Tag Archives: briowealth

Do You Know About These Tax Changes for Your 2018 Filings?

30 Oct

Late last year, federal tax laws underwent sweeping changes. Nearly a year later, you can be forgiven for not keeping up with them all. Here is a look at some important (yet underrecognized) adjustments that may affect the numbers on your 2018 federal return.1

First, most miscellaneous itemized deductions are gone. The Tax Cuts & Jobs Act of 2017 eliminated dozens of them through the year 2025. Tax preparation expenses? You can no longer deduct those. Expenses linked to a hobby that made you some income? In 2018, no deduction available. Legal fees you paid that were related to your work as an employee? No, you cannot deduct them. Chat with a tax professional; if your tax situation is complex, chances are some deduction, which you may have relied on, is history.1

Can you still claim a deduction for continuing education expenses? No. Some taxpayers used to present the cost of classes or training designed to expand or maintain their job skills as an unreimbursed employee business expense. Some would even claim a deduction for tuition paid toward their MBA. This is now disallowed.1

Employee vehicle use deductions are gone. You can no longer deduct unreimbursed travel expenses related to the performance of your job, and that includes mileage expenses stemming from the use of your car or truck. In response, some employees have asked their employers to set up “accountable” plans allowing them to receive tax-free reimbursements. (You will still find the deduction for certain types of business mileage on Schedule C, and you may still deduct miles you drive for medical purposes and in the service of qualified charitable organizations.)1,3

Speaking of mileage, the moving expense deduction has all but disappeared. Only active duty members of the military may take this deduction now, and only if the move is made in response to a military order.3

You can no longer claim personal casualty losses as itemized deductions. There is an exception to this. You can still deduct these losses in tax years 2018-25 if they occur due to an event that becomes a federally declared disaster (FDD). Unfortunately, most fires, floods, and storms are not defined as FDDs, and most theft has nothing to do with natural or manmade disasters.3

Fortunately, the standard deduction has almost doubled. It was slated to be $6,500 for single filers, $9,550 for heads of household, and $13,000 for joint filers; thanks to tax reform, those respective standard deduction amounts are now $12,000, $18,000, and $24,000. (The personal exemption no longer exists.)

How have things changed regarding charitable donations? There is less of a tax incentive to make them, because many taxpayers may just take the higher standard deduction, rather than bothering to itemize. The non-partisan Tax Policy Center estimates total U.S. charitable gifting will fall to $20 billion this year, a 38% drop, due to the 2017 federal tax reforms. That said, there are still paths toward significant tax breaks for the charitably inclined.5

A traditional IRA owner aged 70½ or older can arrange a qualified charitable distribution (QCD) from that IRA to a qualified charity or non-profit. The QCD can be as large as $100,000. From a tax standpoint, this move may be very useful. The donated amount counts toward the IRA owner’s annual mandatory withdrawal requirement and is not included in the IRA owner’s adjusted gross income (AGI) for the year of the donation.5

Some wealthy retirees are now practicing charitable lumping. Instead of giving a college or charity say, $75,000 in increments of $15,000 over five years, they donate the entire $75,000 in one year. A single-year charitable contribution that large calls for itemizing.5

Turn to a tax professional for insight about these changes and others. The revisions to the Internal Revenue Code noted here represent just the tip of the proverbial iceberg. Additionally, you may find that the changes brought about by the Tax Cuts & Jobs Act have given you new opportunities for substantial tax savings.

Julie Newcomb, a Certified Financial Planner™ in Orange County, CA, specializes in financial planning for women.  As a wife, mom and business owner, Julie understands the pressures and challenges most women feel on a daily basis as they juggle many important priorities. Julie’s favorite thing about her job is the ability to give women peace of mind when they entrust her with their finances. To learn more about Julie Newcomb Financial, go to julienewcomb.com.www

Sources:

1 – marketwatch.com/story/the-little-noticed-tax-change-that-could-affect-your-return-2018-03-19 [9/19/18]

2 – cpajournal.com/2018/08/01/narrowing-the-casualty-loss-deduction/ [8/1/18]

3 – forbes.com/sites/kellyphillipserb/2018/03/26/taxes-from-a-to-z-2018-m-is-for-mileage/ [3/26/18]

4 – cnbc.com/2018/02/16/10-tax-changes-you-need-to-know-for-2018.html [2/16/18]

5 – kiplinger.com/article/taxes/T055-C032-S000-strategies-for-giving-to-charity-under-new-tax-law.html [10/1/18]

Ways to Improve Your Credit Score

31 Jul

We all know the value of a good credit score. We all try to maintain one, but do you know what factors the credit bureau considers when calculating your score? A few strategic tweaks can make a difference and help you improve your credit score over time.

