Posts made in July 2019

If you have a short-term vacation rental, you may be bringing in some extra income this summer season. By following a few easy tips, you can reduce your income taxes and keep more of what you make (some of which might go into a savings account for a vacation of your own!). Here are some helpful tips that short-term rental owners should consider:
• You don’t have to pay income tax on what you earn from your short-term rental, but only if you don’t rent it out for more than 14 days throughout the year, and also, if you live in it as your primary residence for at least 14 days out of the year.

• Keep thorough records as well as separate business and personal expenses. You may be able to deduct all ordinary and necessary expenses to operate the rental home.

• If you rent out a room in your home rather than the entire property, you may still be able to deduct a portion of the mortgage interest and property taxes of the property. But you still need to delineate between personal and business use of the residence.

Renting out an extra property or an extra space in your house is a great way to make some extra cash, and the tax laws may work in your favor.

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from TurboTax[8]

[8] turbotax.intuit.com/tax-tips/rental-property/10-tax-tips-for-airbnb-homeaway-vrbo-vacation-rentals/L8CEWgLSP

The Week on Wall Street
Stock benchmarks retreated during the first week of the second-quarter earnings season. As some big names shared quarterly results, investors seemed more interested in what might happen at the Federal Reserve’s upcoming policy meeting.
For the week, the S&P 500 declined 1.23%. The Dow Jones Industrial Average lost 0.65%, and the Nasdaq Composite, 1.18%. International stocks, measured by the week-over-week performance of the MSCI EAFE index, were down 0.79%.[1][2]

Households Bought More Last Month
Retail sales were up 0.4% in June, according to the Department of Commerce. Consumer purchases account for more than two-thirds of America’s gross domestic product, and data like this may rebut some assertions that the economy is losing steam.[3]

Traders still expect the Federal Reserve to make a rate cut at the end of this month, even with low unemployment, solid consumer spending, and stocks near record peaks. Ordinarily, the Fed lowers interest rates to try to stimulate business growth and investment when the economy lags. After ten years without a recession, its new challenge is to make appropriate moves to ward off such a slowdown.[4]

Will Wall Street’s Expectations Be Met?
Thursday, Federal Reserve Bank of New York President John Williams noted that Fed policymakers could proactively adjust interest rates and take “preventative measures” to ward off a potential slowdown. A New York Fed spokesperson later said that Williams’ comments were “academic” and did not concern “potential policy actions.” Still, Fed Vice President Richard Clarida made similar comments last week, expressing the view that Fed officials “don’t have to wait until things get bad to have a dramatic series of rate cuts.”[5]

Two other Fed officials – Esther George and Eric Rosengren – have publicly stated that they are not in favor of a cut.[6]

What’s Next
About 25% of S&P 500 companies report earnings this week. In addition, the federal government will present its first snapshot of the economy’s second-quarter performance.

[1] www.wsj.com/market-data
[2] quotes.wsj.com/index/XX/990300/historical-prices

[3] www.cnbc.com/2019/07/17/the-feds-expected-rate-cut-not-supported-by-economic-data.html

[4] www.cnbc.com/2019/07/17/the-feds-expected-rate-cut-not-supported-by-economic-data.html
[5] www.thestreet.com/markets/stocks-climb-rate-cut-hopes-microsoft-earnings-15025435

[6] www.cnbc.com/2019/07/19/feds-rosengren-not-on-board-for-rate-cut-i-think-we-should-wait.html

Because this week’s tips are all about our furry friends, we thought we’d share some potential pet-related tax deductions. Tax law is always changing, so these deductions may no longer be relevant if new developments arise, but they’re things to consider if you have four-legged friends at home.

• Business animals, or animals that live at a trade or business, can be a potential deduction. This would include animals that primarily live at a business, such as a dog that serves as a security measure or a cat that keeps the rodent population at bay. You may be able to deduct expenses, like food, vet visits, and training associated with the job.
• Donations to pet-related charity or organization may be deductible. This is different, though, than adopting a pet, which isn’t tax deductible.

• Fostering pets can also be a tax write-off. This is considered a charitable contribution, and expenses for fostering a pet for an IRS-qualified 501(c)(3) organization can be deducted.

• If you have a service dog, these expenses are also tax deductible. According to IRS Publication 502, deductions are available for individuals requiring a guide dog for vision or hearing impairments.

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from ThinkAdvisor[9]
[9] www.thinkadvisor.com/2018/04/03/6-potential-pet-related-tax-deductions/?slreturn=20190421211413

The Week on Wall Street
Friday, the S&P 500 settled above 3,000 for the first time, after rising 0.78% for the week. The Dow Jones Industrial Average chalked up a milestone of its own: the blue chips ended the week above 27,000, gaining 1.52% on the way. Additionally, the Nasdaq Composite wrapped up the week 1.01% higher. The MSCI EAFE index, a gauge of overseas developed markets, fell 0.65%.[1][2][3]
Stocks rallied at midweek with help from Federal Reserve Chairman Jerome Powell’s congressional testimony on monetary policy, plus the latest Fed meeting minutes.

