Real Estate IRA Caveats
Investing in real estate inside an IRA comes with strict rules. Complication number one: Owning property in an IRA negates all the familiar tax benefits of owning investment real estate, says James Lange, a CPA and financial planner in Pittsburgh. You can’t deduct property taxes or mortgage interest or take advantage of depreciation.
Aggravation number two: There’s a long list of prohibited transactions. You and your relatives are barred from occupying or working on the property, so forget free rent or “sweat equity.” The IRA, not you, owns the place, so if you’re considering a rental property, you’ll need a property manager to find tenants. Every dollar you invest in the property, plus expenses such as roof and furnace repairs, must come out of the IRA. Flout any rule and it’s a Catastrophe: The tax-deferred status of your entire IRA is ruined, and you’ll owe income taxes on the full value of the IRA’s assets, plus a 10% penalty if you’re younger than 59½.
Contact Connie Dello Buono, helping doctors and business owners reduce income taxes via a busiess structure and financial strategy. 408-854-1883 motherhealth@gmail.com or conniedbuono@gmail.com
http://www.hardingfp.com Schedule a phone chat with our sr investment advisor
What would the Federal Reserve do
Economic indicators: SP500, building permit, unemployment, capital goods spending, money supply
What would you do with your income and spending this 2015?
Contact Connie Dello Buono, helping doctors and business owners reduce income taxes via a business structure and financial strategies. 408-854-1883 motherhealth@gmail.com or conniedbuono@gmail.com
Strategic financial structure for doctors saves $71k in income tax per year
Strategic financial structure for doctors saves $71k in income tax per year
Maximize Tax Savings For 2014 Business Car Purchases
Maximize Tax Savings For 2014 Business Car Purchases
Doctors and Business Owners who purchased a business car in 2014 will be able to boost their tax savings using the $8,000 increase in first-year depreciation, thanks to the recent extension of bonus depreciation. Doctors who purchased a heavy SUV or pickup (Gross Vehicular Weight Rating over 6,000 pounds) by December 31, 2014 are eligible for even greater tax breaks.
Assume a doctor or Business Owner purchased a new SUV for $60,000 in 2014. First, the doctor or business owner can expense $25,000, the cap for SUVs. One-half of the remaining $35,000 cost, or $17,500, can be deducted using bonus depreciation. Another 20% of the $17,500 remaining balance, or $3,500, can be claimed as normal depreciation. Accordingly, with 100% business use, the total 2014 write-off for a $60,000 SUV purchase is $46,000. If the doctor or business owner purchased a used, rather than new SUV, bonus depreciation cannot be claimed, although the other tax breaks remain available.
Information only, please run this by your Professional Tax Advisor to implement.
Contact Connie Dello Buono 408-854-1883 motherhealth@gmail.com or conniedbuono@gmail.com to have a phone chat with a Sr Investment Advisor on ways to reduce income taxes for doctors and business owners via a business structure and financial strategy.
Migrant workers abused
Hong Kong is home to hundreds of thousands of women from Indonesia and the Philippines who work as “helpers” in pursuit of meager wealth. They are an indispensable part of the city’s vibrant economy and society. But incidents of abuse often stay hidden from public view. Follow one woman’s tale as she seeks to put her life back together after a horrific crime.
The Indonesian maid was asleep one night in a loft bed in the living room of her employer’s apartment, surrounded by a television and a dining room table. It had been her bedroom and her home for less than a month.
She said she awoke when she felt someone groping under her clothing. By the glow of the aquarium, she said she recognized her employer’s brother-in-law standing next to her bed.
The Indonesian maid. Hong Kong law prohibits identifying rape victims.BILLY H.C. KWOK FOR THE WALL STREET JOURNAL
“What is it?” she later recalled saying, pulling up her covers. She was both startled and groggy. He smiled and walked away without speaking.
