Mortgage Interest Deductions

When you do your taxes this year, it probably won’t be much of a comfort to know that in February 1913, the personal income tax was born. Bravo. But the good news is that if you will be writing out a check this year, you might want to ask yourself if a nice, fat mortgage interest deduction would come in handy next year.

For many people it certainly will. Mortgage interest is tax deductible. This means it is one of the expenses that reduces the amount of income on which you pay taxes.

Many, if not most, people who do not own houses, also do not itemize their deductions. That makes sense because if they added up all their potential deductions, the deductions would not be greater than the standard deduction. For 2016 the standard deduction for heads of household will also rise to $9,300 (up from $9,250 in 2015) but the other standard deduction amounts will remain the same: $6,300 for singles and $12,600 for married couples filing jointly. Personal exemptions will be $4,050 in 2016, up from $4,000 in 2015.

The beauty of the mortgage interest deduction is that it allows you to deduct all the interest you pay on your home loan. During the first years you pay on a home loan, nearly everything you pay is interest — up to 75 percent of your payment. That nice deduction can reduce the taxes you owe, while allowing you to live in the house you want. Owning a home also offers you some subtle protection from inflation. Inflation is an increase in the general level of prices for goods and services over time. So you notice that your grocery bill is going up and your dollars buy less, that is inflation, according to investopedia.com

According to inflationdata.com, in 2016 inflation was about 1.7 percent. For 2017, Kiplinger’s predicts inflation to head to 2.5 percent. Meanwhile, mortgage rates are ranging from 4.2 percent to 5.2 percent on 30-year fixed rate. That is an increase of at least 2 point from 2015 and 2016 but still very low. If you buy a home this year, and inflation continues to increase, you’ll soon be paying off your home with cheaper dollars. Your food will cost more; your luxuries will cost more; rent will cost more. But your mortgage is going to stay the same.

Meanwhile, inflation will also have some effect on home prices, forcing prices up. Right now, in most parts of the country, home prices are low because there are a lot of houses on the market and fewer buyers than five years ago. That means, right now you can get a lot of house for fewer dollars. In coming years, however, as the supply of houses for sale decreases, the pressure of inflation plus a reduced supply of houses, will force home prices up. In 10 years, your home purchase today will be a bargain and you will be living in a home you love while paying prices locked in the past! It’s like being a financial time travel

Social Security Strategies for Couples

Social Security is, like many government programs, rife with confusion.

For those nearing retirement age, it would be wise to plan now to create the benefits strategy that will maximize their retirement income while allowing them to enjoy life how they wish. Most experts, such as those at USA Today, recommend using benefit optimization software or an advisor to find the ideal outcome since there are a myriad of situations that affect benefits.

Maximize Benefits by Delaying (70/70)

Mathematically, delaying social security benefits until both partners have reached the age of 70 will normally maximize potential benefits. This is true because according to the Social Security Administration, benefits rise an average of 8 percent per year (for those born after 1943) for each year delayed past full retirement age until the age of 70. Delaying will ensure the maximum possible income for both partners.

The 66/70 Strategy

This strategy works best if both partners are about the same age and have earned similar incomes throughout their careers. In this scenario, it could be best to use what’s called a restricted application. Forbes outlines the plan by explaining that one partner will first file for benefits promptly at age 66. Immediately after that, the other partner will file a restricted application for spousal benefits (50 percent of the other partner) and begin collecting those. Meanwhile, the second partner will receive benefit increases over the next four years while they continue to work. After four years, the second partner files for their own benefits which will end their spousal benefit and put both partners on their own full retirement amounts. If both partners are destined to live a very long life this strategy may not be ideal, but it does offer a good mix of income and life enjoyment!

An Argument for Claiming Early

Most experts agree that claiming social security benefits early is a poor choice, but Fidelity Investments says it can make sense in some cases. If one or both partners are experiencing health issues or expect to have a shorter life expectancy for any reason it might be worthwhile to take benefits as soon as possible to maximize enjoyment during those non-working twilight years!

2 Ways of Thinking

Things are so divided these days. Say the word “Republican” to some people and an internal flare goes off. Say the word “Democrat” to another and you get the same reaction.

This article leads with the title, “Congress could pump the brakes on these new retirement plans”. It’s been shared multiple times on social media sites. But before anyone flares up, let’s break it down. Is this really a political play or just 2 different ways to see something – both having pros and cons?

The article state:

At issue are the state-run retirement plans being created in states including California, Oregon, Illinois, Maryland and Connecticut. Under the programs, workers who don’t have access to retirement plans through their jobs would be automatically enrolled in portable individual retirement accounts (IRAs), and contributions would be deducted directly from their paychecks.

A new Labor Department ruling is making it easier for states to offer Retirement Plans. Congress is considering doing away with the rule.

