Is my Home Equity loan interest still deductible?
Prior to 2018, mortgage interest on $1M primary mortgage and Home Equity loan interest on a loan up to $100k were deductible on your Schedule A itemized deduction form of [...]
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Filed under General, Miser Tip, Personal Finance
non-deductible IRA distributions?
This question came up recently with a client that had both Non-deductible contributions in an IRA mixed with Pre-tax (deductible) contributions. When you take a withdrawal how much is taxable? It is called the Pro-Rata rule with the IRS and you have divide your after tax contributions by the entire retirement balance to figure out non taxable basis.
Kudos to Wells Fargo for putting out this great info sheet that explains the whole thing: https://www08.wellsfargomedia.com/assets/pdf/personal/investing/retirement/taxes-and-retirement/pro-rata-rule.pdf
IRS videos
Did you know that the IRS has short video tutorials on a variety of topics? These videos discuss individual tax items as well as questions small business owners might have regarding payroll withholdings and retirement plans:
Time to adjust your tax withholdings?
As we wrap up the 2017 tax year and look forward to the tax cuts of 2018, many are wondering if they should adjust their withholdings? In my small sampling statistic, about 85% of the clients I do taxes for will see a benefit from the 2018 Tax Cuts. Those that are still earning a regular paycheck have the option of adjusting their current withholdings to keep more money throughout the year or simply wait and get a refund when they file next year.
Whether you did your own taxes or worked with a tax pro, you should have gotten an estimate on what your 2018 taxes would look like based on the new rules. From there you can figure out if you need to adjust your withholding’s through your employer by submitting a new W4.
So how do you make the decision on what to put in your W4? The IRS has a withholding calculator to help you get closer to your actual tax liability under the new rules here: https://www.irs.gov/individuals/irs-withholding-calculator
Once you determine any changes you need to make, fill out a new W4 and hand in to your payroll department: https://www.irs.gov/pub/irs-pdf/fw4.pdf
Does the news affect the markets?
A communication that I sent out to clients this morning, along with a picture that to me shows the predestined potential market moves ahead:
“Another week, another headline out of DC as the Chief Economic Advisor, Gary Cohn resigned. Last week it was tariffs, this week a departure, next week it will be something else.
The market initially gapped down overnight Wednesday on the news of Cohn’s departure but promptly worked its way higher the next day to close relatively flat. Today (Friday) morning we are gapping higher premarket on good jobs numbers. (don’t be surprised if we close a little lower today, as we are still in a consolidating sequence in the market)
Why does news sometime matter and sometime not? The market is made up of humans around the world that trade based on news flows, but the only thing that matters is where the market stands at the daily close. Sometimes news events will matter but many times it is simply noise for short term traders to try and capitalize on.
There are many in the academic field that will try and tell you markets are “efficient” meaning that they price in all known and unknown information and that no one has an edge. However, any time you have something controlled by human beings, there is no possibility of it being fully efficient. There are to many opinions, biases and emotions at play for the market to fully price in everything. That is the reason we get gap downs and gap ups on various news flow. At the end of the day it isn’t the news that matters, it is the markets reaction to the news that matters.
I’ve been at this long enough to learn to be skeptical of the news, yes I see the headlines but instead of letting it steer my biases, I simply want to see what the markets reaction to it is.
Eventually the news cycle will turn, and it may have a negative affect on the market that lasts for more than 24 hours. However, it will be more than a White House news story. It has to be something substantial that affects liquidity, employment or economic activity. Interest rates, inflation and trade are the ones that come to mind. When I start to see headlines about those items is when I know to pay closer attention to news flow.”
Market update:
If the market is consolidating as shown below and hits point E and holds early next week, the odds favor a strong move higher into the end of the quarter or early April(north of 2900). There is still a chance that the consolidation breaks the other way (down) so that bottom trend line is very important support. We don’t want to see the S&P drop below 2680 – 2700 or a swoosh lower to 2400 is in the cards. Triangles are generally penultimate patterns suggesting that if we move higher it will be an ending run for awhile:
Is the correction over, or is there more?
The long awaited market correction came with a vengeance the past two weeks, and now the question becomes is the coast all clear? Before we look at possible scenarios let’s discuss what finally triggered the rapid selloff. Lurking beneath the strong stock market rise in 2017 were slowly rising interest rates. With the strong economy, robust rising market and very low unemployment the recipe for inflation suddenly kicked in and rates began to break what many saw as a decade plus downtrend. This sent a sudden shock through the market that maybe the Fed is behind the curve by keeping interest rates artificially low for to long. Being late to correct this could mean inflation takes off and then the Fed must rapidly raise interest rates to counter that. So the market had a momentary panic as this reality came to the surface and dropped over 10% in two weeks. Why did it all of a sudden appear in February? Who knows, maybe the market participants suddenly became realists all at the same point.
So last week was pretty ugly in the markets, however an important “support” area held in the S&P 500, the 200 day moving average of prices. What does that mean? Market participants (traders, institutions, etc) all watch the price charts of the various indexes. And certain levels are known as support levels where many traders will look to enter. Hence when the S&P hit the 200 day Moving Average on Friday and held, we got a good bounce. I personally put some client cash to work at this level as well. Now the question becomes was that it? Or is there more downside? I can see two scenarios playing out in the coming one to two weeks. The first and best case is that we saw the entire correction play out in two weeks and we now march back to all time highs. See pic:
Could that scenario play out? Of course and that is why you put some cash to work when the markets pull back to prior support levels. HOWEVER, there is another scenario that could come into play if this bounce stalls out. And this is the one you need to be prepared for as it could cause some major anxiety. What I’m going to be watching for in the next few days / week will be the strength of this bounce. If it stalls around the area highlighted below, there is a potential for one final move lower that is approximately the same point drop as we just experienced. Potentially down to the 2450 level on the S&P. That would clear the decks and put enough fear in the market that we could have a sustainable run through early Summer. Is it possible? Yes. Is it probable? The next few days will shed more light on that question. Just know that anything can happen in the market. Nothing is impossible.
Do you remember?
Just a few short years ago Greece was about to implode and default on its debt, so their interest rates skyrocketed. Would you believe that now Greece’s 2 year treasury yield is lower the the US 2 year treasury yield (1.26% vs. 2.06%)? What do you think this is telling us?
2018 Tax reference / Key Financial Facts
Interested in the tax reform info for 2018? Or maybe SS/Medicare info? Or simply retirement plan limits? Here is the latest quick reference guide: