Author: 16783607

Tax Tips – Selling Your Car or Buying From a Private Seller? Here are the Tax Tips You Should Know

Buying a new car is an exciting purchase. If you are buying your next vehicle from a private seller rather than a dealership or selling a used car to an individual, there are a few tax considerations you should know. The first is that if you are selling your car for less than you paid for it, you likely won’t have to pay sales tax on the sale. This is because the IRS considers selling a used car for less than you paid a capital loss. But in contrast, if you are selling your car for more than you paid (like if it’s a classic car you’ve restored and it’s increased in value), you may have to pay sales tax.

If you’re buying a car from a private seller, you’ll have to pay sales tax. But this sales tax doesn’t go to the seller, it goes to the DMV. This sales tax is incorporated in your car’s registration.

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from CarGurus[8]

[8] www.cargurus.com/Cars/articles/how_do_taxes_work_on_private_car_sales

Equities Face Some Volatility – WEEKLY UPDATE – AUGUST 19, 2019

The Week on Wall Street
U.S. stock indices saw significant ups and downs last week, with traders looking for economic cues from Treasury yields and also developments in the tariff fight between the U.S. and China.
The S&P 500 lost 1.03% on the week; the Dow Jones Industrial Average and Nasdaq Composite respectively declined 1.53% and 0.79%. Overseas shares also retreated: the MSCI EAFE index lost 2.34%.[1][2]

Attention on the Bond Market
Wednesday, the yield of the 2-year Treasury bond briefly exceeded that of the 10-year Treasury bond. When this circumstance occurs, it signals that institutional investors are less confident about the near-term economy. That view is not uniform. Asked whether the U.S. was on the verge of an economic slowdown, former Federal Reserve Chair Janet Yellen told Fox Business “the answer is most likely no,” noting that the economy “has enough strength” to avoid one.

The demand for bonds has definitely pushed prices for 10-year and 30-year Treasuries higher, and their yields are now lower (bond yields usually fall as bond prices rise). The 30-year Treasury yield hit a historic low last week.[3][4]

Some China Tariffs Postponed
Last week, the Office of the U.S. Trade Representative announced that about half the Chinese imports slated to be taxed with 10% tariffs starting September 1 would be exempt from such taxes until December 15.

The White House said that the reprieve was made with the upcoming holiday shopping season in mind, so that tariffs might have less impact on both retailers and consumers.[5]

Final Thought
Lower interest rates on bonds are now influencing mortgages. According to mortgage reseller Freddie Mac, the average interest rate on a conventional 30-year home loan was just 3.6% last week. That compares to 3.81% roughly a month ago (July 18).[6]

[1] www.wsj.com/market-data

[2] quotes.wsj.com/index/XX/990300/historical-prices

[3] www.cnbc.com/2019/08/15/us-bonds-30-year-treasury-yield-falls-below-2percent-for-first-time-ever.html

[4] www.foxbusiness.com/economy/janet-yellen-to-wall-street-a-recession-is-unlikely

[5] www.reuters.com/article/us-usa-trade-china-tariffs/trump-delays-tariffs-on-chinese-cellphones-laptops-toys-markets-jump-idUSKCN1V31CX

[6] www.freddiemac.com/pmms/archive.html

Tax Tips – Cake Tasting, Wedding Dress Shopping, and Tax Planning, Oh My!

If you or someone you know is getting married this year, they should include tax planning on their wedding preparation checklist. Here are some tax tips to remember before you tie the knot:
• Check your withholding, and if you’re going to change your filing status (for example, going from single to married filing jointly or married filing separately), you’ll need to complete a new W-4 and Employee Withholding Allowance Certificate.

• If you’re changing your name after you get married, you need to report your new name to the Social Security Administration. The name on your tax return must match the name on file at the SSA.

• If you’re moving, make sure to fill out a Form 8822, Change of Address
This wedding season, love is in the air. Knowing these tax tips will help you or someone you know successfully include the IRS in all the fun.

