Now IRAs Can Be as Good as Gold
QUESTION: For years, I have wanted to invest my individual retirement account money in gold coins, but couldn’t because of the rules against it. I haven’t heard anything that makes me think there has been a change in that rule, but tax reform changed so many things, I thought I’d ask.--D. K.
ANSWER: You’ll be glad you asked. Assuming you are one of the fortunate few who can still get a tax deduction for contributing money to an IRA, you can now choose to invest that money in gold coins. Investments in silver coins also will be allowed beginning this year.
Be careful, though. Coins set in jewelry are still outlawed as IRA investments, as are such collectibles as works of art.
Q: My sister, who lives in Michigan, tells me she recently heard about an interesting new way to finance a college education. Since my daughter is less than two years away from going to college, I am interested in all the money-saving ideas I can get. As she tells it, parents give money to the college of their choice several years before their child begins school, and the money earned on that is exempt from the parents’ taxes. Do you know anything about this?--W. Y.
A: “Tuition futures” is the name that Michigan and Pennsylvania educators have given this new ploy for saving money for college.
The way this works is basically as you described it. Parents give the participating state government or private college an amount of money predetermined by the institution. Depending on the plans, that must be done either upon the child’s birth or over a period of years, beginning well before the student enrolls in college. (If your daughter is only two years away from college, it is probably too late for you to participate in one of these plans.)
In exchange for getting the tuition money so many years in advance, the school guarantees the cost of tuition and isn’t allowed to increase that sum even if educational costs go up before the child gets to school.
The money is invested by the school system over the years to help build the size of the fund.
Why is there any advantage to doing this? Couldn’t the parents do the same thing themselves? Yes, but the beauty of this plan is that the parents don’t pay taxes on the interest as it builds up because they don’t actually receive the money. The school does.
So far, only Duquesne University in Pennsylvania and the Michigan school system have latched onto this tuition savings plan. But 20 other states, including California, are considering it.
You should know, however, that the Internal Revenue Service also is considering it. Some in the IRS think the plan smacks of yet another tax dodge for the rich. A ruling on whether the federal agency will permit the interest to escape taxation is expected later this year.
Q: I am planning to move cross-country. But before I do, I want to check whether moving expenses are still tax deductible. Are they?--S. S.
A: Under tax reform, taxpayers who don’t itemize their deductions lose the ability to deduct moving expenses. What wasn’t changed is the requirement that moving expenses must be related to the taxpayer’s employment to be tax deductible.
The change lawmakers made to the moving expense writeoff is rather technical. From this year on, taxpayers with employment-related moving expenses deduct those expenses from their adjusted gross income--that is, gross income minus such deductions as travel and entertainment expenses--rather than from gross income.
This has no effect whatsoever on the value of the moving expense deduction. Rather, the bottom line is that taxpayers who don’t itemize their deductions lose this deduction altogether.
Q: I haven’t seen any mention of whether the tax law governing taxation of prizes changed with tax reform. Do you know?--W. E.
A: It did. Until this year, monetary awards and prizes recognizing literary, artistic, educational, civic, scientific, charitable or religious achievements weren’t taxable.
Now, the only way such awards escape taxation is if the recipient assigns the prize or award to a charity or if the award is given by an employer to an employee in recognition of safety or length of service.