Jerome Powell’s Statements
Wednesday, Chairman Powell told Capitol Hill lawmakers that “uncertainties around global growth and trade continue to weigh on the outlook” of the Federal Open Market Committee. He also noted that “manufacturing, trade, and investment are weak all around the world.”[4]

On the same day, the Fed presented the minutes of its June policy meeting. The record shared the belief of some Fed officials that “a near-term cut in the target range for the federal funds rate could help cushion the effects of possible future adverse shocks to the economy.”[5]

Overall Inflation Remains Muted
The June Consumer Price Index, released last week by the Bureau of Labor Statistics, measured only 1.6% yearly inflation. The Federal Reserve uses the Bureau of Economic Analysis’ Core Personal Consumption Expenditures (PCE) Price Index as its inflation barometer; in its latest edition, it showed just a 1.5% year-over-year rise.[6]

Currently, the Fed has a yearly inflation target of 2.0%. In the past, it has often raised interest rates in response to increasing inflation, which can potentially slow growth and affect hiring and employment levels. Absent significant inflation pressure, such a response may not be forthcoming.[7]

Final Thought
All eyes are on corporate earnings this week, as prominent banks and about two dozen other S&P 500 firms report second-quarter results. Market participants have much to consider in terms of profits, revenue, and guidance
[1] www.cnbc.com/2019/07/12/stock-market-dow-futures-rise-after-fed-hints-at-rate-cut-ahead.html
[2] www.wsj.com/market-data
[3] quotes.wsj.com/index/XX/990300/historical-prices
[4] www.investopedia.com/markets-cheer-lower-interest-rate-outlook-4692639
[5] www.investopedia.com/markets-cheer-lower-interest-rate-outlook-4692639
[6] www.reuters.com/article/us-usa-economy-inflation/u-s-core-cpi-posts-biggest-gain-in-nearly-1-1-2-years-idUSKCN1U61NR?il=0
[7] www.reuters.com/article/us-usa-economy-inflation/u-s-core-cpi-posts-biggest-gain-in-nearly-1-1-2-years-idUSKCN1U61NR?il=0

Not only does donating to a local charity or nonprofit feel good and help others, but your donations can also be a tax deduction. But before you donate, make sure you research the organization to see if it is, indeed, tax exempt.
The IRS makes it easy to check the status of various organizations to ensure that they are eligible to receive tax-deductible contributions. Their tool, Tax Exempt Organization Search, allows users to research an organization, quickly and easily, using information like the organization’s name, Employee Identification Number, and location.

In addition to finding out whether an organization is eligible to receive tax-deductible donations, users can also see automatically revoked organizations (which happens if they don’t file their required Form 990-series for three years in a row), IRS determination letters that recognize the organization as tax exempt, and more. Doing good for others, getting rid of things you no longer need, and being eligible for a tax deduction? Sign us up!

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov[14]

[14] www.irs.gov/newsroom/tool-helps-donors-research-tax-exempt-organizations

The Week on Wall Street
U.S. stock benchmarks opened a new quarter positively. The S&P 500 gained 1.65% in the opening week of July; the Dow Jones Industrial Average, 1.21%; the Nasdaq Composite, 1.94%. Overseas, stocks in developed markets, tracked by MSCI’s EAFE index, rose 1.43%.[1][2][3][4]
On July 3, the S&P posted its latest record close: 2,995.82. In other news, the Department of Labor said that the economy added 224,000 net new jobs in June, far more than the 160,000 projected by analysts in a Bloomberg poll. The headline jobless rate ticked up 0.1% to 3.7% in June; the U-6 rate, including the underemployed, also rose 0.1% to 7.2%. Finally, the Office of the U.S. Trade Representative said that the federal government plans to levy new tariffs on $4 billion of food and beverages coming from the European Union.[5][6][7]

Monday, July 15 will mark the start of the next earnings season. Money-center banks report first, followed by companies from a variety of industries. As Wall Street gets ready for their results, we will take a moment to recap Q2 index performance and the quarter’s two biggest news developments.

Stocks Rose, Fell, and Rose Again
The S&P 500 gained 3.93% in April, dropped 6.58% in May, and climbed 6.89% in June. In the end, it advanced 3.79% for the quarter, outdoing the Q2 gains of the Nasdaq Composite (3.58%) and Dow Industrials (2.59%).[8][9]

The Fed Hinted at a Shift in Monetary Policy
The central bank’s June statement took out a reference about being “patient” on borrowing costs and noted that Fed policymakers would “act as appropriate” to try and sustain economic growth. The latest dot-plot, showing the opinions of Fed officials about where interest rates might be in the near future, showed nothing like consensus.[10]

U.S.-China Trade Talks Stalled, But May Resume Soon
In May, the U.S. and China announced they would hike tariffs on each other’s exports during the quarter. Formal trade negotiations broke down for six weeks. On June 29, President Trump announced at the Group of 20 summit in Japan that talks would soon resume and that the U.S. would hold off on tariffs slated for another $300 billion in Chinese goods.[11][12]

What’s Next
As the quarter gets underway, traders are wondering if an interest rate adjustment and a U.S.-China trade deal are in store for the summer; there is also some ambiguity about the economy’s momentum. Investors will have plenty to consider in the coming weeks.

[1] quotes.wsj.com/index/DJIA/historical-prices
[2] quotes.wsj.com/index/COMP/historical-prices
[3] quotes.wsj.com/index/SPX/historical-prices

[4] quotes.wsj.com/index/XX/990300/historical-prices

[5] www.marketwatch.com/story/sp-500-heads-for-3rd-straight-record-ahead-of-private-sector-jobs-report-2019-07-03

[6] fortune.com/2019/07/05/us-hiring-jobs-data-rebounds/

[7] www.cnn.com/2019/07/02/economy/us-tariffs-on-eu/index.html

[8] money.cnn.com/data/markets/sandp/

[9] www.tradingview.com/markets/indices/quotes-us/

[10] www.bloomberg.com/news/articles/2019-06-19/fed-scraps-patient-rate-approach-in-prelude-to-potential-cut

[11] www.piie.com/blogs/trade-investment-policy-watch/trump-trade-war-china-date-guide

[12] www.bloomberg.com/news/articles/2019-06-29/xi-trump-agree-to-restart-trade-talks-china-says