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18Jul
IRS on Your Mind? – Here Is What NOT To Try!
Taxes

The subject of taxation is not normally a welcomed topic – here are some “fun” court cases provided by Kiplinger’s.

“A Little Peace and Quiet”

A busy tax preparer ran her business from her home.  During tax season, she felt so harassed from clients calling her at all hours of the day and night that she occasionally booked a room at a local hotel for some peace and quiet.  On her own return, she deducted the cost of this rest and relaxation as a business expense.  Unfortunately for her, the Tax Court ruled that the cost of her good night’s sleep was a nondeductible personal expense.

 

“Billing Mommy”

A wife was sent to jail for killing her husband.  Although she was named as the primary beneficiary of his 401(k) plan, state law barred her from receiving any of the funds because of her crime.  The account was paid to their son instead as the secondary beneficiary.  He claimed that his mother should be taxed on the payout as the intended beneficiary.  An Appeals Court gave him an A for effort but an F in taxation, ruling that he owes tax on the distribution.

 

“Wrecking a Rental Car”

An airline employee needed to get to New Orleans but was stranded by heavy fog.  He worked out a great deal with a rental car company where he paid nothing for a car that the company needed driven to New Orleans.  Unfortunately, he wrecked the auto in Mississippi and had to pay for the damages.  He tried to deduct the payment as a casualty loss, but the Tax Court denied his write-off because he wasn’t the owner of the vehicle.

Now here’s a little good news:

Kiplinger’s recently a report on “The LEAST Tax Friendly States in the U.S. for 2016”.

The good news is that Ohio, Kentucky, Florida, and Indiana are NOT on the list.

Here are the factors that were considered to create the list: income, property, gas and sales tax.

In order from the LEAST tax friendly, here are the top states. (Before reading further, it might be fun for you to see how many of them you could guess.)….  California, Hawaii, Connecticut, New York, New Jersey, Minnesota, Maine, Vermont, Illinois, and Rhode Island!

From our Blogs page, simply search for “tax” to find additional articles of interest.

Please note that, while we are not accountants and cannot provide tax advice, we do work cooperatively with very qualified accountants.  The information that we will share is available to the general public and should not be construed as giving income tax advice.

Barbara A. Culver
CFP®, ChFC®, CLU, AEP®
Resonate, Inc.
(513) 605-2500

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11Jul
Are You Paying Too Much In Income Taxes?
Taxes

While we are not accountants and cannot render tax advice, we are very much aware of taxes as we work with our clients.

Based on the information in the Income Level Risks chart, here are some of the questions we review before we make recommendations from where to take income:

  1. What types of investment accounts do you have to work with?  For example, Roth IRA’s offer a tax-free option, taxable accounts, tax-loss harvesting and the opportunity to create capital gain income as opposed to ordinary income.
  2. For clients under the age of 70.5, does it make sense to consider a Roth Conversion?
  3. Will you benefit from holding equities in taxable accounts (due to the possibility of creating capital gain income) and holding fixed income securities in IRA’s?  (Interest from fixed income securities is taxed as ordinary income. Since all income from a traditional IRA is taxed as ordinary income, you may save on taxes by holding equities in taxable accounts and creating capital gain income.)
  4. Are tax-deferral annuities an option?
  5. Do municipal bonds make sense?
  6. Is there is benefit to accelerating charitable deductions?
  7. Can we get your income below the higher Medicare Part B premium threshold?
  8. Can we work to avoid the 3.8% surtax on net investment income?

I am clear that the content of this blog is very technical and complicated.

As always, we welcome a conversation with you and/or your tax advisor.

Barbara A. Culver
CFP®, ChFC®, CLU, AEP®
Resonate, Inc.
(513) 605-2500

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19Jun
Did You Know about This New Charitable Deduction?
Retirement

Pet therapy for children and the elderly is now considered a charitable purpose by the IRA’s standards.  An organization that has others take their therapy dogs on visits to hospitals and nursing homes at no cost to the patient or facility, now qualifies for tax exemption as a 501 (c)(3) charity.  These pet therapy sessions are intended to improve the well-being of patients, lessen distress and encourage socialization.  Donors can now deduct contributions made to the group.

