July 2019 SMALL BUSINESS TIPS Quarterly: Oct 17 Deducting the Business Use of Your Vehicle If you operate a small business and you drive regularly for that business you have two choices: you can either drive your personal vehicle and reimburse yourself for the business portion of the associated costs, or you can transfer the vehicle to the business and pay all of the associated costs directly from the business. Which of these options you choose depends on the vehicle and how you use it within the business. There are no inherent tax benefits to titling your vehicle into your business, in fact doing so limits your options in how you deduct the cost of that vehicle. However, when your vehicle is 100% business use then titling it to your company can simplify your record-keeping requirements and allow you to pay for your vehicle costs directly out of your business account. The first step to decide where you should place ownership of your vehicle is to determine which vehicle cost deduction method is more beneficial in your situation. Standard Mileage Rate vs Actual Expenses There are two primary methods for deducting the cost of using a vehicle for business purposes: The standard mileage rate method and the actual costs method. Standard Mileage With the standard mileage rate you can deduct a specific dollar amount for each business mile you drive during the year (for 2022 the standard rate is 58.5 cents per mile). The standard mileage rate is used more often since it only requires you to keep track of the miles you drive throughout the year and does not require records of any other expenses. However, the standard mileage rate can only be used for a vehicle that is in your personal name. If your vehicle is titled to your business, you are required to use the actual expense method.. Actual Expense With the actual expense method you can deduct your out of pocket costs for fuel, insurance, repairs, etc. You can also deduct the cost of the vehicle by depreciating it over its asset life (typically 5 years). The actual expense method requires much more thorough record-keeping. You need to keep track of each vehicle related expense throughout the year, and if you use the vehicle for both personal and business use then you also need to keep track of the total business and total personal miles for the year Choosing the Right Method If your vehicle title is in the name of your business you are required to use the actual expense method. However, if the title is in your personal name you can choose which method to use in the first year. You can switch methods in the following years, but there are additional restrictions to do so. It is in your best interest to take the time in the first year to determine which method will be more beneficial. The standard mileage rate method is intended to simplify record-keeping requirements while still providing for an accurate deduction for the cost of using your vehicle in your business. To that end, in many cases the standard mileage rate method should provide the same or greater tax benefits as the actual expense method. However, there are specific factors that can make the actual expense method more beneficial: Price of Car: Since you can deduct the cost of a car over several years with the actual expense method, a more expensive car increases the probability that the actual expense method will be more beneficial Fuel Efficiency: With the standard mileage rate you get the same deduction no matter how many miles you get per gallon, so a less efficient vehicle will eat away at a greater portion of your allowed deduction. Highway vs City: If you are driving primarily in a large city you are likely putting much fewer miles on your vehicle while still spending the same amount on car payments, insurance, etc. If any of these factors apply to your situation then you may receive a greater benefit through the actual expense method. It is also worth noting that under the actual expense method you will receive a greater tax benefit in the first few years while you are depreciating the cost of the vehicle. Once the vehicle is fully depreciated your deduction will drop significantly. Under the standard mileage method your deduction will be relatively consistent subject only to small changes in the standard rate each year. Summary If 100% of the use of your vehicle is for your business and you have large vehicle costs either from buying a newer car or driving mostly in the city, putting your vehicle title into your business can simplify your record-keeping requirements without sacrificing the benefits of the standard mileage rate method. If you use your vehicle for both personal and business needs or you drive an older vehicle with a low market value, you may want to keep it in your personal name to preserve the option to use the standard mileage rate. Previous Article Next Article

SMALL BUSINESS TIPS Quarterly: Oct 17 Deducting Your Business Travel If you travel as part of your business or you have employees who travel you have several options for how you deduct those travel expenses. Typically you can either track and deduct the actual cost of travel or you can use standard allowance amounts provided by the IRS to simplify the record-keeping requirements. If you choose to use standard allowance amounts to deduct your travel expenses it is important to keep up-to-date on what the allowance rates are as they are typically updated on an annual basis. Vehicle Expenses If you use your personal vehicle for business-related travel you can deduct either a portion of your actual vehicle expenses or a standard rate per mile driven. Actual vehicle expenses would include gas, insurance, repairs and depreciation on the cost of the vehicle. For 2022 the standard mileage rate is 58.5 cents per mile, up from 56 cents in 2021. For more information on the vehicle