance policies and dividends from participating whole life insurance policies are not taxable.  

As Ben Franklin said, “in this world, nothing can be said to be certain, except death and taxes”.  Unfortunately, no truer words have been spoken.  However, by diversifying your investment income, it can be possible to minimize your tax risk.  While we cannot avoid taxes, we can plan for them.   An Advisor and a Tax Professional will work with you to devise a plan to help you keep more of what you make. 

If You Would Like a Downloadable Graphic Click Understanding Your Investment Income

Matt Dressel is the Owner of the Independent Financial Solutions Group, a Registered Investment Advisor. He is an Investment Advisor and Life & Disability Insurance Agent.  He can be reached at 252-515-0242 or matthewdressel.ifsg@gmail.com. Securities are offered through Trade PMR, Member FINRA/SIPC.  This article is not to be construed as tax advice.

Do You Have Elderly Parents? You Need to Know About Filial Law

In this day and time, people are living much longer lifespans than previous generations. It is not unusual to see the elderly require some type of nursing home care, assisted living arrangement, or home health care. This long-term care arrangement can last for years and be extremely costly.  Unfortunately, it is not unusual for the individual in a long-term care situation to eventually run out of money.  Traditionally, when this happens, the service provider, along with the individual’s family, have turned to Medicaid to cover the costs.  However, with the Medicaid system becoming more overburdened, service providers could begin to seek payment directly from the elderly’s children.  This is where Filial Law comes into play.

Filial Law places a financial responsibility upon adult children for the support of their elderly parents or relatives who cannot pay for their own care. These laws obligate adult children to pay for their indigent parents/relatives basic needs such as food, clothing, shelter, and medical care. Should the children fail to provide adequately, Filial Law allows nursing homes and other long-term care facilities to bring legal action to seek reimbursement for unpaid bills. Adult children can even go to jail in some states if they fail to provide filial support.

Currently, thirty states have laws that can require adult children to be financially responsible for their parents' necessities when the parents no longer have the ability to pay them.  These states are Alaska, Arkansas, California, Connecticut, Delaware, Georgia, Indiana, Iowa, Kentucky, Louisiana, Massachusetts, Mississippi, Montana, Nevada, New Hampshire, New Jersey, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Virginia, West Virginia.

Currently, very few people know about Filial Law, but there has been little enforcement of this law.  However, according to Charlie Douglas, board member of the National Association of Estate Planner and Councils, filial laws “could be a sleeping giant” when it comes to recovering the cost of caring for the elderly. Douglas points to the findings of a recent court case in Pennsylvania. In Health Care & Retirement Corp. of America v. Pittas, the defendant was ordered to pay $93,000 to cover his mother's outstanding debt to a nursing home.  Douglas adds, with the current cost of nursing home care in the United States running between $7,000 and $8,200/month, it is possible that filial law will be used more.  

Given the current costs associated with long-term care, increasing life-spans, and possible legal ramifications, every retirement plan should include a provision for funding long-term care. An advisor working in cooperation with an elder care attorney can put together a plan to fund nursing home costs through a mixture of savings, investments, long-term care insurance, and family support.

  

Matt Dressel is the Owner of the Independent Financial Solutions Group, a Registered Investment Advisor. He is an Investment Advisor, Life & Disability Insurance Agent and does Financial Planning.  He can be reached at 252-515-0242 or matthewdressel.ifsg@gmail.com. Securities are offered through Trade PMR, Member FINRA/SIPC.  This article is not to be construed as legal advice. 

Life Insurance Benefits for the Living

For many individuals, life insurance is an extremely uncomfortable subject.  It conjures up images of their own mortality and the reality that someday we will all pass away.  In the past, life insurance was only considered useful for paying final expenses and leaving funds for survivors. However, as time progressed, life insurance has developed far beyond providing death benefits

Today life insurance can be used by the living for many different purposes. So, let’s take a quick look at how life insurance can be used for the living.