  1. Reduce your credit utilization ratio (CUR). CUR is credit industry jargon, an arcane way of referring to how much of a credit card’s debt limit a borrower has used up. Simply stated, if you have a credit card with a limit of $1,500 and you have $1,300 borrowed on it right now, the CUR for that card is 13:2, you have used up 87% of the available credit. Carrying lower balances on your credit cards tilts the CUR in your favor and promotes a better credit score.1
  2. Review your credit reports for errors. You probably know that you are entitled to receive one free credit report per year from each of the three major U.S. credit reporting agencies – Equifax, Experian, and TransUnion. You might as well request a report from all three at once. You can do this at annualcreditreport.com (the only official website for requesting these reports). About 25% of credit reports contain mistakes. Upon review, some borrowers spot credit card fraud committed against them; some notice botched account details or identity errors. Mistakes are best noted via a letter sent certified mail with a request for a return receipt (send the agency the report, the evidence, and a letter briefly explaining the error).2
  3. Behavior makes a difference. Credit card issuers, lenders, and credit agencies believe that payment history paints a reliable picture of future borrower behavior. Whether or not you pay off your balance in full, whether or not you routinely max out your account each month, the age of your account – these are also factors affecting that portrait. If you unfailingly pay your bills on time for a year, that is a plus for your credit score. Inconsistent payments and rejected purchases count as negatives.3
  4. Think about getting another credit card or two. Your CUR is calculated across all your credit card accounts, in respect to your total monthly borrowing limit. So, if you have a $1,200 balance on a card with a $1,500 monthly limit and you open two more credit card accounts with $1,500 monthly limits, you will markedly lower your CUR in the process. There are potential downsides to this move – your credit card accounts will have lower average longevity, and the issuer of the new card will of course look at your credit history.1
  5. Think twice about closing out credit cards you rarely use. When you realize that your CUR takes all the credit cards you have into account, you see why this may end up being a bad move. If you have $5,500 in consumer debt among five credit cards that all have the same debt limit, and you close out three of them accounting for $1,300 of that revolving debt, you now have $4,200 among three credit cards. In terms of CUR, you are now using a third of your available credit card balance whereas you once used a fifth.Beyond that, 15% of your credit score is based on the length of your credit history – how long your accounts have been open, and the pattern of use and payments per account. This represents another downside to closing out older, little used credit cards.4

If your credit history is spotty or short, you should know about the FICO XD score. A few years ago, the Fair Isaac Co. (FICO) introduced new scoring criteria for borrowers that may be creditworthy, but lack sufficient credit history to build a traditional credit score. The FICO XD score tracks cell phone payments, cable TV payments, property records, and other types of data to set a credit score, and if your XD score is 620 or better, you may be able to qualify for credit cards. Credit bureau TransUnion created CreditVision Link, a similar scoring model, in 2015.5

At BrioWealth, we believe that financial planning should be done for the purpose of giving your life greater confidence, security and joy. That’s why we work closely with our clients to understand their personal goals and passions and build a plan around that. As retirement income specialists, BrioWealth helps our clients build wealth and create smart strategies for secure, sustainable retirement income. Call us at 877-606-1484 or visit http://www.briowealth.com to start creating your life enhancing financial plan!

Sources:

1 – investopedia.com/terms/c/credit-utilization-rate.asp [6/28/18]

2 – creditcards.usnews.com/articles/everything-you-need-to-know-about-finding-and-fixing-credit-report-errors [9/15/17]

3 – creditcards.com/credit-card-news/behavior-scores-impact-credit.php [11/9/17]

4 – creditcards.com/credit-card-news/help/5-parts-components-fico-credit-score-6000.php [11/9/17]

5 – nytimes.com/2017/02/24/your-money/26money-adviser-credit-scores.html [2/24/17]

 

Smart Ways to Do Year-End Charitable Giving

26 Dec

If you are planning to make any year-end donations, you should know about some of the financial “fine print” involved, as the right moves could potentially bring more of a benefit to the charity and to you.

To deduct charitable donations, you must itemize them on I.R.S. Schedule A. So, you need to document each donation you make. Ideally, the charity uses a form it has on hand to provide you with proof of your contribution. If the charity does not have such a form handy (and some charities do not), then a receipt, a credit or debit card statement, a bank statement, or a cancelled check will have to suffice. The I.R.S. needs to know three things: the name of the charity, the gifted amount, and the date of your gift.1

From a tax planning standpoint, itemized deductions are only worthwhile when they exceed the standard income tax deduction. The 2017 standard deduction for a single filer is $6,350. If you file as a head of household, your standard deduction is $9,350. Joint filers and surviving spouses have a 2017 standard deduction of $12,700. (All these amounts rise in 2018.)2

Make sure your gift goes to a qualified charity with 501(c)(3) non-profit status. Also, visit CharityNavigator.org, CharityWatch.org, or GiveWell.org to evaluate a charity and learn how effectively it utilizes donations. If you are considering a large donation, ask the charity involved how it will use your gift.