expenses deduction read Deducting the Business Use of Your Vehicle . Meal and Lodging Expenses If you travel overnight for a business-related trip you can deduct your meal and lodging expenses as well as other miscellaneous travel expenses. If you would like to deduct the actual cost of meals, hotel rooms and other miscellaneous expenses you will need to keep copies of receipts for each expense in your records as well as document the business purpose of the trip. If you would prefer not to keep track of each receipt you can instead use the IRS per diem rates to deduct a standard amount for meals and lodging expenses for each day of your trip. You will still need to document the destination, length and business purpose of your trip but will not need to maintain receipts for your expenses. The per diem rates vary depending on your travel destination. You can lookup the rates for your destination at https://www.gsa.gov/travel/plan-book/per-diem-rates . These rates are typically updated every October. The current rates will be effective until September 30, 2022. If you choose to use per diem rates to deduct your business travel, do not have your business directly pay the cost of meals, lodging, etc. Instead, pay for these costs personally and then submit an expense report to your business using the per diem rates and reimburse yourself. If your business is structured as a sole proprietorship, you do not need to reimburse yourself through an expense report. Instead you can simply use the per diem rates to claim a business travel deduction on your tax return at the end of the year. Please note that if your business is a sole proprietorship you can only use the per diem rates for meal expenses, not lodging. Summary Traveling can be expensive. But if you know how to maximize the tax benefits of your business-related travel you can reduce some of that cost. Using the standard mileage and per diem rates can simplify your record-keeping requirements and in many cases can provide a greater tax benefit than deducting your actual costs. To maximize your business-travel deductions read How to Deduct Your Vacation Travel as a Business Expense . Schedule Your Tax-Planning Call Previous Article

Have you taken the proper steps to ensure your loved ones receive your property after you pass away? Save as PDF Read more articles Share 1 2 WILL VS TRUST: WHICH IS RIGHT FOR YOU? Have you ever thought about who you would like to give your money, real-estate, or that special family heirloom to after you pass away? Most of us have, but have you taken the necessary steps to ensure that your belongings are received by that person or persons? The two most common methods of transferring your assets to your loved ones after your death are a will or a living revocable trust . What is the difference between them, and which one is right for you? WILL A will is a written document that allows you to establish how you would like your personal assets to be distributed amongst your family and friends after you have passed away. You can also dictate, within reason, how you would like your assets to be used by their recipient. A will can be changed at any time throughout your life but becomes irrevocable at the time of your death. A will also allows you to designate a guardian for any minor children you may have. Without such guidance in your will, it will be up to a judge to appoint a guardian as they see fit. Advantages Easier to set up. A will is generally easier and cheaper to set up than a trust as it does not need to be actively managed or funded. Can be used to designate a guardian for your minor children Disadvantages More restrictive. A will does not provide as much freedom as a trust to control the distribution of your assets after your death. Court intervention. Transferring your property through a will requires the beneficiaries to go through probate court, which can be a time-consuming process and makes your financial affairs part of the public record. LIVING REVOCABLE TRUST A living revocable trust is a legal entity that you set up in order to manage your assets while you are alive and transfer them to your beneficiaries after your death. Unlike a will, there is no court intervention required to transfer property to your beneficiaries. One of the major differences between a will and a trust is that a trust must be funded in order to be valid. A trust can only be used to transfer property that was placed in it before your death. Advantages Greater control. A trust allows you to dictate how and when a minor child will receive any money left to them. It can also be used to set up specific funds such as for a child’s education. Avoid court. Transferring your property through a trust allows you to bypass the time-consuming process of probate court and allows for your financial affairs to remain private. Any assets placed in a trust can be transferred immediately to your beneficiaries after your death. Disadvantages More costly to set up. Trusts are more expensive than wills because they require continued management after the initial setup and they can only control assets that have been placed into them. Cannot be used to designate a guardian for your minor children. Summary You should consider the unique circumstances in your life to determine if a will or a trust would be more beneficial. In some circumstances it may make sense to have a trust but to supplement it with a will. For example, if you have one or more minor children you may consider setting up a trust so that you can establish college funds or hold money for them until they reach a certain age, and then you may want to supplement that trust with a will to designate a legal guardian for your children if you pass away before they reach adulthood. Read more articles Share Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us.