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov[9]

[9] www.irs.gov/newsroom/taxpayers-should-include-tax-plans-in-their-wedding-plans

Trade Tensions Affect Stocks – WEEKLY UPDATE – AUGUST 12, 2019

The Week on Wall Street
Stocks spent much of last week rebounding from a Monday drop that reflected nervousness about the U.S.-China trade fight. By Thursday’s closing bell, the S&P 500 had regained all its Monday losses – but it descended again on Friday.
The three big U.S. equity benchmarks finished the week lower: the S&P declined 0.46%; the Dow Jones Industrial Average, 0.75%; the Nasdaq Composite, 0.56%. A broad index of foreign shares, the MSCI EAFE, lost 0.95%.[1][2]

China Devalues Its Currency
Last Monday, stocks fell 3% in reaction to the overnight weakening of the Chinese yuan. A weaker yuan makes Chinese exports cheaper for buyers who pay for them in dollars.

Critics quickly accused China of manipulating its currency to strike back at the U.S. The federal government plans to impose tariffs on nearly all Chinese products next month, likely making those goods more expensive to American consumers; a weaker yuan could counter the effect of those import taxes.[3][4]

Earnings Season Update
Ninety percent of S&P 500 firms have now reported second-quarter results. Their collective sales and profits have surprised to the upside.

Stock market analytics firm FactSet says that overall earnings have beaten estimates by 5.7%. Seventy-five percent of firms have reported actual earnings per share surpassing estimates, which is better than the five-year average.[5]

Final Thought
We are seeing a significant bond rally this summer, even with interest rates at very low levels. (When bond prices rise, bond yields tend to fall.) At the moment, about a quarter of the global bond market is invested in government notes with negative interest rates. The 10-year Treasury stands in contrast. Friday, it was yielding 1.74%.[6][7]
[1] www.wsj.com/market-data
[2] quotes.wsj.com/index/XX/990300/historical-prices

[3] www.bloomberg.com/news/articles/2019-08-04/asia-stocks-set-to-drop-with-trade-back-in-focus-markets-wrap

[4] www.bloomberg.com/news/articles/2019-08-05/china-hits-back-at-trump-with-weaker-yuan-halt-on-crop-imports

[5] insight.factset.com/earnings-season-update-august-9-2019

[6] www.cnbc.com/2019/08/07/how-bonds-with-negative-yields-work-and-why-this-growing-phenomenon-is-so-bad-for-the-economy.html

[7] www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield

Tax Tips – Roth vs. Traditional IRAs: What’s the Difference?

Roth and Traditional IRAs are popular retirement savings accounts and have some similarities and differences. Here are a few:

Income Limits
Anyone who has earned income and is younger than 70½ can contribute to a Traditional IRA. Roth IRAs have income eligibility limits for contributions. Single filers can’t earn more than $137,000, and married couples can’t earn more than $203,000.

Tax Incentives
Traditional IRA contributions are generally tax deductible when you make the contributions, and withdrawals in retirement are taxed at the current income tax rate. Contributions to a Roth IRA aren’t tax deductible, but earnings and withdrawals are generally tax free.

Withdrawal Rules
Traditional IRAs require you to start taking minimum distributions at age 70 ½. Roth IRAs don’t have any required minimum distributions.

Deciding which retirement savings account is right for you is a personal decision and will depend on your income tax bracket (both now and when you retire), your income, and other criteria. A skilled financial advisor can help you decide which option, if any, is right for you.

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax. The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

Tip adapted from IRS.gov[8]
[8] www.irs.gov/retirement-plans/traditional-and-roth-iras

Fed Cuts Rates, Stocks Retreat – WEEKLY UPDATE – AUGUST 5, 2019

The Week on Wall Street
Last week, the Federal Reserve cut interest rates for the first time in more than a decade, in line with Wall Street’s expectations. Ironically, stocks had their worst week of 2019.

The S&P 500 finished the week 3.10% lower. The Dow Jones Industrial Average and the Nasdaq Composite also posted weekly losses; the blue chips fell 2.60%, while the premier tech benchmark slumped 3.92%. International stocks tracked by MSCI’s EAFE index dipped 1.06%.[1][2][3]
Fed Cuts Benchmark Interest Rate
On Wednesday, the central bank reduced the federal funds rate by 0.25%. The latest Fed policy statement noted that “global developments” and “muted inflation” influenced the decision.

Addressing the media, Fed Chairman Jerome Powell described the cut as a “mid-cycle adjustment.” After that comment, Wednesday’s trading session turned volatile on the interpretation that the cut was a “one and done” move, instead of what might be the first in a series.[4]

More Tariffs Planned
Shares also fell Thursday, after a White House tweet indicated that the U.S. would put a 10% tariff on another $300 billion of goods coming from China, effective September 1.

