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Tax Tip: Your Expenses May be Eligible for Itemized Deductions

If you have big plans to sell or buy a home, donate some old items, or hit the casino, you may itemize some of these activities as deductions. Here are some examples:

If you are refinancing your home, you can deduct some of your mortgage interest. There are some limits to these deductions, though. The IRS limits the deduction to interest paid on a loan secured by the taxpayer’s primary or secondary home. When refinancing, you must use the loan to buy, build, or substantially improve your primary or secondary home.

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

Now is a great time to go through your things and donate old clothes, furniture, or home goods you no longer need. Even better, these donations may qualify for a tax deduction if you itemize the deductions and show proof of the donations.

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

Lastly, you can itemize and deduct gambling losses up to the amount of gambling winnings.

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

Tip adapted from IRS.gov5

Footnotes and Sources

  1. IRS.gov, April 5, 2023

Weekly Market Insights: Stocks Rally Friday; Powell Cautious On Progress

A powerful Friday rally left stocks higher last week, extending the market’s early November gains.

The Dow Jones Industrial Average rose 0.65%, while the Standard & Poor’s 500 advanced 1.31%. The Nasdaq Composite index jumped 2.37% higher for the week. The MSCI EAFE index, which tracks developed overseas stock markets, edged 0.25% higher.1,2,3

Stocks Extend Gains

In a news-light week, stocks added to the gains of the previous week’s rally, helped by stable bond yields. Last week’s advance did not go smoothly, however, as the week’s accumulated gains were erased on Thursday by the combination of a 30-year Treasury bond auction that saw lower-than-expected investor demand, which sent bond yields sharply higher, and disconcerting remarks by Powell that disappointed investors harboring hopes for the conclusion of the Fed’s rate-hike cycle.

Stocks rebounded strongly on Friday as investors reconsidered Powell’s comments, and bond yields retreated, leaving the rally from October lows intact.

Powell Speaks

In last week’s presentation to a gathering sponsored by the International Monetary Fund, Fed Chair Powell said that while he and other Fed officials were encouraged by the progress in bringing down inflation, he was “not confident” that the Fed’s current restrictive monetary policy stance was sufficient to achieve the Fed’s target inflation rate of two percent.4

His comments, which followed the Fed’s two successive decisions to pause on fresh interest rate increases, emphasized that there remained a long way to go to achieve their goal, and the Fed is committed to doing what’s necessary to reach that target, whether that’s through additional rate hikes or by keeping rates high for longer.

Footnotes and Sources

  1. The Wall Street Journal, November 10, 2023.
  2. The Wall Street Journal, November 10, 2023.
  3. The Wall Street Journal, November 10, 2023.
  4. CNBC, November 9, 2023.

Tax Tip: Is it Time for a Paycheck Checkup?

There’s no better time to check your withholding status and make sure your paycheck accurately reflects the taxes you should be paying. These paycheck checkups are a great practice when something happens in your life that may change your tax status, such as getting married or getting divorced, having a baby, getting a new job, or getting a raise or promotion at work. You can also adjust your withholding status if you want to change your withholding due to other circumstances.

During your paycheck checkup, you can also check other factors, such as how much you contribute to your health insurance or 401(k). These expenses can also impact your tax liability.

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

Tip adapted from IRS.gov6

Footnotes and Sources

  1. IRS.gov, May 30, 2023.

Weekly Market Insights: Stocks Rise, Jobs Cool

Stocks ripped higher last week on a dramatic retreat in bond yields triggered by easing inflation and a slowing labor market.

The Dow Jones Industrial Average jumped 5.07%, while the Standard & Poor’s 500 surged 5.85%. The Nasdaq Composite index rocketed 6.61% higher for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 3.12%.1,2,3

Stocks Rise

Stocks jumped higher right from the start of the week, shaking off the prior week’s sell-off. The combination on Wednesday of the Fed’s decision to keep rates unchanged, which accompanied dovish comments from Fed Chair Powell, and a reassuring Treasury announcement on future bond sales, sparked a third straight day of gains. Slight employment gains and weak manufacturing data provided an additional impetus.

The rally continued on Thursday following a sharp drop in bond yields that was driven, in part, by substantial productivity gains and decelerating wage growth. When Friday’s monthly employment report was lighter than forecast, yields pulled back further, and stocks added to their week’s gains.