Beware of Hedge Fund Managers Bearing Gifts Quarterly: Oct 17 "Do not trust the horse, Trojans. Whatever it is, I fear the Greeks even when they bring gifts." According to Greek mythology, the Greeks had struggled for nearly a decade to penetrate and conquer the city of Troy. In an act of trickery, they constructed a huge wooden horse, hid men inside it and pretended to sail away from the city. Ignoring wise counsel, the Trojans opened the gates and unknowingly opened the door for the Greek army to enter their city. Shortly after the Trojans brought the horse into the formerly impenetrable area, the Greek army sailed back under the cover of night and stationed their men to attack. Once the Greek army was in place, the men crept out of the horse and opened the gates for the rest of the army to enter and destroy the city of Troy. The term "Trojan Horse" has metaphorically come to mean any trick or strategy that causes a target to invite a foe into a securely protected area. We correlate this story to the appeal of hedge funds and private equity to a high net worth investor and the economic reality that is likely to follow. Diverging from our normal lines of discussion, we are going to explore the implications of the Tax Cuts and Jobs Act (the new tax code) on alternative investment income. The tax implications on alternative investment income are staggering. The new US tax code raises the bar so high that most alternative investments will fail to pass the test for the average high-net-worth investor. The term “high-net-worth investor” is a relative term. After all, nobody wants to be the one millionaire on an island of billionaires! Rather than defining high-net-worth by the size of someone’s balance sheet, we are going to define it as anyone with an annual income above $400,000, the beginning of the 35% tax bracket for married couples filing a joint tax return here in the United States ($200,000 is the beginning of the 35% bracket for a single filer). For today’s discussion we are going to use the 37% tax bracket to define high net worth, so technically this would be a married couple with a taxable income above $600,000 or an individual with a taxable income above $300,000. A brief history lesson on our tax code and investment management fees: The “two and twenty” fee structure (2% management fee and 20% performance or carried interest fee) charged by hedge fund and private equity managers has always been a challenging hurdle for alternative investment managers to overcome. Prior to 2018, however, the US tax code took some of that sting out of the bite by allowing investors to deduct their investment management fees once they surpassed 2% of adjusted gross income. In other words, a tax payer with $1 million dollars in adjusted gross income could deduct the investment management fees that surpassed the $20,000 mark (the 2% hurdle). The new tax code however, has removed investment management fees from the list of itemizable deductions. The colossal impact of this change comes down to the fact that 100% of your investment income flows through to your personal tax return and your investment management fees no longer offset that income. It’s like the opposite of a tax-free municipal bond. Instead of receiving income on which the government will not tax you, you are required to pay tax on income you will never receive. Let’s take the example of a married couple making $700,000 per year from their employer plus another $150,000 of income from their alternative investments. To keep things simple, we will make the following assumptions: The couple earns $700,000 in wage income from their employer The alternative investment is custodied in a traditional taxable account (ie. non-retirement account) The alternative investment generates $150,000 of investment income on $1,000,000 of invested capital Half of the investment income is taxed at the investor's ordinary income tax rate and half is taxed at the long-term capital gains rate The investment manager is paid $20,000 from the 2% management fee and $26,000 from the 20% performance fee Description $150,000 Of Investment Income ($20,000) 2% Management Fee ($26,000) 20% Performance fee $104,000 Net to Investor Before Tax Tax Liability +$42,750 (Federal Income Tax) +$3,885 (Net Investment Income Tax) Cannot be deducted on Schedule A Cannot be deducted on Schedule A $46,635 Additional Tax Liability The investor receives $57,365 after investment management fees and federal income tax, and still has a state income tax bill to pay. This 5.7% return is a long way from the 15% gross return generated by the hedge fund manager. Keep in mind, we are just looking at the tax implications of alternative investment fee structures. Considering the fact that the HFRI Equity Hedge Index only returned 3.38% over the last five years (according to Hedge Fund Research, Inc. – 2/28/19), we haven’t even begun to address the impact of performance fees on net returns to investors. Potential Solution: Asset Location One potential way to address this problem is to put investments with high management fees into tax-deferred retirement accounts instead of traditional taxable accounts. The challenge with this option is that it puts the investor at risk of being subject to UBIT issues (unrelated business income tax). Because of the potential UBIT and ERISA issues, some managers and many custodians will not accept retirement assets in alternative funds. This asset location issue is a critical piece of the wealth preservation and accumulation puzzle. Unfortunately, this mission-critical issue is often missed by the wealth management community due to a lack of knowledge about our tax code. Conclusion The Tax Cuts and Jobs Act creates a very challenging hurdle for many alternative investments to overcome. Investors should be careful to analyze the net after-tax return on their investments and make sure they are being fairly compensated for putting their capital at risk.

