Posts made in June 2024

Who Can Deduct Car Expenses on Their Tax Returns?

Can you deduct expenses such as gas, depreciation, and lease payments on your tax returns? If you are a business owner or self-employed individual, you may be able to. If you use your car for business and personal purposes, you may split the expenses and base the deductions on a portion of the mileage used for business.

There are two methods to calculate the car expenses you can deduct. The first method involves calculating and deducting expenses, including depreciation, lease payments, gas and oil, tires, repairs and tune-ups, insurance, and registration fees.

The second entails using the standard mileage rate, which is a rate calculated to represent gas and some of the above factors. In 2021, the standard mileage rate is 56 cents per mile. Taxpayers who want to use the standard mileage rate for a car they own must use this method in the first year the vehicle is available for use in their business.

*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.gov⁷

Footnotes and Sources

^{IRS.gov, January 12, 2023}

Weekly Market Insights: Stocks Rise Modestly Over Short Trading Week

Stocks edged higher over the four trading days last week, with the three major averages taking turns leading based on various economic and artificial intelligence (AI) news.

The Dow Jones Industrial Average rose 1.45 percent–its best week since May–while the Standard & Poor’s 500 Index gained 0.61 percent. The Nasdaq Composite, which has led all year, ended flat. The MSCI EAFE Index, tracking developed overseas stock markets, rose 0.94 percent for the week through Thursday’s close.¹

Mixed Economic News

All three averages began the week with gains, including new highs for the S&P 500. However, stocks posted only modest gains on Tuesday as mixed economic data came in. Retail sales rose 0.1 percent—less than expected, although better than in April when sales fell.^2,3,4

Markets were closed for the Juneteenth holiday on Wednesday.

As the week ended, it was the Dow’s turn to lead as sentiment shifted on mega-cap tech names as investors again questioned the sustainability of AI market drivers. Home prices hit a new high in May—this, paired with high mortgage rates, caused existing home sales to fall for the third consecutive month.^4,5

A Notable AI Driver

Some investors and market analysts are examining the underlying long-term drivers of AI more closely, given its outsized impact on market averages like the S&P 500 and Nasdaq.

One such underlying driver is “DRAM”: Dynamic Random Access Memory, the AI-turbocharged version of a RAM semiconductor, more commonly referred to as “memory chips.” Companies making DRAM chips are an essential part of the AI ecosystem. Expect attention to shift to prominent DRAM players as they report earnings in Q2.⁶

Footnotes and Sources

^{The Wall Street Journal, June 21, 2024}
^{CNBC.com, June 17, 2024}
^{The Wall Street Journal, June 20, 2024}
^{MarketWatch.com, June 18, 2024}
^{The Wall Street Journal, June 21, 2024}
^{MarketWatch.com, June 20, 2024}

Your Plans This Summer May be Eligible for Itemized Deductions

These activities can be itemized as deductions if you have plans to sell or buy a home this summer or to donate some old items. Here are some examples:

If you are refinancing your home this summer, you can deduct some of your mortgage interest. However, there are some limits to these deductions. According to the IRS, the deduction is limited to interest paid on a loan secured by the taxpayer’s main or second home. When refinancing, you must use the loan to buy, build, or substantially improve your main or second home.

If you buy a new home this summer, you can deduct mortgage interest if you pay $750,000 in qualifying debt for a first and second home or $375,000 when married and filing separately.

Summer is a great time to sift through your things and donate old clothes, furniture, or home goods you no longer need. If you itemize the deductions and provide proof of the donations, these donations may qualify for a tax deduction.

In addition to donating items, you can deduct mileage on your vehicle for services performed for a qualifying charity.

*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.gov⁹

Footnotes and Sources

^{IRS.gov, April 5, 2023}

Weekly Market Insights: Market Enjoys Gains, Reacting to Major Reports

Stocks notched a solid gain last week, driven by the Fed’s decision, May’s inflation report, and Apple’s AI-related news.

The Standard & Poor’s 500 Index rose 1.58 percent, while the Nasdaq Composite picked up 3.24 percent. The Dow Jones Industrial Average, which has lagged most of the year, slid 0.54 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, fell 1.44 percent for the week through Thursday’s close.¹

S&P 500, Nasdaq Lead; Dow Lags

Market leadership took a familiar form. The tech-heavy Nasdaq led while the Dow trailed for the second week (and four out of the past six weeks).²

Stocks trended higher at the start of the week as investors cheered an artificial intelligence update from Apple.^3,4

By midweek, the market had split, with the Nasdaq and S&P 500 moving higher while the Dow lagged. Investors were upbeat after learning that consumer prices rose less than expected in May and that the Fed decided to keep rates steady. However, some investors were unsettled after learning Fed officials had shifted their outlook and now only penciled in a single rate cut between now and year-end. A few months ago, the Fed had indicated as many as three cuts were possible.⁵

Busy Week for News

Last week was chock full of market-moving events. Between Apple’s AI update, inflation, and the Fed, it was a toss-up which one influenced sentiment the most.

AI’s outsized role in driving market momentum continued last week. OpenAI’s deal with Apple arrived at the start of last week, and the news followed OpenAI’s deal earlier this year with Microsoft. (These companies are mentioned for illustrative purposes only; it is not a recommendation to buy, sell, or hold this or any security.)⁶

Wednesday morning, the Consumer Price Index (CPI) was announced. A few hours later, the Federal Open Market Committee updated its monetary policy. Those pieces of news have only arrived together 13 times since 2008.

