Yearly Archives: 2017

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Congress Finalizing Tax Reform Bill

The U.S. House and Senate have each passed different tax reform bills and are working together to reconcile the differences. The goal is to deliver a final tax reform bill to the president before Christmas.

“Both bills are big improvements to America’s out-of-date tax code,” wrote Adam Michel, a policy analyst for the Heritage Foundation, in a recent article comparing the two packages. “Both bills cut taxes for individuals and businesses, largely repeal the state and local tax deduction, and allow businesses to invest more in the American economy through temporary expensing.”

Though nothing has been finalized as of this writing, a common theme seems to be allowing fewer itemized deductions for individuals and to balance that by increasing standard deduction amounts. For example, the personal exemption of $4,050 for income taxes would be eliminated and offset with a higher standard deduction of $12,000 for individuals and $24,000 for married couples. (The current standard income tax deduction is about half that – $6,350 for individuals and $12,700 for married couples.) Deductions for state and local income and sales taxes (SALT) will likely be capped at $10,000. In contrast, the child tax credit is expected to increase from $1,000 currently to $1,600 or more.

In anticipation of potential changes, those who typically itemize on their income tax returns may want to consider accelerating deductible expenses in 2017. For example, they could pay second-half property taxes and/or make a January mortgage payment before year-end. They could also make their fourth-quarter estimated state income tax payment by year-end.

By |December 18th, 2017|Current Affairs, Taxes|

Year-End Tax Saving Strategies

Lupe Camargo, financial plannerNow is a perfect time to check for any remaining opportunities to help minimize your tax bill before 2017 comes to a close. There are many year-end tax saving strategies for you to consider.

At Perspective Financial Services, we take a proactive approach to minimize our clients’ tax bills through a variety of investment strategies. Selling a security in a taxable account at a loss and replacing it with another security of the same asset class can help offset some of your capital gains tax; this is referred to as tax loss harvesting. We also research mutual funds that may generate a capital gains distribution before making end of year purchases; this helps avoid unnecessary capital gains taxes on new investments.

There are additional things you can do, with the help of your financial planner. Here is a checklist of things to think about.

When possible be proactive about the timing of your income. This can make a significant impact on your tax bill.

  • Defer a bonus or a sale of appreciated property to the following year when it becomes advantageous to avoid the income this year.
  • Pay expenses this year, such as fourth quarter state income taxes or medical expenses. This helps especially when next year’s income will be less than this year.
  • Increase your federal income tax withholding to soften the blow of a significant tax bill.

Take advantage of the vehicles that not only help you plan for the future, but give the added bonus of reducing your income taxes.

  • Max out your IRA contributions, and take advantage of the catch-up if you are over 50 years old.
  • If you are over 70 1/2 years old, or you have an inherited IRA, do not forget to take your required minimum distribution. The penalties are very steep if you do not.

If you are planning to gift money to family or charities, do so before the end of the year.

  • Give $14,000 per individual annually in federal tax-free gifts.
  • Make planned charitable contributions and take advantage of the charitable rollover provision if you are over 70 1/2 years of age.
By |December 4th, 2017|Advisors, Charitable Giving, Taxes|

Ease Financial Burden of Funeral Planning

gravestones and funeral planningLosing a loved one is never easy. To make matters worse, it’s difficult to make major financial decisions when you’re feeling overwhelmed and heartbroken. Funerals can be a significant expense. The average cost is about $10,000 according to the funeral-pricing site Parting.com. Thankfully, understanding the different expenses, knowing your options and planning ahead can help ease both the emotional and financial burden of funeral planning.

“In the best of all worlds, you or a loved one will have included funeral arrangement wishes in your estate planning,” said Carrie Schwab-Pomerantz, senior vice president at Charles Schwab. “That can save a lot of guessing, and money, for the people you leave behind.”

She recommends putting your preferences in writing and giving copies to family. Since the will is often not found or read until after the funeral, putting these preferences or instructions in your will is not advisable.

Tips to Ease Financial Burden of Funeral Planning

According to the Federal Trade Commission (FTC), the federal funeral rule allows funeral providers to charge a basic services fee that customers have to pay. The basic services fee includes services that are common to all funerals, regardless of the specific arrangement. These include funeral planning, securing the necessary permits and copies of death certificates, preparing the notices, sheltering the remains, and coordinating the arrangements with the cemetery, crematory or other third parties.

If budget is a concern, understand that you’re not legally required to purchase optional goods or services from your funeral provider. There are other businesses that may offer a lower price for things such as transportation, flowers, caskets, urns, facilities for memorial services, and more.

The FTC has an online guide that can help you plan manage your funeral planning and budget. www.consumer.ftc.gov/articles/0301-funeral-costs-and-pricing-checklist.

 

Image courtesy of tiverylucky at FreeDigitalPhotos.net
By |November 20th, 2017|Current Affairs, Estate Planning|

Stay Connected to Your Financial Goals

Life happens – family, work, school, fitness, illnesses and the list goes on. As you get tugged in many directions at once, how can you stay connected to your financial goals and dreams? In this brief video, Lupe Camargo explains the role a financial planner can play in helping you stay on track, even when your daily life tries to derail you.

By |November 6th, 2017|Financial Planning, Video Blog|