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
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:
Standard Deduction:
Personal Exemptions:
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.
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
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
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:
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
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 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.
