Last week we reported on the fact the stock market had indeed suffered a “Correction.” A Correction is a series of stock market declines over several days or weeks leading to a 10% to 20% decline from a stock market high. The stock market typically recovers from a Correction in a relatively short time of 3 to 12 months.
Please join me in welcoming Stefany Keiser to our Valley National team as Administrative Assistant. The firm will be releasing an official announcement this week, but I wanted to let you know first. Stefany will be available immediately to assist my clients with scheduling appointments and taking questions. Of course, the rest of your service team will be right alongside to offer additional assistance and to help Stefany become familiar with our procedures and our people. They have already completed a week of intensive training with her on our systems and processes. I am confident that you will find your experience with Stefany to be everything you have come to expect from my team.
Stefany comes to us with 17 years of client service experience. She is originally from Easton and now resides in Bethlehem. She can be reached at firstname.lastname@example.org or by phone at extension 118.
Thomas M. Riddle
Founder & Chairman
Valley National Financial Advisors
The U.S. stock market, as well as most of the global stock markets, have entered into a “Correction”. A Correction is a series of stock market declines over several days or weeks leading to a 10% to 20% decline from a stock market high. The stock market typically recovers from a Correction in a relatively short time of 3 to 12 months. As of today, we do not see any system-wide issue so large as to cause the market to slide further into a “Bear Market” which is a decline of 20% from a stock market high. Our insight is also supported by strong consumer spending and business profits as further explained in The “Heat Map” section.
Starting in 2018, the “kiddie tax” is changed substantially. First, a child’s kiddie tax is no longer affected by the tax situation of his or her parent or the unearned income of any siblings – this makes tax return preparation simplified. Second, the taxable income of the child who must file a tax return is taxed using the Trusts and Estates rates – which could result in a higher tax on child’s unearned income like interest and dividends.
The new tax law knocks out the itemized deduction for interest paid on home equity loans. That’s right, a taxpayer may not claim an itemized deduction for mortgage interest paid or accrued on any home equity debt of any qualified residence of the taxpayer for tax years beginning in 2018 through 2025.
Tax Tips you can use
Mortgage interest related to home office. A self-employed taxpayer who reports his or her trade or business on Schedule C of Form 1040, and who uses a portion of his or her residence as a qualified home office will continue to be able to deduct the share of mortgage interest related to the home office, without regard to the mortgage limitation. (Note: The home office deduction is subject to limitation, based on the income earned by the taxpayer in the related activity).
The annual limit for gifts (to family members or other individuals) in 2018 has been raised to $15,000. Such gifts are free of income taxes for both the person giving the gift as well as the person receiving the gift.
Tax Tips you can use
Speaking of gifts, one the best gifts to consider is a gift to your child to jump start your child’s Roth IRA. The maximum Roth IRA contribution equals $5,500 per year. A gift of $11,000 would fund both 2017 and 2018 Roth contributions. Assuming your child is age 25, this $11,000 could grow to equal $165,700 at age 65, if it averages 7% per year. The entire $165,700 can be withdrawn at that time TAX-FREE.
Disclosure: 7% rate of return is used for illustrative purposes only. There is no assurance this rate of return will be achieved. Investments are not FDIC insured and may lose money.
You are going to receive a raise in your February paycheck. The IRS is expected to post the new income tax withholding tables this month for your employer to use for payrolls in February. The new withholding tables reflect the lower tax rates stemming from the new income tax law.
Section 529 qualified tuition plans are modified BY THE NEW TAX LAW to allow the plans to distribute no more than $10,000 in tuition expenses incurred during the tax year for designated beneficiaries enrolled at a public, private, or religious elementary or secondary school.
The FED has been raising interest rates. But, banks have been slow to raise interest rates in the same manner on their checking accounts, savings accounts and CD’s. There is an alternative which is becoming much more attractive. Money market funds now yield between .50% to 1.00% and by the end of next year could be yielding 1.25% to 2.00%.
As rates rise, it pays to shop for higher rates for your savings.
You may be entitled to appeal higher Medicare premiums for Parts B and D of Medicare. You may have recently received a nasty surprise in the form of a Medicare letter notice. This letter puts you on notice your premiums will be higher in 2018 (and your Social Security benefit will be lower since these Part B and D premiums are deducted from your Social Security) because your income exceeds certain levels in 2016.
You can appeal the Medicare notice if you have experienced a “life-changing event” that caused your income to decrease in 2017 from 2016. The definition of life-changing event is (1) retirement or reduced work hours or (2) marriage or (3) divorce or annulment or (4) death of a spouse or (5) loss of income producing property due to natural disaster or (6) loss of a pension.
However, a one-time boost in 2016 income due to sale of a vacation home or large portfolio distribution, for example, would not qualify as a life-changing event – in these cases your Medicare parts B and D premiums will be increased for at least one year.
If you qualify for the appeal, click here to obtain the form needed to make an appeal.