Over the next seven weeks, he cornered her repeatedly, sexually assaulting her in the kitchen and raping her in the bathroom of the 650-square-foot apartment, which was home to a family of five.
Yet she faced no good choices in what to do – a problem when things go wrong for the more than 325,000 maids from poor countries who work in Hong Kong and at times face brutal treatment and abuse.
If she wanted to keep her job, she would have to stay in the apartment because Hong Kong policy requires foreign maids to live with their employers.
If she fled for home, she would be shamed in the eyes of her husband and mired in the debt she racked up to get to Hong Kong.
If she sought a new employer and decided just to stay quiet about the assaults, Hong Kong rules say she would normally have to leave her job, go back home within two weeks and re-apply for a work visa, a move she couldn’t afford.
And if she turned in her assailant to the police and pursued a case – a daunting prospect given her limited familiarity with the local language and with the city – she would not be able to work until the case was resolved without special government permission because of a Hong Kong policy meant to discourage false complaints.
That predicament, advocates say, leaves maids vulnerable and near-powerless when they face mistreatment and can embolden employers to treat them badly.
“The system is so weighted against domestic helpers,” said Melville Boase, a solicitor in Hong Kong who has represented maids for three decades. “These ladies are not here for a get-rich scheme. Most of them are here to support their families,” he said.
In a survey of more than 3,000 live-in maids released last year by the Mission for Migrant Workers, a Hong Kong-based advocacy group, 58% said they had experienced verbal abuse; 37% said they worked 16-hour days; 18% said they experienced physical abuse such as slapping and kicking; and 6% said they had been subjected to rape, touching or sexual comments in the homes of their employers. Some reported having to sleep in the bathroom or in the kitchen.
Connie’s comments: Each country in Asia should protect migrant workers who help increase their GDP in form of remittances in dollars sent by migrant workers.
About Annuities
About Annuities
Annuities are insurance contracts that guarantee a fixed or variable payment to the annuitant (the investor) at some future time, usually retirement. Annuities come in different varieties with many different options (called riders) so each annuity works in its own particular way, but there are some general concepts to understand.
Two Phases of Annuities
Generally, Annuities have two phases: an “accumulation” phase and a “distribution” phase.
The Accumulation phase is when the investor’s contributions (called premiums) are made. The contributions can be made in a lump sum or in installments over a period of time.
The Distribution phase is when the investor can withdraw their money. The distribution can also be done in either a lump sum or in payments over a period of time.
Deferred vs. Immediate
When entering an Annuity, you may set the Distribution phase to begin immediately or have the payments delayed to some point in the future. As such, Annuities can be Deferred Annuities or Immediate Annuities. Whether Deferred or Immediate, earnings in the Accumulation and Distribution phases grow on a tax-deferred basis.
Fixed Annuities
In a Fixed Annuity, the insurance company guarantees a fixed payment to the annuitant (investor) for either the lifetime of the investor or for a specified period of time. If an investor dies before their principal has been fully paid out, they may receive only a portion of the monies invested during the Accumulation phase. Essentially, the insurance company insures two risks in offering the Fixed Annuity: the investment risk and the risk of an investor living beyond the principal and interest earned.
To finance a fixed payment over time, a Fixed Annuity must generate interest on the premiums paid. A Fixed Annuity contract typically specifies two levels of interest: a Current Rate and a Minimum Rate. The Current Rate reflects the current interest rates the Fixed Annuity will earn and is guaranteed at the beginning of each calendar year. The Minimum Rate is the minimum interest rate the insurance company will guarantee if the Current Rate falls. Minimum Rates are determined by states. Utah currently requires a minimum of 3 percent.
As the principal and interest is guaranteed by the insurance company, the risk of a fixed annuity is entirely based on the financial health of the company selling the Fixed Annuity.
Variable Annuities
Variable Annuities differ in that their rate of return is based on an underlying securities portfolio or other index of performance (called a subaccount). That means that the value of the Variable Annuity contract itself may rise or fall with the stock market. Not only does this affect earnings in the Accumulation phase and payments during the Distribution phase, but also presents the risk that the Variable Annuity loses money.