Signs of Labor Cooling

Last week’s employment data showed potential for a cooling labor market after many months of confounding economists’ expectations. The first sign was a lower-than-expected growth in new private sector jobs in October, as reported by Automated Data Processing (ADP), which showed a gain of 113,000 new jobs versus a forecast of 130,000, while job openings were little changed.4

Initial and continuing jobless claims also rose, exceeding consensus estimates. On Friday, the government’s monthly employment report further confirmed a potentially cooling employment picture, showing an October slowdown in hiring (150,000 new jobs versus September’s revised gain of 297,000) and an uptick in the unemployment rate to 3.9%.5

Footnotes and Sources

  1. The Wall Street Journal, November 3, 2023.
  2. The Wall Street Journal, November 3, 2023.
  3. The Wall Street Journal, November 3, 2023.
  4. CNBC, November 2, 2023.
  5. The Wall Street Journal, November 3, 2023.

 

Tax Tip: Rules for Home Office Deductions

If you have a business and work out of your home, the IRS allows you to deduct certain expenses on your return. Here are a few key things to keep in mind:

  • The IRS requires you to use your office (or a part of your home) for “regular and exclusive use.” The part of the house should be your principal place of business, a place where you meet customers, or a separate structure dedicated to the business, like a garage or studio.
  • To calculate your deduction, you can use two methods:
    1) The simplified choice allows you to multiply the allowable square footage of your office by $5 up to a maximum of 300 square feet.
    2) The regular method allows you to specifically calculate the actual expenses like rent, mortgage interest, taxes, repairs, depreciation, and utilities you pay for the portion of your home used for the business. You must determine the percentage devoted to business activities if you use only part of a space for your business.

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

Tip adapted from IRS.gov6

Footnotes and Sources

  1. IRS.gov, January 19, 2022

Weekly Market Insights: Stocks Retreat on Cautious Earnings Reports

Amid a busy week of corporate earnings reports, stocks slumped on cautious earnings guidance, fears of higher interest rates, and growing anxiety over the increasing amount of Treasury bonds and notes coming to market.

The Dow Jones Industrial Average dropped 1.88%, while the Standard & Poor’s 500 declined 3.29%. But the Nasdaq Composite index gave up 4.48% for the five trading days. The MSCI EAFE index, which tracks developed overseas stock markets, retreated 1.82%.1,2,3

October Slide Continues

Stocks continued their slide last week despite mostly better-than-expected earnings results. While earnings surprises were generally positive, investors were troubled by declines in year-over-year net profit margins and tepid earnings guidance. Particularly hard hit were technology companies, following mixed earnings results.

Economic data released on Thursday showed remarkable economic strength, with above-consensus forecast growth in third-quarter Gross Domestic Product (GDP) and September’s durable goods orders, with only a minor uptick in initial jobless claims. The results fanned worries that the Fed might need to hike rates further or, at least, maintain high rates for longer.

Strong Economic Data

The first read of third-quarter economic growth was a blowout, with GDP increasing at an annualized rate of 4.9%. This pace was well ahead of the prior quarter’s 2.1% expansion and above consensus forecasts. Powering the third quarter’s economic performance was strong consumer spending and inventory build-up.4

Durable goods orders jumped 4.7% in September, confirming the nation’s continued good economic health, easily outpacing the 0.1% rise in August and economists’ forecast of two percent. Meanwhile, initial jobless claims slightly increased, suggesting that the labor market remains healthy.5

Footnotes and Sources

  1. The Wall Street Journal, October 27, 2023
  2. The Wall Street Journal, October 27, 2023
  3. The Wall Street Journal, October 27, 2023
  4. CNBC, October 26, 2023
  5. CNBC, October 26, 2023

Gig Economy Tax Tips

There are some essential tips to remember if you work as a gig worker:

All income is taxable, regardless of whether you receive information returns, including full-time and part-time work and those paid in cash.

As a gig worker, your classification is as an employee or an independent contractor; this can depend on where you live, even for the same services.

Lastly, it’s important to remember to pay the correct taxes on this income throughout the year to manage owing additional taxes when you file. Because gig employees don’t have an employer withholding taxes from their paychecks, they can either submit a new W-4 and have their employer withhold more from their pay (if they have another job as an employee) or make quarterly estimated tax payments throughout the year.


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

Tip adapted from IRS.gov8

Footnotes and Sources

  1. IRS.gov, January 31, 2023

Weekly Market Insights: Stocks Retreat Despite Solid Earnings

Rising bond yields and uncertainty over whether this was the close of the Fed’s rate-hike cycle dragged markets lower last week despite solid corporate earnings results.