Practically speaking, this would mean a tariff on nearly all Chinese products arriving in America. So far, the announcement has not affected plans for trade delegates from both nations to continue negotiations in September.[5]

The Latest Hiring Data
Payrolls expanded with 164,000 net new jobs in July, according to the Department of Labor. The headline jobless rate stayed at 3.7%; it has now been under 4% for 17 months. The U-6 jobless rate, which counts both underemployed and unemployed Americans, dipped to 7.0%, a level unseen since December 2000.

Monthly job growth has averaged 140,000 over the past three months, compared to 187,000 in 2018.[6]

[1] www.apnews.com/e15c18b9dbc44efab400d2214e2cb6f9
[2] www.wsj.com/market-data

[3] quotes.wsj.com/index/XX/990300/historical-prices

[4] www.forbes.com/sites/jjkinahan/2019/07/31/feds-quarter-point-rate-cut-weak-global-growth-trade-tensions-muted-inflation-cited

[5] www.cnn.com/2019/08/01/investing/asian-market-latest-trade-war/index.html

[6] www.cnn.com/2019/08/02/economy/july-jobs-report/index.html

Tax Tips – Short-Term Rentals, Long-Term Income Tax Deductions

If you have a short-term vacation rental, you may be bringing in some extra income this summer season. By following a few easy tips, you can reduce your income taxes and keep more of what you make (some of which might go into a savings account for a vacation of your own!). Here are some helpful tips that short-term rental owners should consider:
• You don’t have to pay income tax on what you earn from your short-term rental, but only if you don’t rent it out for more than 14 days throughout the year, and also, if you live in it as your primary residence for at least 14 days out of the year.

• Keep thorough records as well as separate business and personal expenses. You may be able to deduct all ordinary and necessary expenses to operate the rental home.

• If you rent out a room in your home rather than the entire property, you may still be able to deduct a portion of the mortgage interest and property taxes of the property. But you still need to delineate between personal and business use of the residence.

Renting out an extra property or an extra space in your house is a great way to make some extra cash, and the tax laws may work in your favor.

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from TurboTax[8]

[8] turbotax.intuit.com/tax-tips/rental-property/10-tax-tips-for-airbnb-homeaway-vrbo-vacation-rentals/L8CEWgLSP

Stocks Descend from Recent Peaks – WEEKLY UPDATE – JULY 22, 2019

The Week on Wall Street
Stock benchmarks retreated during the first week of the second-quarter earnings season. As some big names shared quarterly results, investors seemed more interested in what might happen at the Federal Reserve’s upcoming policy meeting.
For the week, the S&P 500 declined 1.23%. The Dow Jones Industrial Average lost 0.65%, and the Nasdaq Composite, 1.18%. International stocks, measured by the week-over-week performance of the MSCI EAFE index, were down 0.79%.[1][2]

Households Bought More Last Month
Retail sales were up 0.4% in June, according to the Department of Commerce. Consumer purchases account for more than two-thirds of America’s gross domestic product, and data like this may rebut some assertions that the economy is losing steam.[3]

Traders still expect the Federal Reserve to make a rate cut at the end of this month, even with low unemployment, solid consumer spending, and stocks near record peaks. Ordinarily, the Fed lowers interest rates to try to stimulate business growth and investment when the economy lags. After ten years without a recession, its new challenge is to make appropriate moves to ward off such a slowdown.[4]

Will Wall Street’s Expectations Be Met?
Thursday, Federal Reserve Bank of New York President John Williams noted that Fed policymakers could proactively adjust interest rates and take “preventative measures” to ward off a potential slowdown. A New York Fed spokesperson later said that Williams’ comments were “academic” and did not concern “potential policy actions.” Still, Fed Vice President Richard Clarida made similar comments last week, expressing the view that Fed officials “don’t have to wait until things get bad to have a dramatic series of rate cuts.”[5]

Two other Fed officials – Esther George and Eric Rosengren – have publicly stated that they are not in favor of a cut.[6]

What’s Next
About 25% of S&P 500 companies report earnings this week. In addition, the federal government will present its first snapshot of the economy’s second-quarter performance.