Variable Annuities are often sold by comparing them to a mutual fund, but focusing on the features that Variable Annuities offer and mutual funds do not. These selling points include:
- Tax-Deferred Earnings — While market gains in the subaccount are not taxed until the Distribution phase, other types of investment accounts offer the same tax advantage. A Traditional or Rollover IRA also holds securities (e.g. mutual funds, stocks, bonds) and defers taxes until distributions are made.
- Death Benefit — Similar to insurance products, most Variable Annuities include a death benefit, which allows a designated beneficiary to receive a certain amount upon the annuitant’s death. That amount is often the greater of either: all the money in the account, or some guaranteed minimum (e.g. all premiums paid minus withdrawals taken). Sometimes riders are available to elect a “stepped-up” death benefit. Remember, that any death benefit guarantee is only as good as the insurance company that gives them.
- Payout Options / Guaranteed Income for Life — As its name implies, a Variable Annuity’s rate of return is not stable, but varies with the investment options in the subaccount. There is no guarantee that an investor will earn any return on their investment and there is a risk that they will lose money. Because of this risk, variable annuities are securities registered with the Securities and Exchange Commission (SEC).
- Other Riders — Variable Annuities are often sold with a number of add-on options (riders) that provide specific benefits. Be aware that these special features may result in additional charges to the investor in the overall annual fees and expenses of the annuity contract.
Equity-Indexed Annuities
Equity-Indexed Annuities are complex financial instruments that combine elements of both Fixed and Variable Annuities. The return on an Equity-Indexed Annuity varies more than a Fixed Annuity, but varies less than a Variable Annuity. So the risk for Equity-Indexed Annuity is somewhere between a Fixed and Variable Annuity.
Equity-Indexed Annuities combine a minimum guaranteed interest rate with another interest rate linked to a market index. The minimum guaranteed interest rate is typically a modest amount and a market index is the combined result of a number of stocks representing a specific segment of the market or the market as a whole. So while the market component of the Equity-Indexed Annuity still creates a risk (and potential losses), the minimum guaranteed interest rate may offset that risk somewhat. However, the minimum guaranteed interest rate may not even cover the costs of the surrender charges, rider expenses, and tax penalties if the investor needed to cash out their Equity-Indexed Annuity.
Regulation of Annuities
Fixed Annuities are not securities and are not regulated by the Utah Division of Securities or the Securities and Exchange Commission (SEC). Fixed Annuities are insurance products regulated by the Utah Department of Insurance.
Variable Annuities are securities regulated by the SEC. The individual sales agents should be licensed both as an insurance agent with the Utah Department of Insurance and as a broker-dealer agent with the Utah Division of Securities.
Equity-Indexed Annuities combine features of traditional insurance products (guaranteed minimum return) and traditional securities (return linked to the stock markets). Currently, Equity-Indexed Annuities are deemed to be a Fixed Annuity in Utah and are regulated by the Utah Department of Insurance, not the Utah Division of Securities. However, the SEC evaluates Equity-Indexed Annuities on a case-by-case basis and may regulate them as securities depending on the mix of features. Proposed legislation may change the way Utah regulates Equity-Indexed Annuities in the coming years.
Free Look Period
Annuity contracts typically have a “free look” period of ten or more days, during which you can terminate the insurance contract without paying any surrender charges and receive a return of your purchase payments (which may be adjusted to reflect charges and the performance of your investment). You can continue to ask questions in this period to make sure you understand your Annuity before the “free look” period ends.
Suddenly everything is a choice rather than a mandatory cost, your personal finance resolution for 2015
- Car: Riding a bike or bus to work. Think of saving the car insurance and cost of gas for years before buying your dream car.