(Source: The Kiplinger Tax Letter May 19, 2017)

In the same Kiplinger Tax Letter, Knight Kiplinger suggests that things are looking up for the housing market.  As home prices rise, underwater mortgages are falling steadily.  Currently 10% of homeowners owe more on their mortgages than their homes are worth, however this statistic is projected to be 8% by year-end and even fewer next year.  Having fewer folks upside-down on loans means more homes hitting the market.

And finally, Kiplinger warns us to expect more destructive cyberattacks to strike in the coming months.  Recent U.S. intelligence agencies data breaches have exposed hidden security flaws to criminals and other nations.

Microsoft urges Uncle Sam to quickly reveal such security holes so they can be covered.

Although future attacks will be more difficult to stop as malware becomes more sophisticated, there are ways to help fend off hackers.

  • Spend money on anti-virus / anti-malware software and keep it up-to-date with virus definitions
  • Install software updates often and quickly to plug security holes – especially on your operating system such as Microsoft Windows.
  • Back up data regularly with an external remote local hard drive.  Keep it disconnected from your computer between back ups.  Also take advantage of web-based back up storage.
  • Don’t click on suspicious email hyperlinks or unknown attachments without proper vetting.

Your Resonate team continues to increase our security measures on a regular basis.  For example, our broker-dealer, Valmark Securities requires all Resonate employees to undergo ongoing cybersecurity training.  We also back up our files daily.

Of course, we still know that hackers continue to increase their sophistication as well.

As always, we would love to hear from you.

Barbara A. Culver
CFP®, ChFC®, CLU, AEP®
Resonate, Inc.
(513) 605-2500

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31May
Six of the Most Overlooked Tax Deductions
Taxes

  1. Student Loan Interest paid by mom and dad:  If parents pay back the child’s student loans, the IRS treats the transactions as if the money were given to the child, who then paid the debt.  So as long as the child is no longer claimed as a dependent, he or she can deduct up to $2500 of student loan interest paid by mom and dad each year.  And the student does not have to itemize to use this money saver.

(Please note that mom and dad cannot claim the interest deduction, even though they pay the bill, because they are not actually liable for the debt.)

2. State Sales Tax:  Many of our clients live in states that do not impose a state income tax.  Congress offers item misers the choice between deducting the state income taxes or state sales taxes they paid.  You choose whichever saves you more money.  So if your state does not have an income tax, the sales tax write off is clearly the way to go.

3. Out-of-pocket charitable deductions:  Like many of you, Resonate is absolutely committed to both corporate and personal philanthropy.  “Little things” that we do can often go unnoticed.  For example, if you prepare a casserole or dessert for your church potluck, provide food for a not- for- profit soup kitchen, contribute stamps for a school’s fundraising mailing, or have other out-of-pocket costs incurred while doings good work for charity, keep your receipts.  These “little things” actually qualify as charitable income tax deductions.  (If your contributions total more than $250, you’ll also need an acknowledgment from the charity documenting the support that you provided.)

Also remember that you can deduct $0.14 per mile plus parking and tolls paid for any philanthropic/volunteer work.

4. Deduction of Medicare Premiums for the Self-Employed:  This deduction is available whether or not you itemize.  Further, it is not subject to the 10% adjusted gross income test that applies to itemized medical expenses for those 65 and older (changed from 7.5% as of 1-1-17).  So, if you continue to run your own business after qualifying for Medicare, you can deduct the premiums for Medicare part B and part D plus the cost of supplemental Medicare policies or the cost of a Medicare advantage plan.

5. Reinvested Dividends:  Many of our investors choose to automatically reinvest their dividends, so that they can purchase extra shares.  Remember that each reinvestment increases your cost basis – just as if you had written a check yourself.  When you decide to sell some shares, it is very important to be sure to include the value of your reinvested dividends in your cost basis.

6. Refinancing points:  Most people know that you get to deduct the points paid to get your first mortgage in a lump sum.

When you refinance, though, you have to deduct the points on the new loan over the life of that loan.  That means if you take out a 30 year mortgage, you can deduct 1/30th of the points per year.