Roth vs Traditional IRA Which One Is Right For You In our last article, Year-End Tax Planning Strategies , we briefly discussed the potential benefits of a Roth IRA over a Traditional IRA. This article will dive deeper into the differences between these two retirement planning options and provide some guidance on when one makes more sense than the other. Contribution Limits You can make 2019 contributions to a Traditional IRA or a Roth IRA until April 15 of 2020. The maximum amount you can contribute in 2019 is $6,000. If you are over the age of 50 then you can contribute an additional $1,000 to either one. Additional limitations apply differently to Roth and Traditional accounts based on your income level and whether or not you are covered by a retirement plan through your employer. These additional limitations are complicated so we won't get into them now. If you want more information on these limitations you can read "Income Limitations" at the end of the article. Which Account Is Right For You? The primary distinction between a Traditional and Roth IRA is when you pay taxes on the money in the account. With a Traditional IRA you deduct your contributions from your taxable income and do not pay any tax on that money until you withdraw it in the future. With a Roth IRA you pay the tax now but can withdraw the funds tax-free in retirement. One clear advantage the Roth has over the Traditional IRA is the earnings of the account can be withdrawn tax-free after age 59 1/2. With the Traditional IRA you pay taxes on the earning as well as your original contributions when you withdraw them. So what is the advantage of the Traditional IRA if it requires you to pay taxes on your earnings? In the past, the argument in favor of Traditional IRAs was that you were likely to be in a lower tax bracket when you retire so it made more sense to defer taxes today so that you could pay them later at a lower rate. However, with the Tax Cuts and Jobs Act we are currently in one of the lowest tax environments our country has seen in decades. And with the national debt growing at an accelerating pace there is an increasing chance of significant tax hikes in the future. If tax rates rise significantly in the future you could find yourself in a higher tax bracket in retirement, even if your income decreases. With that possibility, deferring taxes now to pay them in retirement may not be the best decision. Summary The decision between a Traditional or Roth IRA comes down to your expectations for your tax bracket in retirement compared to your tax bracket today and the length of time before you retire. If retirement is still 20 or 30 years away, you may be better off investing in a Roth IRA to take advantage of tax-free growth for all of those years. If you are planning to retire in the near future, the benefit of a tax deduction today may outweigh the potential increase in taxes a few years from now, if your income drops significantly when you retire. For a deeper discussion on which account makes more sense for your personal situation, please reach out to us. Income Limitations Roth IRA: To contribute the full amount to a Roth IRA in 2019 your Modified Adjusted Gross Income (MAGI) needs to be less than $122,000 if you file single or head of household and it must be less than $193,000 if you file a joint return with your spouse. If your MAGI is between $122,000 and $137,000 ($193,000 and $203,000 if filing a joint return) then you can make a partial contribution. Once your MAGI exceeds $137,000 ($203,000 if filing a joint return) then you are no longer eligible to contribute to a Roth IRA. Traditional IRA: If neither you nor your spouse are covered by a retirement plan at work then there is no income limit to your Traditional IRA contributions. If you are covered by a retirement plan at work and file single or head of household, your Traditional IRA contribution begins to be reduced once your MAGI reaches $64,000 and is eliminated once your MAGI reaches $74,000. The rules become even more complicated if you file a joint return and either spouse is covered by a retirement plan at work. If you are covered by a retirement plan at work, your contribution begins to be reduced once your MAGI reaches $103,000 and is eliminated once your MAGI reaches $123,000. If you are not covered by a retirement plan but your spouse is then your contribution begins to be reduced once your MAGI reaches $193,000 and is eliminated once your MAGI reaches $203,000. Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us.

