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Presented by MidAmerica Financial Resources. You can reach them at 618.548.4777 or greg.malan@lpl.com or on the web at www.mid-america.us

 

Tax Changes That May Be Overlooked

Tax Changes That May Be Overlooked

Some alterations to the Internal Revenue Code were less publicized than others.

Provided by MidAmerica Financial Resources

 

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.)4

 

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.

 

MidAmerica Financial Resources may be reached at 618.548.4777 or greg.malan@lpl.com www.mid-america.us

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Securities and advisory services offered through LPL Financial, a Registered Investment Adviser, Member FINRA/SIPC.
MidAmerica Financial Resources and Malan Financial Group are separate and unrelated companies to LPL.

Citations.

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]

Why Did Treasury Yields Jump?

Why Did Treasury Yields Jump?

A look at the early October selloff of U.S. government bonds.

Provided by MidAmerica Financial Resources

 

Investors raised eyebrows in early October as long-dated Treasury yields soared. On Tuesday, October 2, the yield of the 10-year note was at 3.05%. The next day, it hit 3.15%. A day later, 3.19%. What was behind this quick rise, and this sprint from Treasuries toward riskier assets? You can credit several factors.1

 

One, Federal Reserve chairman Jerome Powell made an attention-getting comment. On October 3, he expressed that the central bank’s monetary policy is “a long way from neutral.” In other words, interest rates (in his view) are nowhere near the point where the Fed needs to stop increasing them. Bond investors found his remark plenty hawkish.2

 

Two, great data keeps emerging. The Institute for Supply Management’s service sector purchasing manager index hit an all-time high of 61.6 in September. (It should be noted that this index has only been around for a decade.) ADP’s latest payrolls report found that private companies added 230,000 net new jobs last month, a terrific gain vaulting above the 168,000 noted in August. Additionally, initial unemployment claims were near a 49-year low when October started. These indicators signaled an economy running on all cylinders. Further affirming its health, Amazon.com announced it would boost its minimum wage to $15 an hour, giving some of its workers nearly a 30% raise.3

 

Three, you have the influence of the Fed thinning its securities portfolio. It has been reducing its bond holdings since last fall and is now doing so by $50 billion per month (compared to $40 billion per month last quarter).2

    

Four, NAFTA could be replaced. Canada, Mexico, and the U.S. have agreed to a preliminary trilateral trade pact designed to supplant the North American Free Trade Agreement. Wall Street applauded that news as October began, which whetted investor appetite for stocks and lessened it for bonds.4

   

What is the impact of these soaring yields? When 10-year, 20-year, and 30-year Treasury yields rise abruptly, the takeaway is that investors believe the economy is booming and inflation pressure is increasing. Meaning, more interest rate hikes are ahead.

 

As long-dated Treasury yields escalate, the housing market could feel the impact. Mortgage rates track the path of the 10-year note, and when the 10-year note yield rises, they move north in response. Higher mortgage rates would further decelerate the pace of homebuying, which has been slowing.4

 

When the yield on the 10-year note reached its highest level in more than seven years on October 4, Wall Street grew a bit worried. The Nasdaq Composite fell 145.57, the Dow Jones Industrial Average 200.91, and the S&P 500, 23.90. Now, the challenge becomes whether investors can shake the prospect of more expensive borrowing from their minds.5

 

MidAmerica Financial Resources may be reached at 618.548.4777 or greg.malan@lpl.com www.mid-america.us

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Securities and advisory services offered through LPL Financial, a Registered Investment Adviser, Member FINRA/SIPC.
MidAmerica Financial Resources and Malan Financial Group are separate and unrelated companies to LPL.

Citations.

1 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield [10/4/18]

2 – investors.com/news/economy/5-reasons-treasury-yields-rising-stocks-sliding/ [10/4/18]

3 – cnbc.com/2018/10/04/us-bonds-and-fixed-income-data-and-fed-remarks.html [10/4/18]

4 – marketwatch.com/story/mortgage-rates-tick-down-ahead-of-bond-market-bloodbath-that-sent-yields-surging-2018-10-04/ [10/4/18]

5 – cbsnews.com/news/stock-prices-tumble-as-interest-rate-fears-grip-wall-street/ [10/4/18]

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