Supporters say – This would make saving for retirement easier to use and providing access for some that don’t currently have access to a 401K of some sort. States should be allowed to do this.

Opponents say – If states begin making their own plans, companies who currently offer retirement savings plans may discontinue offering savings plans of their own. It isn’t free for companies to provide these services, especially when they also offer contribution matching.  Opponents would prefer to make it easier for companies to start and maintain 401K programs as well as offer incentives to companies to provide any or better savings plans.

Neither say – Retirement savings plans are bad and should be done away with. Both sides are just looking for the best way to offer option to Americans workers. Now, it’s just a matter of opinion – which seem to be in no short supply these days! LOL!

More Information (per the article):

  • State plans, as currently proposed, do not allow company matching – which might actually decrease your current saving ability.
  • No current structure exists for oversight – could lead to higher costs initially and possibly more long term if those oversights are sourced out to third parties.

So, just curious, what do you think?

Should states be allowed to move forward with these plans or not?

Why or why not?

To The Moon, Alice!

Jackie GleasonAlice Kramden was famously unimpressed when her husband Ralph regularly threatened to send her to the moon. The hugely successful and iconic series ‘The Honeymooners’ starred Jackie Gleason as the frustrated bus driver Ralph and Audrey Meadows (as sensible housewife Alice. It was just one part of the hugely successful career of Jackie Gleason. In fact, the series was so enduring and popular (though perhaps a little shocking by today’s standards) that in 2000, a life-size statue of Jackie Gleason, in uniform as bus driver Ralph Kramden, was installed outside the Port Authority Bus Terminal in New York City.

By the time Gleason was age of 71, he had established an entertainment legacy that included one of the most financially lucrative shows in history (The Honeymooners), a list of memorable films like The Hustler’ with Paul Newman and Smokey and the Bandit with Burt Reynolds, as well as, a collection of romantic music LPs, the first of which, ‘For Lovers Only,’ sold over half a million copies.

The larger than life star, who had entertained audiences for more than half a century, was a self-made man who propelled himself beyond the limitations of his background. A high-school dropout, Gleason was born on February 26, 1916, to a poor Irish-Catholic immigrant family from Brooklyn, New York. Originally named Herbert John Gleason, his childhood, and adolescence were scarred by hardship. Gleason’s father abandoned him when he was only 8 years old, five years after the death of his only sibling from tuberculosis. 8 years after that, he would find himself completely alone at age 16, after the death of his mother.

Initially involved with a street gang called ‘The Nomads’, Gleason was well- known for his acerbic tongue, fashion sense and pool table smarts. He resolved to make a career out of his understated talent for wordplay. He used the streets to develop a comedic style and create a slew of characters that eventually won him first prize in a neighborhood talent contest for an original comedy routine. He headed in the direction that this early achievement pointed, becoming a club emcee before landing his first job in broadcasting, working as a part-time disc jockey on Newark radio.

His ability to turn life’s lemons into lemonade became a notable part of Gleason’s biography. Although the pathway to fame was far from smooth, he had learned how to hustle on the streets of New York. He saw failure from two different perspectives. When for instance, he was hired to host a TV game show that was cancelled after only one episode, Gleason apologized on air, and landed himself what was to become the precursor to the Honeymooners – ‘The Jackie Gleason’ show. Later, when he couldn’t sell his music album to a major company, he paid Capitol to publish it, and of course, the sales did nothing but prove his instincts right.

What’s your favorite Jackie Gleason memory?

New Money-Wise

Rolling over an IRA

In an effort to simplify the process of rolling over an IRA account, the IRS has just made a change to the way it handles the 60-day deadline to avoid paying penalties on those funds. As of August 2016, those filing past 60 days will have the opportunity to apply for a waiver and be given the benefit of the doubt from the government while they wait for their answer. This means the funds can move safely into their new home without waiting in limbo for a decision.

Buying Flowers

According to Aboutflower.com Valentine’s Day accounts for 25 percent of the total dollars spent on flowers for the year in the U.S. But surprisingly, only 20 percent of mothers surveyed by Offers.com list flowers as one of their top gift picks. If flowers are a must, purchasing a few days early through a local florist will often yield the best results and value.

Pros and cons of mobile check deposits

As technology progresses, even old industries such as banking are beginning to offer new features that can utilize the convenience of smartphones.  According to Bankrate.com, 63 percent of mobile bankers are likely using their phone to deposit checks. They also point out that mobile deposits can help prevent some types of fraud, allow deposits after business hours, and allow customers unprecedented convenience. Be sure to void the checks and mark them deposited. It’s not all great, however, as banks often place a cap on your deposits, place temporary holds on mobile-deposited funds, and have no safeguards against bounced checks.

Changes in Training Employees

ln the world of Facebook, Snapchat, and Twitter, employees just don’t want to sit down with a 400 page book for training. Employers are responding.