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If your taxable income is between $315,000 and $415,000, you could be paying a higher tax rate than any other taxpayer. July 2018 MONOTELO QUARTERLY Quarterly: Oct 17 STAYING OUT OF THE "DANGER ZONE" OF THE NEW SMALL-BUSINESS DEDUCTION The Tax Cuts and Jobs Act introduced a 20% deduction for small business owners. You can read our overview of this deduction in our last quarterly article. The gist of this new deduction is it will allow small-business owners to deduct 20% of their business income from their taxable income on their personal return. While this new deduction provides some welcome relief for small-business owners, there are restrictions on the deduction that highlight how critical proper tax planning is in 2018. If your business qualifies as a “specified service trade or business ” then your deduction will start to be phased out at taxable income of $157,500 ($315,000 if married filing a joint return) and entirely eliminated at taxable income of $207,500 ($415,000 if married filing a joint return). While this means any service business owner with taxable income above $415,000 will receive no benefit from the deduction, the toll is heaviest for any business owner who lands in the middle of the phaseout range. Example: John and Mary own a small consulting business and have taxable income of $315,000. Since they are right at the lower phaseout threshold they will receive the full deduction and their taxable income will be $252,000 ($315,000 x 80%). The tax they will pay on this income is $49,059. Now if their taxable income increases by $100,000 they will be completely phased out of the deduction and their taxable income will jump from $252,000 to $415,000, increasing their tax bill to $96,629. That is $47,500 in federal taxes alone on $100,000 of income. With what is effectively a marginal tax rate of 48%, small-business owners with taxable income between $315,000 and $415,000 are paying a higher tax rate than any other taxpayer! To avoid this heavy tax burden, proper tax planning is critical to reduce your taxable income and stay out of this “danger zone” of high taxes. Strategies to Reduce Your Taxable Income Contribute to a retirement plan. As a small-business owner, you have several options to save for retirement while simultaneously avoiding the heavy tax burden of this phaseout range. By setting up a SEP IRA you can contribute up to $55,000 per year (subject to earned income limitations). A SEP IRA is a simple way to defer significant income for retirement and works best when you are the sole employee. If you have other employees in your business, be aware that you will need to contribute an equal percentage of wages for each eligible employee. Make the most of your medical expenses Take advantage of the deduction for self-employed health insurance premiums . Unless you or your spouse are eligible to receive subsidized health insurance through your employer, you can reduce your taxable income by paying your health insurance premiums through your business. Set up a Health Savings Account . If you have a High-Deductible Health Plan then you can contribute up to $6,900 per year to save for future medical costs. Your contributions will lower your taxable income in the year they are made, and as long as your distributions are for qualified medical expenses they will be tax-free. Increase your charitable donations. If you find yourself in the middle of this phaseout range after an exceptionally successful business year, then you may already be considering increased charitable donations. With the large tax burden you could be facing in this phaseout range, the tax deduction from your donations will be more valuable than ever. These are just a few of the options available to you to lower your taxable income and avoid this danger zone of high taxes. Even if you don’t expect your income to reach the phaseout level for the new deduction, you can still realize significant tax savings by taking advantage of these strategies to lower your taxable income. Previous Article Next Article

SIX MYTHS About Health Savings Accounts If you qualify for one, a Health Savings Account is an incredibly compelling way to pay for your future medical costs. Not only does it allow you to bypass the 7.5% threshold for deducting your medical expenses, it also provides for tax-free growth when you use the proceeds for medical expenses. With significant medical expenses in retirement all but guaranteed, a Health Savings Account is a great tool to save for retirement. As compelling as HSAs are, there are a number of misconceptions about how they work and how you can use the funds held in them. Our goal today is to dispel some of the common myths that surround Health Savings Accounts. 1. You need to use HSA money before the end of the year HSAs are frequently mixed up with flexible spending accounts, which require you to use the funds in the account before the end of the year or lose them. With an HSA the money in the account is yours to keep until you need it. 2. You can’t use your HSA after enrolling in Medicare While you cannot continue to contribute money to your HSA after enrolling in Medicare, you can continue to use the funds that are already in the account to pay for your medical expenses. In fact, once you turn 65 you can also use your HSA funds to pay your Part B and Part D Medicare premiums. If your Medicare premiums are paid directly out of your Social Security benefits you can withdraw the same amount from your HSA to reimburse yourself. 3. You can only open an HSA if your employer offers them. As long as you meet the eligibility requirements, you can open an HSA and start contributing on your own. Many banks and other financial institutions offer Health Savings Accounts. However, if your employer does offer an HSA you are likely better off setting one up through them since many employers make direct contributions to employee’s HSA and will likely also cover the administrative fees of the account. 