• Education Funding- If you have a permanent policy such as Whole Life or Universal, the cash value could be very helpful with paying for college. The policy owner may take out tax-free loans from the policy’s cash value to pay for tuition and/or expenses. This strategy could lessen the need for the student to take a loan or supplement any withdrawals from a college savings account. Furthermore, a student may qualify for a greater financial aid amount because current FAFSA guidelines don’t count your life insurance policy’s cash value as an asset.

• Retirement Savings and Building Wealth- Whole Life Insurance and Universal Life Insurance could be of great value due to the buildup of cash value inside the policy. Roth or Traditional IRAs have contribution limits and in some case income restrictions for contributing to these accounts. A life insurance policy may allow you to save more with no limitations on eligibility based on income. Cash Value policies have a history of paying higher interest rates than savings accounts and money markets. Furthermore, the life insurance cash value is free from stock market volatility.

• Retirement Income Supplement- This is another area where the cash value inside whole life insurance and universal life insurance is a great resource. The policyholder may take out tax-free loans from policy’s cash value to supplement retirement income. In addition. Whole Life Insurance can potentially pay dividends to policy owners. These dividends are considered the return of premium and are tax-exempt. Using Life Insurance cash value to supplement your income can be very useful for individuals in high-income tax brackets by helping limit the required distributions from a Traditional IRA or 401(k).

• Living Benefits for Critical, Chronic, or Terminal Illness- Depending on the issuing insurance company, many Whole Life, Universal Life, and Term Life Policies carry some or all of these features. This feature allows the policy owner to access the policy’s death benefit or a portion of it to pay for medical treatments, hospice, and other related expenses associated with one of these illnesses. Keep in mind, these payments are subject to guidelines by the issuing company. Accessing this benefit can preserve a family’s finances from the high cost of medical care so they will not have to dip into their savings or other assets.

Life Insurance has many present days uses in addition to its original purpose. If you don’t have life insurance, perhaps these living benefits will help you consider getting it. If you currently have a policy, now would be a good time to have it reviewed. A financial advisor and/or a life insurance agent can work with you to structure a policy or use your current policy to meet your financial goals. Matt Dressel is the Owner of the Independent Financial Solutions Group, a Registered Investment Advisor. He is an Investment Advisor, Life Insurance Agent and does Financial Planning. Securities provided by Trade PMR, Member FINRA, SIPC. If you have any questions about this article, he can be reached at 252-515-0242 or matthewdressel.ifsg@gmail.com. Disclosures:

1. Distributions, for any purpose, are not taxed under the current law provided the policy avoids Modified Endowment Contract (MEC) status and remains in force. If tax-free loans are taken and the policy lapses, a taxable event may occur. Loans and withdrawals from life insurance policies classified as modified endowment contracts may be subject to tax at the time the loan or withdrawal is taken and, if taken prior to age 59½, a 10% federal tax penalty may apply.
2. Withdrawals and loans reduce the death benefit and cash surrender value. Withdrawals from 529 plans are tax-free if used for qualifying education expenses. 
3. Benefits are subject to the claims-paying ability of the issuing life insurance company.  You should consult a tax professional before taking any distributions.

Scholarships and Grants

It is hard to believe that the new school year is almost upon us.  Very soon students will be returning to classes, meeting new teachers, making new friends, and settling into the routine of the semester.  In addition, many high school seniors will be turning their attention to the next step of their academic career - applying to college and finding a way to pay for it.  When it comes to funding a college education, most students will require some type of financial aid with the most preferred being scholarships and grants.  Scholarships and grants are the most sought-after types of financial aid. However, many students (and their parents) don’t realize they are different.  So, let’s take a quick look at these financial aid vehicles.

