The Classic Story of a Spender and a Saver

The untypical financial planning blog! Yes, my wife came up with the title as I get teased a bit for being a little frugal. However, we do try to find some humor in it. Hopefully some of these random thoughts will help you in your financial journey, So enjoy! - James Daniel, CFP®, CFA, CMT, EA Now for the DISCLAIMER: This blog is not intended as financial advice. We encourage you to consult with your personal advisor before acting on anything you read here.

Should you apply for medicare at 65?

Written on May 12th, 2019 by Jamesno shouts

The folks at Medicare.gov have put out a good question and answer PDF with different scenarios to help clear up the confusion about when to apply for medicare.

Do I apply for both A and B medicare at 65?

Where are the Atlanta offices for SS and Medicare?

 

What’s the real story with 2018 taxes?

Written on February 26th, 2019 by Jamesno shouts

The media has been all over the fact that many are not getting a refund this year and actually owe taxes this year.  Actually from what I’m seeing, they are correct.  However, it has nothing to do with the 2018 Tax Cuts.

Employers lowered the amount they were withholding from employee paychecks in 2018 and now it is coming back to haunt those taxpayers.  Overall, what I’m seeing is that most are in a lower tax bracket (a few percent), but unfortunately did not withhold enough throughout 2018, so they owe.  Especially those with higher incomes (limit on state/local tax deduction is also hurting).

Go ahead and adjust your W4 so that this doesn’t become a reoccurring problem next year:  https://www.irs.gov/individuals/irs-withholding-calculator

Understanding the new tax deduction for self employed/ rental income

Written on February 15th, 2019 by Jamesno shouts

Just posted a newsletter that gives examples and explains the new 199A deduction.  Download the newsletter here:  Tax Newsletter Feb 2019

bank consolidation

Written on February 7th, 2019 by Jamesno shouts

Today BB&T and Suntrust announced a merger.  I guess to survive and compete with the mega financial institutions they had to, but dang look at this graphic from 1996 to 2009 of how the last few standing have gobbled up everyone: (click on image and it will enlarge for viewing)

20% pass through deduction for Rental property income

Written on January 30th, 2019 by Jamesno shouts

The IRS has clarified the new tax law and its impact on rental properties.  Originally the wording stated that small businesses and REIT’s would get the 20% pass through but for owners of residential rental properties it was unclear.  They have now issued guidance and if you treat your properties like a business and spend over 250 hours annually on them (client service, collecting rent, repairs, etc) then you meet the safe harbor test to deduct 20% of net rental income from passing through to your tax return.

More info here:  https://www.irs.gov/pub/irs-drop/n-19-07.pdf

Medicare is adding home health options

Written on November 12th, 2018 by Jamesno shouts

This should not be considered a replacement for Long Term Care insurance, but Medicare is relaxing rules on home health/assistance as they realize it is cheaper than hospitalization:

https://www.apnews.com/55e619262d5d455f9a9ac35900e3f3a1

Reminder on how the new Tax Law affects your 2018 deductions

Written on October 24th, 2018 by Jamesno shouts

As we near the end of 2018, here is a reminder of the major change for tax filers next year:

- The biggest item of the tax law change is the caps on itemized deductions that will move more people to use the “standard” deduction:

  • SALT taxes:  state taxes, property taxes, sales taxes are going to be capped at a combined $10,000 deduction on your schedule A.  This means if you are a high income earner that pays a lot of state tax or you pay a lot of property taxes, you will see a cap on total deductions which means higher income shown on your tax return.
  • Mortgage Interest:  interest on primary mortgages up to $1M is still grandfathered in for loans prior to 2018, loans taken out this year the interest will be capped on loans up to $750k
  • Charitable Deductions:  You can still deduct all charitable contributions, however if your charitable + mortgage interest + SALT taxes are less than $24k you will just use the Standard Deductions.
  • Misc Itemized Deductions:  These pretty much are eliminated, including moving expenses and unreimbursed job expenses (moving expenses still deductible for members of military).

Standard Deduction:

  • Single $12,000 / married $24,000
  • if over 65 add $1300 to that deduction
New Tax Credit:
  • kids under 17 you get a child tax credit of $2000 each.  A credit is a dollar for dollar reduction in taxes owed.

Personal Exemptions:

  • These have gone away with new tax law, sort of replaced with that Child Tax Credit above

Summary:

Unless you have a lot of mortgage interest and charitable contributions, odds are you will now just do a standard deduction.

NOTE:

If you are over 70 1/2 and required to do RMD’s, and you make charitable contributions but will fall into the standard deduction category – consider making your charitable contributions direct from your retirement account (IRA).  These will go towards your RMD requirement and not be taxable as income when sent direct from your IRA.

Is my Home Equity loan interest still deductible?

Written on July 16th, 2018 by Jamesno shouts

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 your tax return.  With the new tax law that has changed and caused a bit of confusion:

For mortgages taken out in 2018, the total combined mortgage loan amounts (primary and home equity/second) where interest can be deducted has dropped to $750,000.  The question is what about Home Equity Loan interest?  The new tax law made it sound as if Home Equity loan interest would no longer be deductible, however per the IRS that is not the case.  If a Home Equity loan was taken out to specifically make improvements to the property then the interest on the loan can still be deducted on your Schedule A.  The caveat is that the loan has to be to improve the residence it is loaned against, no using it to pay off credit cards, vacations, etc…

For more info see the IRS’ statement on this:  https://www.irs.gov/newsroom/interest-on-home-equity-loans-often-still-deductible-under-new-law

non-deductible IRA distributions?

Written on June 22nd, 2018 by Jamesno shouts

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