- House: Settling for a room to rent or mobile home or community house sharing. Think Income first before Spending. This means buying a fourplex as your first home or a house that you can rent out first and own the second or third house while maintaining the rental homes. Know capital gains and ways to control them thru sound investing and business structuring.
- Emergency Fund for unforeseen events like car repairs, college teens, lost job or lost opportunity. Cutting on stuff that you want to cut back on like expensive vacations to fatten your emergency funds first.
- Emotional about spending, mortgage worries. The reality of being debt-free is more important than joining or copying the Joneses. Buying stuff second hand.
- Saving in your net worth personal banking , be it in your bank savings account, cash value life insurance, managed stock savings/account, bonds, others.
- Negotiate everything or trade/barter services for stuff.
- Challenge Are you getting value in your gym membership?
- Marry someone with same level of ambition, personal finance habits and enterprenueral spirit as you.
- Walk your talk when guiding your children about finances. Allow them to work during summer break or school break to learn the value of money. Use a revocable living trust to transfer assets to them.
- Take care of your health for in the end, when your health fails you might end up selling your houses to pay for nursing home. Health first and then wealth Or move to other countries or cities to downsize and afford retirement.
- Use a business structure and financial strategy to write off most of your expenses and save the extra when you minus your lifestyle from your gross income. For this one, contact Connie Dello Buono to help you reduce your income tax using a business structure and financial strategy at 408-854-1883 conniedbuono@gmail.com , motherhealth@gmail.com
Donate your real estate to the following charities: Motherhealth Inc for affordable senior care and Green Research Institute for sustainability at 1708 Hallmark Lane San Jose CA 95124. Contact Connie Dello Buono.
Taxes 2015 – Finance Planning and Financial Strategies coupled with Business structure
Taxes 2015 – Finance Planning and Financial Strategies coupled with Business structure
How Demographics Could Doom the Bull Market by Anthony Mirhaydari
In the popular perception of economics, some things are taken to be self-evident. Like the truism that investors should just buy and hold stocks for the long term. Or that prosperity is attainable through hard work, saving and home ownership. Or that a college education is the path to personal empowerment.
But the truth is, our history is limited. The Baby Boomer generation — the 76 million Americans born between 1946 and 1964 — was the first to really live a full lifecycle in the economy as currently structured. Members of the Greatest Generation were paying their mortgages when the value of the U.S. dollar was still tied to gold. Before that, folks remembered what it was like when there was no Federal Reserve — or federal income taxes, for that matter.
Related: Two Housing Markets for the Two Americas
Boomers in recent decades benefited from one of the largest increases in household wealth in human history, largely due to factors outside their control, as asset values soared and wages stagnated. For the roughly 80 million members of the millennial generation there is a nagging sense that maybe the boomers enjoyed a one-off boon and that a repeat performance isn’t in the cards.
In other words, it’s looking like the American Dream — as enjoyed by the boomers — is increasingly unattainable. The evidence is damning.
First, let’s look at what the Boomers have enjoyed.
Between 1970 and now, household net worth has more than tripled on an inflation-adjusted basis and now totals $81 trillion on a nominal basis. But this asset price appreciation — both financial assets and housing, the latter of which makes up the bulk of the wealth of Middle America — masks a stagnation in incomes. On an inflation-adjusted basis, average hourly earnings are actually below where they were in 1970. As a result, Americans have grown reliant upon asset price gains to compensate for median household income about 10 percent below the highs reached during the dotcom boom.
The reason most Americans feel wealthy is that the median price of new homes sold has gone from $22,300 in 1970 to $280,900 now.
The rise has been enabled by the expansion of easy credit terms, a growing share of family budgets dedicated to housing costs, as well as the “trade up” of boomers from one house to another. Consider that in 1984, new homes sold for 3.6 times median household income compared to 5.1 times now.