Scholarships are awarded to students based on merit. Individual recipients receive scholarships based on their achievements in the classroom, sports, or some other type of activity.  The source of most scholarships is College Departments, Alumni, Businesses, Community Organizations, Religious Organizations, Philanthropists and the Military (ROTC).  Grants are “needs” based.  This means grants are awarded based on the student’s or his/her family’s financial situation.  The sources for grants vary.  While many colleges offer some type of grants, most grants come from the federal and state government.  The most well known federal grant is the Pell Grant; also many states offer grants for in-state students. 

If a student wishes a scholarship or grant, it is important to start the application process early in his/her senior year of high school.  The procedure is fairly simple. First, it is required that a student complete the FAFSA (Free Application for Federal Student Aid).  This can be done online at https://fafsa.ed.gov/.  Next, find out what financial aid forms your college requires. Finally, research and apply for outside scholarships.  In addition, it is recommended that a student and his/her parents talk with the high school guidance or college placement counselor. It is also encouraged that a student and his/her parents schedule a personal appointment with the college financial aid office.  If you are a prospective college athlete, it is very important to register with the NCAA Eligibility Center (formerly the NCAA Clearinghouse) and to meet with your high school athletic director and coach to discuss the recruiting process.

Once a scholarship or grant is awarded, this does not mean that the student is “free and clear” for the rest of his/her college career.  Scholarships and grants have certain requirements for the student to satisfy to keep the award in force. This means a recipient must maintain a specified minimum GPA, course load, and full-time admittance status.  Some scholarships or grants also have a work requirement associated with them that must be met.  In the case of a scholarship athlete (or student-athlete in general), certain minimum NCAA eligibility requirements must be met along with the practice, training, and game commitments.  If an individual accepts an ROTC Scholarship from one of the branches of the armed forces, the student will have drill and Summer Camp commitments.  Upon graduation, Military Service as an officer will be required. 

Given the increasing cost of college tuition plus mounting student loan debt, scholarships and grants are an excellent source of financial aid.  Just remember, these two awards are different and there are obligations that go with them.  Your guidance counselor and the internet are excellent sources of information to help to locate the right scholarship and/or grant to help finance a college education.  Have a Great School and Successful Year!!! 

Matt Dressel is the Owner of the Independent Financial Solutions Group, a Registered Investment Advisor.  He is an Investment Advisor, Life Insurance Agent and does Financial Planning.  If you have any questions about this article, he can be reached at 252-515-0242 or matthewdressel.ifsg@gmail.com. 

Mutual Funds and ETFs

Today’s investors have many different types of investments from which to choose.  The most commonly used vehicles are ETFs (Exchange Traded Funds) and Mutual Funds. According to the independent research firm, ETFGI, $4.6 trillion worldwide is invested in ETFs. At the same time, mutual fund investments amount to $17.4 billion globally according to the research site, mutualfunds.com.  Combined, mutual funds and ETFs account for 70-75% of all investment holdings. They are found in Investment Accounts, Retirement Accounts, and Educational Savings Accounts. Still, in spite of their popularity and widespread use, most individuals know little about these investments beyond the advertisements they see. Providers such as iShares ETFs, Spiders ETFs, Oppenheimer Mutual Funds, Franklin Templeton Mutual Funds and others are widely advertised.


Mutual Funds are a professionally managed portfolio of stocks and/or bonds. Each fund has a specific strategy or focuses such as growth, growth, and income, etc. The goal of the fund is to outperform an index like the S&P 500 or Russell 2000. In order to achieve this goal, the fund manager is constantly buying and selling stocks and/or bonds to increase performance.  This is called active management. Mutual Funds are purchased through a mutual fund company by an investment company or brokerage house and a minimum investment amount is required. Fund prices are set by the fund managers at the end of each business day. Many investors purchase mutual fund shares as part of a periodic investment plan. Investors purchase mutual funds to gain access to stocks or bonds without having to purchase these securities individually. In addition, mutual funds are purchased to provide diversification, build wealth, plus generate income through dividends and capital gain distributions.