If you happen to sell the house or refinance before the existing mortgage is paid off, then you can deduct all of the as yet un-deducted points in a lump sum.

Beware: if you refinance a refinance loan with the same lender, then you have to go back to deducting points gradually over the life of the new loan.

(Please note that, while we are not accountants and cannot provide tax advice, we do work cooperatively with very qualified accountants.  The information that we will share is available to the general public and should not be construed as giving income tax advice.  We are simply providing it as a value-added service to our clients, their friends and family.)  Credit to Kiplinger’s, 2017

Barbara A. Culver
CFP®, ChFC®, CLU, AEP®
Resonate, Inc.
(513) 605-2500

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09Mar
Tax Reform 2017
Taxes

Click Here for an interesting article posted by CCH Tax News.

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17Jan
Expect These Campaign Promised to Be Kept
Economy

In my previous blog, I shared which campaign promises are expected to be broken.   This blog covers the ones expected to be met.

(Source: The Kiplinger Letter November 11, 2016.)
  1. Domestic oil, gas, and coal production will be more in favor. Drilling in new regions as well as offshore will be favored.
  2. He will push hard for more spending on infrastructure.
  3. Trump will try to overhaul financial regulations in order to boost bank lending. (Dodd-Frank is at risk.)
  4. The Trump isolationist stance will force European nations to spend more on their own defense and security needs.
  5. Trump is likely to rip up the Iran nuclear deal and issue new sanctions.


Barbara A. Culver

CFP®, ChFC®, CLU, AEP®
Resonate, Inc.

(513) 605-2500

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04Oct
Resonate’s Enhanced Services
Intergenerational Planning

Richness of Life

 

 

As a natural result of our clients’ busy lives, it is becoming increasingly clear that planning to meet their life and financial goals is rapidly becoming more complex.

Therefore, to act on our dedication and commitment to our clients, I am pleased to share that we have enhanced our services to include the following:

  1. Tax strategies designed to optimized the tax efficiency of a retirement portfolio both current and in the future.
  2. An annual Medicare check-up.  Whether you are currently covered with Medicare or you know someone who is, here are items that need to be updated each year:
  • A change in prescription medications;
  • Gradual increases in the Medicare gap filler or Part D premiums;
  • If a current carrier has discontinued the Medicare Part C or D plan;
  • A change in legal name;
  • A change of residence.
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05Jul
Tax Changes in 2016
Taxes

2016 ushered in some interesting tax changes.

I will summarize some of the key changes in this blog.

Social Security: There is no hike in the 2016 Social Security wage base.  It remains at $119,500.

The earnings test also did not change.  If, at any time in 2016, you are 66 or older, you may earn $41,880 and not have to repay any Social Security benefit.  (There is no earnings cap once a beneficiary turns 66.)

Any one ages 62-65 can earn up to $15,720 and keep their full Social Security benefits.

Medicare: Most people will pay $104.90 for Medicare Part B.

For those in the upper income brackets, the combined Part B and D premiums plus surcharges can be as high as $340.90 a month.

Health Savings Accounts: The annual cap on deductible contributions to HSA’s increases to $6750 in 2016.

The limits for deducting long term care premiums per person are:

Under age 40: $390
41 to 50: $730
51 to 60: $1460
61 to 70: $3900
70 and older: $4870

The estate and gift tax exemption for 2016 increases to $5,450,000 and the top tax rate remains at 40%.

There is significant new legislation that applies to executors of taxable estates.  Executors are now required to report to the IRS and heirs the basis of inherited assets within 30 days of filing the IRS estate tax form 706.

Please know that Resonate can definitely assist providing cost basis information and works cooperatively with your other advisors toward creating best results for you and your loved ones.

The source for this information is the April 2016 Kiplinger Tax Letter.

Please be sure to meet with your tax advisor to see how this information applies to you.  The let’s coordinate his or her advice with that of your Resonate team to be sure you are using all tax laws to your benefit.

This is especially important for anyone interested in legacy planning.

Barbara A. Culver
CFP®, ChFC®, CLU, AEP®
Resonate, Inc.
(513) 605-2500
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