[1] www.wsj.com/market-data
[2] quotes.wsj.com/index/XX/990300/historical-prices

[3] www.cnbc.com/2019/07/17/the-feds-expected-rate-cut-not-supported-by-economic-data.html

[4] www.cnbc.com/2019/07/17/the-feds-expected-rate-cut-not-supported-by-economic-data.html
[5] www.thestreet.com/markets/stocks-climb-rate-cut-hopes-microsoft-earnings-15025435

[6] www.cnbc.com/2019/07/19/feds-rosengren-not-on-board-for-rate-cut-i-think-we-should-wait.html

Tax Tips – Potential, Pet-Related Tax Deductions

Because this week’s tips are all about our furry friends, we thought we’d share some potential pet-related tax deductions. Tax law is always changing, so these deductions may no longer be relevant if new developments arise, but they’re things to consider if you have four-legged friends at home.

• Business animals, or animals that live at a trade or business, can be a potential deduction. This would include animals that primarily live at a business, such as a dog that serves as a security measure or a cat that keeps the rodent population at bay. You may be able to deduct expenses, like food, vet visits, and training associated with the job.
• Donations to pet-related charity or organization may be deductible. This is different, though, than adopting a pet, which isn’t tax deductible.

• Fostering pets can also be a tax write-off. This is considered a charitable contribution, and expenses for fostering a pet for an IRS-qualified 501(c)(3) organization can be deducted.

• If you have a service dog, these expenses are also tax deductible. According to IRS Publication 502, deductions are available for individuals requiring a guide dog for vision or hearing impairments.

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from ThinkAdvisor[9]
[9] www.thinkadvisor.com/2018/04/03/6-potential-pet-related-tax-deductions/?slreturn=20190421211413

S&P 500 Tops 3,000 – WEEKLY UPDATE – JULY 15, 2019

The Week on Wall Street
Friday, the S&P 500 settled above 3,000 for the first time, after rising 0.78% for the week. The Dow Jones Industrial Average chalked up a milestone of its own: the blue chips ended the week above 27,000, gaining 1.52% on the way. Additionally, the Nasdaq Composite wrapped up the week 1.01% higher. The MSCI EAFE index, a gauge of overseas developed markets, fell 0.65%.[1][2][3]
Stocks rallied at midweek with help from Federal Reserve Chairman Jerome Powell’s congressional testimony on monetary policy, plus the latest Fed meeting minutes.

Jerome Powell’s Statements
Wednesday, Chairman Powell told Capitol Hill lawmakers that “uncertainties around global growth and trade continue to weigh on the outlook” of the Federal Open Market Committee. He also noted that “manufacturing, trade, and investment are weak all around the world.”[4]

On the same day, the Fed presented the minutes of its June policy meeting. The record shared the belief of some Fed officials that “a near-term cut in the target range for the federal funds rate could help cushion the effects of possible future adverse shocks to the economy.”[5]

Overall Inflation Remains Muted
The June Consumer Price Index, released last week by the Bureau of Labor Statistics, measured only 1.6% yearly inflation. The Federal Reserve uses the Bureau of Economic Analysis’ Core Personal Consumption Expenditures (PCE) Price Index as its inflation barometer; in its latest edition, it showed just a 1.5% year-over-year rise.[6]

Currently, the Fed has a yearly inflation target of 2.0%. In the past, it has often raised interest rates in response to increasing inflation, which can potentially slow growth and affect hiring and employment levels. Absent significant inflation pressure, such a response may not be forthcoming.[7]

Final Thought
All eyes are on corporate earnings this week, as prominent banks and about two dozen other S&P 500 firms report second-quarter results. Market participants have much to consider in terms of profits, revenue, and guidance
[1] www.cnbc.com/2019/07/12/stock-market-dow-futures-rise-after-fed-hints-at-rate-cut-ahead.html
[2] www.wsj.com/market-data
[3] quotes.wsj.com/index/XX/990300/historical-prices
[4] www.investopedia.com/markets-cheer-lower-interest-rate-outlook-4692639
[5] www.investopedia.com/markets-cheer-lower-interest-rate-outlook-4692639
[6] www.reuters.com/article/us-usa-economy-inflation/u-s-core-cpi-posts-biggest-gain-in-nearly-1-1-2-years-idUSKCN1U61NR?il=0
[7] www.reuters.com/article/us-usa-economy-inflation/u-s-core-cpi-posts-biggest-gain-in-nearly-1-1-2-years-idUSKCN1U61NR?il=0