4. You need to withdraw funds in the same year you pay your medical expenses. Many HSA providers will give you a debit card that you can use to pay your medical expenses directly out of your HSA. However, you can also pay your medical bills out of pocket and then withdraw funds from the account to reimburse yourself. There is no time-frame in which the reimbursement needs to be made. As long as a medical expense is incurred after you set up your HSA, you can wait five, ten or even fifty years to reimburse yourself out of the account. However, the longer you wait the more difficult it may be to prove that the expenses were not already reimbursed in a previous year if the IRS chooses to question the reimbursement so it is best not to wait too long to reimburse yourself. 5. You can only use HSA funds for family members covered under your insurance plan The amount of money that you can contribute to your HSA is dependent on whether your health plan covers your family or just yourself. You can contribute up to $3,500 annually if you have a single plan or $7,000 if you have a family plan. However, even if your health plan only covers yourself and your other family members are on a separate plan, you can still use your HSA funds to cover any medical expenses for your spouse or dependents. 6. You don’t need one if you are healthy. Even if you don’t expect to have significant medical expenses anytime in the near future, you are very likely to have large medical expenses later in life. When viewed as a retirement planning tool rather than an emergency medical fund, the HSA beats both traditional and Roth retirement accounts by allowing for pre-tax contributions and tax-free distributions when used for qualified medical expenses. Summary The Health Savings Account is a powerful tool to prepare for any unexpected medical costs while also saving for retirement. If your healthcare plan qualifies as a High Deductible plan you should strongly consider the benefits offered by an HSA and if you are choosing a new healthcare plan you should look at plans that will qualify for a Health Savings Account. Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us.

Spend some time reviewing your retirement accounts before 2019. 1 2 If you hold shares of a mutual fund in a taxable investment account (taxable meaning not held in an IRA or other “deferred” investment account), then you will receive distributions from this fund in the form of interest, dividends or capital gains. These distributions are likely automatically reinvested into more shares immediately after they are received. While this can help you keep your money productive, it can also create a number of tax consequences when these funds are not held in tax-deferred accounts. Save as PDF TAX CONSEQUENCES of Reinvesting Your Mutual Fund Taxes on Reinvested Distributions When these funds are held in a taxable account, you will pay taxes on the interest, dividends or capital gains in the year that you receive them, even if they are immediately reinvested back into the fund. This can come as a surprise to some taxpayers who think they shouldn’t owe any taxes since they never pulled the money out of the account. Disallowed Losses When a fund that you hold shares in has declined significantly in value you may sell those shares to prevent any further decline in value as well as to realize a tax deduction for your losses. However, if the proceeds are automatically reinvested back into the fund you may cost yourself the tax deduction for those losses due to the IRS “wash sale” rule. This rule states that when you purchase “substantially identical” shares within 30 days before or after the loss sale, your deduction will be reduced by the amount of purchases made within the window. If you plan to sell shares of a fund to realize a loss, make sure the proceeds are not automatically reinvested in a similar fund within 30 days. Records Nightmare from Long-Held Stock When you sell shares of a fund you need to report the original purchase price in order to reduce the taxable gain on the sale. If you only held the shares for a few months or a few years, then this likely is not a cause for concern. The fund company should know exactly when you purchased the shares and how much you paid. However, if you purchased the shares many years or even decades ago, you could find yourself making countless phone calls and digging through old records to try and determine your basis in the shares. Worse, if you cannot find your original purchase price the IRS will set it at zero and you will owe capital gains taxes on the entire sale. Reinvesting at the Top You are likely to receive more distributions from a mutual fund after the fund has a profitable year. If your distributions are set to be reinvested automatically this can lead to you routinely buying more shares at their highest price and fewer at their lowest price. In these situations, it may be more advantageous to manually invest the distributions in other funds that are not at their peak price. Summary Automatically reinvesting your earnings from mutual funds is an efficient way to keep your money active in the market without requiring your constant supervision. However, it can also create some unforeseen tax consequences at the end of the year if those funds are not held in a tax deferred account such as an IRA. Being aware of these potential tax consequences and monitoring your investment account throughout the year can help you avoid surprises and headaches when you file your taxes at the end of the year. Read more articles Share Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us.