And this brings us to the pressures hitting millennials as they try to participate in the American Dream as lived by their parents. You may have heard much of this before, but let’s briefly look at the predicament millennials face: For those who are taking the bold step of venturing out on their own, they are faced with trying to buy expensive homes without the benefit of home equity to roll over, and burdened by the stratospheric rise of education costs (which have tripled since the mid-1990s), low starting wages and hefty student loan debts.
Related: Are 401(k) Plans Setting Up Millennials for Pain?
According to the Economic Policy Institute, the wages of young college grads are stuck at levels seen in 1989 on an inflation-adjusted basis. But in 1989, student loan debt totaled roughly $291 billion according to Federal Reserve data. Now, it’s over $943 billion, as college is pushed as a way to overcome the financial hurdles young people face. EPI data shows that the share of young high-school graduates enrolled in college or university grew from less than 45 percent in 1989 to a peak of 60 percent in 2012.
The financial straight jacket has led to a postponement of social maturation. Household formation rates are still down as millennials delay buying a home, getting married, buying cars and having kids — idling instead in an extended adolescence in which they spend on electronic gadgets and vacations while shacking up with friends and family. This generation cares more about experiences than stuff.
Related: Millennials Are Young, Broke and Spending on Luxury
The Pew Research Center has found that the share of adults who have never married has doubled since 1970, and one in four young adults today may never marry at all. Multi-generational living has doubled since 1980. The National Association of Realtors reports that the share of first-time homebuyers has dropped to the lowest levels since 1987.
All this is darkening the worldview of young Americans. A separate Pew survey shows they are decidedly less trusting of others. They tend to be independent of political parties and religious institutions. And while they are optimistic that things will get better, their expectations have been lowered: According to an Ipsos Mori Global Trends survey cited by Goldman Sachs, just 25 percent of those under 30 believe they will have a better life than their parents. Compare that to the 80 percent of Chinese youth that believe they will do better.
Before baby boomers dismiss all this as youthful indignation, or engage in some self-adoration, there could be a catch. Remember, asset price gains exist only on paper until the assets are sold. Realizing those gains requires a buyer for every seller.
The trouble is that as more baby boomers approach and enter retirement, they will need someone else — the millennials — to buy their homes and their stocks at a high price. If they don’t, those paper gains could disappear.
Related: 7 Ways Boomers and Millennials Differ at Work
Indeed, a new study by the Federal Reserve Bank of San Francisco estimates that U.S. stock market valuations could be cut sharply over the next decade because of this: “Our current estimate suggests that the P/E ratio of the U.S. equity market could be halved by 2025 relative to its 2013 level,” the researchers note.
Their study is based on the share of the population in their prime investing years (40-49 years old) vs. their prime selling years (60-69). The ratio of these two age groups is shown in the chart below, and is set to drop not only in the U.S. but in other G7 countries as well.
But this troublesome projection could be underestimating the damage. The last time this ratio bottomed in the United States, in the early 1980s, the cyclically adjusted price-to-earnings ratio on the S&P 500 — which takes a 10-year average of earnings to smooth the impact of the business cycle — bottomed at a multiple of 7.2 vs. a current reading of roughly 27. Holdings earnings constant, a return to that level would be worth a 74 percent drop in stock prices.
The good news is that the researchers found that global aging shouldn’t make the demographic headwinds even worse — and boomers living longer may look to draw down their holdings more slowly, shifting the projected balance of sellers and buyers.
Related: 3 Ways the Boomer Housing Crisis Benefits Millennials
Plus, the researchers remind us, “factors other than demographics may play important roles in determining future U.S. equity values.” Private citizens in China, for example, could respond to liberalized policies there by buying more U.S. stocks.
Still, if millennials are too busy buying iPhones, using Uber, taking selfies and sunbathing in Mazatlán, the risks to boomers and the U.S. stock and housing markets are very real.
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Connie’s Comments: Call 408-854-1883 or motherhealth@gmail.com or conniedbuono@gmail.com to help reduce your income taxes via a business structure and financial strategy.