The Dow Jones Industrial Average sank 1.61%, while the Standard & Poor’s 500 fell 2.39%. The Nasdaq Composite index, which has led for much of the year, slumped 3.16%. The MSCI EAFE index, which tracks developed overseas stock markets, retreated 1.67%.1,2,3

Rising Yields Sink Stocks

Stocks rallied to start the week on earnings optimism before losing momentum over rising bond yields. Yields rose after traders speculated that strong economic data might persuade the Fed to raise rates. By mid-week, stocks turned lower as the 10-year Treasury yield moved above 4.9% for the first time since 2007, while mortgage rates hit 8%–the highest level since mid-2000.

Stocks were under pressure Thursday as the 10-year Treasury yield moved closer to 5% and in response to comments from Fed Chair Powell that inflation remained too high. With the 10-year Treasury yield crossing above the 5% mark on Friday–and ahead of a weekend of uncertainty in the Middle East–stocks weakened further, ending a down week on a sour note.

Economic Strength, Housing Weakness

The economy continued to evidence surprising strength according to data released last week. Despite worries of a struggling consumer, consumers increased their spending as retail sales rose 0.7% in September–well above the forecast of a 0.3% rise, while industrial output jumped 0.3%, exceeding the forecast of a 0.1% gain.5

There were also updates on the state of housing. Housing starts rebounded 7.0% from August, though permits (an indicator of future housing starts) declined 4.4% month-over-month. Existing home sales were weak, falling 2.0% from August and 15.4% from a year ago. Existing home sales are on track to record their slowest year since 2011.6,7

Footnotes and Sources

  1. The Wall Street Journal, October 20, 2023
  2. The Wall Street Journal, October 20, 2023
  3. The Wall Street Journal, October 20, 2023
  4. CNBC, October 17, 2023
  5. CNBC, October 17, 2023
  6. CNN, October 18, 2023
  7. The Wall Street Journal, October 19, 2023

Taxpayer Bill of Rights

The Internal Revenue Service (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 have the right to know what is required to comply with tax laws.
  • The right to quality service: You will receive prompt, courteous, and 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 have the right to 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 won’t 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 the tax system to consider all facts and circumstances that might affect their liabilities, ability to pay, or ability provide timely information.


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

Tip adapted from IRS.gov6

Footnotes and Sources

  1. IRS.gov, February 6, 2023

Weekly Market Insights: Markets React to Turmoil in Middle East, Inflation Concerns.

Stocks ended mixed last week amid the outbreak of hostilities in the Middle East and higher-than-expected inflation data.

The Dow Jones Industrial Average gained 0.20%, while the Standard & Poor’s 500 rose 0.45%. But the Nasdaq Composite index slipped 0.18% for the five trading days. The MSCI EAFE index, which tracks developed overseas stock markets, advanced 2.37%.1,2,3

Inflation Hurts Sentiment

Stocks exhibited remarkable resilience in the face of a surprise attack on Israel and hotter inflation data than investors expected. Stock prices initially buckled on the breakout of hostilities in the Middle East. Still, they rallied in afternoon trading as investors gained optimism that the war may not spread to other countries. Oil and defense stocks rose sharply, while airlines fell.

Stocks continued to advance into Wednesday as falling bond yields and a retreat in oil prices overcame the disappointment of an elevated wholesale inflation report. When consumer prices also came in higher than anticipated by Wall Street, stocks moved lower in response to higher bond yields. The weakness continued into Friday on a bump in consumer inflation expectations despite a solid start to a new earnings season.

PPI, CPI Updates

The disinflationary trend appears to be stalling if the inflation numbers are any indication. September’s producer price index (PPI) came in higher than expected, rising 0.5% versus a forecast of a 0.3% increase, while the year-over-year increase of 2.2% was the most significant jump since April. The driver of last month’s hop was in goods, which surged 0.9%.4

Consumer inflation data followed, which also came in hotter than forecast. The Consumer Price Index (CPI) rose 0.4% in September and 3.7% year-over-year above the forecast of 0.3% and 3.6%, respectively. The news on core inflation was a bit more comforting, rising in line with expectations.5

Footnotes and Sources

  1. The Wall Street Journal, October 13, 2023
  2. The Wall Street Journal, October 13, 2023
  3. The Wall Street Journal, October 13, 2023
  4. CNBC, October 11, 2023
  5. CNBC, October 12, 2023