TAX TIPS For Home Sellers As the housing recovery begins to pick up steam, some home sellers will have gains on the sale of their homes for the first time in nearly a decade. The good news is that the tax code recognizes the importance of home ownership by providing certain tax breaks when you sell your home. THE MOST IMPORTANT THING TO KNOW when selling your home is that your sale qualifies for an exclusion of $250,000 in gains ($500,000 if married filing jointly) if you owned the home and used it as your main home during 2 of the last 5 years before the sale and you have not claimed any exclusion for the sale of another home within the last 2 years. The 24 months of residence can fall anywhere within the 5-year period. It doesn't even have to be a single block of time. All you need is a total of 24 months (730 days) of residence during the 5-year period. POINTS/HOME IMPROVEMENTS/ MOVING & PROPERTY TAX DEDUCTIONS IF YOU HAVE TO SELL YOUR HOUSE because you're relocating for work, you might be able to deduct some of your moving expenses. Deductions could include transportation costs, travel to the new place, storage costs and lodging costs. YOU CAN DEDUCT YOUR PROPERTY TAXES for the portion of the year that you owned the home - up to the date of the sale. SOMETIMES YOU NEED TO IMPROVE YOUR HOME to get it sold. If you make home improvements that help sell your home, and if they are made within 90 days of the closing, they may be considered selling costs, which could be deductible. IF YOU PAID POINTS TO LOWER YOUR INTEREST RATE when you refinanced your home, you might qualify for an additional deduction. Because you can deduct a proportional share of the points until the loan is paid, when you pay off the loan through a sale,you can deduct the remaining value of those points. ADDITIONAL TIPS IF YOU DON'T QUALIFY for the Section 121 exclusion (left), you will owe taxes on any profit, so make sure you deduct all your selling costs from your gain. Some of the selling costs could include: Your real estate agent's commission Legal fees Title insurance Inspection fees Advertising costs Escrow fees Legal fees SELLING PRICE - SELLING EXPENSES CALCULATION AMOUNT REALIZED - ADJUSTED BASIS GAIN OR LOSS REPORTING REQUIREMENTS YOU NEED TO REPORT THE GAIN IF: 1 2 3 You have a taxable gain on your home sale and do not qualify to exclude the sale. You received Form 1099-S. If so, you must report the sale even if you have no taxable gain to report. You wish to report your gain as a taxable gain because you plan to sell another property that qualifies as a home within the next two years, and that property is likely to have a larger gain. Save as PDF Read more articles Share Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us.

2020 Strategies for a Lifetime of Tax Savings Join us as we share clear steps you can take to reduce your tax bill and cohesively address each area of your financial life. Minimize the risk of rising tax rates Reduce your current tax burden Maximize the productivity of your assets to improve your future income stream Minimize the drag from your long-term tax liabilities with potential lifetime savings of more than $200,000 on a $500,000 retirement portfolio Provide a quiet confidence that your financial affairs are arranged to meet your long-term goals

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