The FOMC kept rates steady at the current 5.25-5.50 percent target range, a widely expected decision. However, the tame CPI report caused some volatility as investors grappled with how the report may influence Fed policy.^7,8

Footnotes and Sources

^{The Wall Street Journal, June 14, 2024}
^{The Wall Street Journal, June 14, 2024}
^{The Wall Street Journal, June 10, 2024}
^{CNBC.com, June 12, 2024}
^{The Wall Street Journal, June 10, 2024}
^{The Wall Street Journal, June 10, 2024}
^{The Wall Street Journal, June 10, 2024}
^{MarketWatch.com, June 10, 2024}

When Was the Last Time You Checked Your Withholding Status?

Most people check their withholding status at the end of the year or as filing season arrives, but the middle of the year may be as good of a time as any to double-check your withholding status and confirm its accuracy. The IRS has a handy tool called the Tax Withholding Estimator, which can help you assess the tax withheld from your wages.

The tool can also help you determine if you must complete a new W-4 to submit to your employer, complete a new W-4P, or make additional payments to the IRS. It does this by estimating your annual income, factoring in any children you may have and earned income tax credit, and accounting for other items that may affect your yearly taxes.

Before using the Tax Withholding Estimator, gather all necessary documents; this includes your W-2 from your employer, any 1099 forms you have from banks and other payers, and any other forms you need. Gathering as much information as possible will be helpful because the estimator will only be as accurate as the information you enter.

*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.gov⁵

Footnotes and Sources

^{IRS.gov, January 10, 2024}

Weekly Market Insights: Solid Week Despite Mixed Reports

Stocks rose last week despite conflicting stories from economic reports.

The Dow Jones Industrial Average inched up 0.29 percent while the Standard & Poor’s 500 Index powered ahead 1.31 percent. The Nasdaq Composite led, picking up 2.38 percent. The MSCI EAFE Index tracks developed overseas stock markets and rose 1.29 percent for the week through Thursday’s close.¹

All Eyes on the Jobs Report

Weak manufacturing data prompted declines early in the week, reflecting investor concerns over the economy’s strength. But stocks rallied in anticipation of the jobs report on Friday.

However, the market reaction was mixed when the stronger-than-expected jobs report finally came. The S&P 500 touched a record high intraday before profit-taking late in the session.^2,3

The Catalyst That Wasn’t

The week closed with a jobs report that underscored the economy’s resilience while highlighting the data’s mixed nature.

The 272,000 jobs added in May were higher than the 190,000 economists expected. At the same time, wages rose 4.1 percent from a year ago. The strong jobs report and surprise wage increase supported the narrative that the Fed may now wait longer before considering a move on interest rates.⁴

Although inflation now exceeds the central bank’s 2 percent target, the jobs report suggests that economic growth remains powerful despite higher short-term rates.⁴

Footnotes and Sources

^{The Wall Street Journal, June 7, 2024}
^{CNBC.com, June 6, 2024}
^{The Wall Street Journal, June 7, 2024}
^{The Wall Street Journal, June 7, 2024}

Tax Season May be Over, but the Taxpayer Bill of Rights Applies Year-Round

Although filing season might be over for most taxpayers, the IRS is available year-round for any questions. They also have a Taxpayer Bill of Rights, which promises the level of service and information you will receive when working with the IRS.

Here are the ten fundamental rights you have as a taxpayer when interacting with the IRS:

The right to be informed: As a taxpayer, you must know what is required to comply with tax laws.
The right to quality service: You will receive prompt, courteous, professional assistance.
The right to pay no more than the correct amount of tax: You only pay what is legally due, including interest and penalties.
The right to challenge the IRS’ position and be heard: You can object to IRS actions and provide further justification with documentation.
The right to appeal an IRS decision in an independent forum: Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including certain penalties.
The right to finality: You have the right to know how much time you have to challenge an IRS position and how soon the IRS must audit your taxes.
The right to privacy: All IRS inquiries, examinations, and enforcement will not be more intrusive than necessary.
The right to confidentiality: Taxpayers have the right to expect that their tax information will remain confidential.
The right to retain representation: Taxpayers have the right to retain an authorized representative of their choice to represent them in their interactions with the IRS.
The right to a fair and just tax system: Taxpayers have the right to expect fairness from the tax system; this includes considering all facts and circumstances that might affect their liabilities and their ability to pay or provide information in a timely fashion.

*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.gov⁴

Footnotes and Sources

^{IRS.gov, May 1, 2023}

Weekly Market Insights: Stocks Sag on Downbeat Economic Indicators

Stocks edged lower in the final week of May as fresh news on economic growth and inflation failed to inspire investors.

Stocks Slide

Markets shrugged off news that the Q1 Gross Domestic Product was revised lower to 1.3 percent from the initial estimated 1.6 percent. Despite concerns that the economy was cooling faster than expected, investors didn’t believe the update was enough to influence the Fed’s decision about adjusting short-term rates.¹

On Friday, investors were on edge waiting for the update on inflation. The Fed’s preferred inflation indicator, called the personal consumption and expenditures (PCE), rose 0.2 percent in April, which was in line with forecasts.²

Stocks rose slightly in pre-market trading on the news but were under pressure throughout the day as investors digested the inflation update. But in the last hour of trading, stock staged a powerful rally led by the Dow, which had its best day of the year.

Is Bad News Good News?

On the economic front, last week’s news was generally disappointing. The update on Q1 GDP was a bit discouraging, and several Fed officials gave seemingly more hawkish updates. Also, the Fed’s “Beige Book” revealed modest economic growth nationwide.

Yet despite the drumbeat of bad news, stocks were resilient and closed only slightly lower for the holiday-shortened week.³

Footnotes and Sources

^{CNBC.com, May 30, 2024}
^{CNBC.com, May 31, 2024}
^{Investors Business Daily, May 30, 2024}