ETFs are a professionally managed portfolio of stocks and/or bonds. Each ETF has a specific strategy or focus such as growth, growth, and income, etc. However, the goal of an ETF is to replicate, not outperform, the performance of an index. Since the goal is to replicate an index, there is not as much buying and selling of stocks and/or bonds by the manager. This is called passive management.  ETFs are purchased on the stock exchange through an investment company or brokerage house and no minimum investment amount is required. Investors purchase to gain access to stocks or bonds without having to purchase these securities individually. ETFs are also purchased to provide diversification plus build wealth and generate income through dividends.

Mutual Funds and ETFs have much in common. Both are managed portfolios, offer diversification, and have some type of focus.  There are also key differences with regard to how each is purchased and the goal of each regarding an index. However, the biggest difference is the expenses and management plus capital gains taxes. Mutual Funds have higher internal expenses due to the active management required to “beat the index”; ETFs generally have low internal expenses fund due to the passive management required to “track the index”.  Mutual Funds generally declare capital gains each year which are passed on to the fund investors as taxable gains. ETFs rarely declare a capital gain which can be tax savings.

So, which investment should you use, Mutual Funds or ETFs?  There is no clear answer. Investing money in securities exposes investors to risks including loss of principal; past performance is NOT an indicator of future returns. You should carefully consider investment risks, objectives, charges, and expenses. An advisor and tax specialist can assist with the decision on whether a mutual fund or ETF would be better for your situation.

Matt Dressel is the Owner of the Independent Financial Solutions Group, a Registered Investment Advisor.  He is an Investment Advisor, Life Insurance Agent and does Financial Planning.  If you have any questions about this article, he can be reached at 252-515-0242 or matthewdressel.ifsg@gmail.com. 

SEP IRA: The Retirement Account Especially for the Self-Employed

Since the beginning of 2017, the number of self-employed individuals in the United States has expanded greatly. According to a study by MBO Partners of Herndon, VA from July 2017, the self-employed population increased to 40.8 million individuals and represented 31% of the working population. Here in Carteret County and nationally, this trend is expected to continue. As the self-employed continue to grow their business and income, many will also begin to think about ways to fund their future retirement. If you are self-employed, have freelance income or a small business owner, a SEP IRA (Simplified Employee Pension) could be appropriate for you. A SEP IRA is a Traditional IRA specifically designed for these individuals. Contributions are made by the business into an IRA held in the self-employed individuals' name or the employee’s name. For an employee to receive this benefit, he/she must be at least 21 years old and has been an employee for 3 of the last 5 years. Contributions are considered tax-deductible to the business.

When it comes to making contributions to a SEP IRA, there are several important points that employers and employees need to know. First, employer contributions are not discretionary and cannot discriminate against highly compensated employees.  An employer can exclude employees with earnings under $600 and non-resident aliens with no source of U.S. income.  Contribution limits for 2018 are 25% of a participants pay or $55,000, whichever is less. If you are a self-employed individual, contributions are based on your self-employment income minus 50% of any self-employment taxes that have been paid. The deadline for establishing and contributing to a SEP is the employer tax filing deadline including extensions. Since SEP is a Traditional IRA, an employee may elect to make a separate contribution in their own name as well.  The Individual Contribution Limit for 2018 is $5500 plus an additional $1000 catch-up contribution for individuals who are age 50 years and older.  All contributions are immediately vested at 100% and the employee directs how they are invested. Finally, the employer does not have to make ongoing contributions.  

A SEP IRA is a great way for the self-employed individual to save for retirement as well as the small business to reward/retain its employees.  The plan requires minimal paperwork and tax filing documentation. Before establishing a plan, it is important to discuss the IRS regulations governing a SEP with a tax professional.  After speaking with a tax professional, an advisor can establish the SEP and recommend the appropriate investments. 

Matt Dressel is the Owner of the Independent Financial Solutions Group, a Registered Investment Advisor.  He is an Investment Advisor, Life Insurance Agent and does Financial Planning.  If you have any questions about this article, he can be reached at 252-515-0242 or matthewdressel.ifsg@gmail.com.