According to Fortune, Walmart is one of a growing number of corporations that are using apps and Facebook to train employees and facilitate conversation about safety.   As a test, Walmart had 5,000 employees train for jobs with three-minute videos.  The number of reportable injuries dropped by nearly half.  Now all of Walmart’s 80,000 warehouse and logistics workers use the mobile app for training.
PayPal, on the other hand, created a private Facebook page where employees can connect with invited expert to troubleshoot problems.

Would something like this help you in your world?

Paying Too Much In Property Tax?

In the last few years, most property taxes have risen in step with the increase in home values. But it never hurts to find out if your taxes are higher than they should be. Getting them reduced is a chore that’s worth the effort.

  • First, look for errors that may be inflating the value of your house. Check the list of factors used to come up with your assessment on the property record card, which is kept at your assessor’s office. Look for obvious errors, such as the incorrect square footage or the wrong number of bathrooms.
  • Because many appraisals are done on a drive-by basis, the assessor may have overlooked defects that could lower your tax bill, such as a wet basement or cracked walls. If you can show that the assessment was based on erroneous information, you may be able to get your tax bill reduced without going through the appeals process.
  • Check out similar properties. Talk to your neighbors or property owners to see whether their tax bills went up as much as yours did. The homes you check should be of similar size as age as your own. Sandra Block of Kiplinger’s Personal Finance recommends getting several examples. If your assessment is considerably larger than theirs, you have a good shot at winning an appeal.
  • Some localities base assessments on the cost of a home replacement plus the value of the land. An amount for depreciation is subtracted. Others use recent sales of comparable homes in the neighborhood. You might be able to challenge the assessment by doing your own research. You can use Zillow.com and Trulia.com to find sales of comparable properties. A real estate agent could provide recent sales prices for comparables.
  • Check to see if the assessor credited you with all the property tax relief available to you, including credits for senior citizens and veterans.

 

Valentine Chuckle

[Old Link Removed]

February 2017 Newsletter

Well, it’s been a while since we’ve been able to get a newsletter to you. We’ve just been so busy making some changes around here. Small ones like database boring stuff. The the BIG ones like developing a new platform for the 2017 version that has LOTS of upgrades and enhancements. See the last page of the newsletter for some of them. All enhancements listed here.

I hope you enjoy this newsletter. We’d love to hear what you think!

Here’s the link to the whole enchilada – Feb 2017 Newsletter[Old Link Removed]

Notes About Nothing

Welcome to 2017.  It is  February already! Where does the time go?  Have you reached 1/12 of your goals for the year?  Not sure I have either.

Setting AND hitting goals is not easy for most people.  Anyway this article isn’t about goal setting.  It’s really about “nothing”.

I’m a huge Seinfeld show fan.  When the day has been long and full of trouble, popping in a Seinfeld DVD still makes me laugh to lighten the mood before bedtime.  The show is famous for making fun of itself as a “show about nothing”.

 

 

Yet it pulled in millions and millions in advertising and royalties.  Enough to make Jerry Seinfeld and Larry David quite wealthy.   Pretty good for a show about “nothing”.

Meanwhile “Elaine” has now become a billionaire to exceed even Jerry in wealth. How?  Her real name is Julia Louis-Dreyfus and she inherited her wealth from her father, one of the founders of Dreyfus Funds who passed away last year.  I bet she is ribbing Jerry to no end about how she is now worth more money than him.

What does this all have to do with Torrid Tech you ask?  Well, “nothing” really.  But if I had to tie all of this together, it would be that the “sum of the parts can add up to a great deal more than the whole”.

The Seinfeld team faced huge obstacles.  They were not hugely successful in the beginning, but their chemistry and camaraderie continued to grow with each show.  They worked hard.  They were rewarded by the network with 9 seasons until Jerry decided he didn’t want to keep going.

This is similar to running a business or running your advisory practice. You’ve got to take many people, get them to work together, and hopefully over time build the team into a well oiled machine.  It’s a challenge that every business owner faces unless you  are just a one man band.

Here at Torrid Tech we started as a one man band in 1993 and have grown over time.  But we are still small – not some huge outfit.  In fact some of our client advisors probably bring in more revenue than our company.  But we persist.

The new 2017 edition is headed out the door onto our website and ultimately your computer.  FINALLY after over 4 years of hard work we are releasing the new codebase for Windows.  It has been a huge task.  But now the code is positioned and ready for a number of enhancements and integrations that we have wanted to tackle but couldn’t due to the rewrite effort.

After 24 years in business, I’d say we are in Season 6 of Seinfeld… hitting our stride and poised to really make an impact in the coming seasons.  Hopefully this show about “nothing” will actually be a show about “something” and give you and your clients the planning juice you need to continue to be successful this year and beyond.

Tim Turner

 

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