If you donated money this year to a crowdsourcing campaign organized by a 501(c)(3) charity, the donation should be tax deductible. If you donated to a crowdsourcing campaign that was created by an individual or a group lacking 501(c)(3) status, the donation is not deductible.3

How can you make your gifts have more impact? You may find a way to do this immediately, thanks to your employer. Some companies match charitable contributions made by their employees. This opportunity is too often overlooked.

Thoughtful estate planning may also help your gifts go further. A charitable remainder trust or a contract between you and a charity could allow you to give away an asset to a 501(c)(3) organization while retaining a lifetime interest. You could also support a charity with a gift of life insurance. Or, you could simply leave cash or appreciated property to a non-profit organization as a final contribution in your will.1

Many charities welcome non-cash donations. In fact, donating an appreciated asset can be a tax-savvy move.

Should you donate a vehicle to charity? This can be worthwhile, but you probably will not get fair market value for the donation; if that bothers you, you could always try to sell the vehicle at fair market value yourself and gift the cash. As organizations that coordinate these gifts are notorious for taking big cuts, you may want to think twice about this idea.7

 You may wish to explore a gift of highly appreciated securities. If you are in a higher income tax bracket, selling securities you have owned for more than a year can lead to capital gains taxes. Instead, you or a financial professional can write a letter of instruction to a bank or brokerage authorizing a transfer of shares to a charity. This transfer can accomplish three things: you can avoid paying the capital gains tax you would normally pay upon selling the shares, you can take a current-year tax deduction for their full fair market value, and the charity gets the full value of the shares, not their after-tax net value.4

You could make a charitable IRA gift. If you are wealthy and view the annual Required Minimum Distribution (RMD) from your traditional IRA as a bother, think about a qualified charitable distribution (QCD) from your IRA. Traditional IRA owners age 70½ and older can arrange direct transfers of up to $100,000 from an IRA to a qualified charity. (Married couples have a yearly limit of $200,000.) The gift can satisfy some or all of your RMD; the amount gifted is excluded from your adjusted gross income for the year. (You can also make a qualified charity a sole beneficiary of an IRA, should you wish.)4,5

Do you have an unneeded life insurance policy? If you make an irrevocable gift of that policy to a qualified charity, you can get a current-year income tax deduction. If you keep paying the policy premiums, each payment becomes a deductible charitable donation. (Deduction limits can apply.) If you pay premiums for at least three years after the gift, that could reduce the size of your taxable estate. The death benefit will be out of your taxable estate in any case.6

You may also want to make cash gifts to individuals before the end of the year. In 2017, any taxpayer may gift up to $14,000 in cash to as many individuals as desired. If you have two grandkids, you can give them each up to $14,000 this year. (You can also make individual gifts through 529 education savings plans.) At this moment, every taxpayer can gift up to $5.49 million during his or her lifetime without triggering the federal estate and gift tax exemption.8

Be sure to give wisely, with input from a tax or financial professional, as 2017 ends.

At BrioWealth, we believe that financial planning should be done for the purpose of giving your life greater confidence, security and joy. That’s why we work closely with our clients to understand their personal goals and passions and build a plan around that. As retirement income specialists, BrioWealth helps our clients build wealth and create smart strategies for secure, sustainable retirement income. Call us at 877-606-1484 or visit http://www.briowealth.com to start creating your life enhancing financial plan!

Sources:

1 – tinyurl.com/y8dkleed [8/23/17]

2 – forbes.com/sites/kellyphillipserb/2017/10/19/irs-announces-2018-tax-brackets-standard-deduction-amounts-and-more/ [10/19/17]

3 – legalzoom.com/articles/cash-and-kickstarter-the-tax-implications-of-crowd-funding [3/17]

4 – irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-distributions-withdrawals [8/17/17]

5 – pe.com/2017/11/04/its-not-that-hard-to-give-cash-or-stock-to-charity/ [11/4/17]

6 – kiplinger.com/article/taxes/T021-C032-S014-gifting-a-life-insurance-policy-to-a-charity.html [11/17]

7 – foxbusiness.com/features/2017/10/18/edmunds-what-to-know-about-donating-your-car-to-charity.html [10/18/17]

8 – law.com/thelegalintelligencer/sites/thelegalintelligencer/2017/11/02/with-2018-fast-approaching-its-time-for-some-year-end-tax-planning-tips [11/2/17]