Category Archives: Financial news updates

Key points of the New Tax Law for 2018 signed into law by President Donald Trump

1132814335-63153 (2)Here are some key points of the new tax law for 2018.

Standard deduction

Biggest changes: Standard deduction has been increased from 6,350 for individuals and 12,700 for couples to 12,000 for individuals and 24,000 for couples.

More people will be able to use the standard deduction vs the itemized deduction.

Mortgage Interest and Charitable Contributions

Other deductions will be far less important such as mortgage interest deduction and charitable contributions.

You won’t be getting a tax break as much on mortgage interest and charitable contributions, this can make charities nervous.

Should you itemize or not in 2018? Many people will choose not to itemize because the standard deduction in 2018 is so much bigger than before.

State, local income and property taxes

If you do itemize, there will be limits for state and local income and property taxes, in 2018, the limit is $10,000 and there wasn’t a limit before on these.

Child tax credit

The child tax credit has been doubled to 2k from 1k. Income limit has also increased. In 2017, it was  110k for a joint filer, now it’s close to 400k for a joint filer, so more people will be able to take the child tax credit deduction.

Mortgage interest deduction

As of 2017, you were allowed to take the mortgage interest deduction if your loan was $1 mil or less, in 2018, it’ll be only 750k. This new law will only be applicable for people who obtain their new mortgages in 2018, if you already have the mortgage previous to 2018, there is no impact to you.

Home equity loans and home lines of credit

In 2018, the interest on home equity loans and home lines of credit will no longer be deductible even if you already have them, so you will no longer be able to take the interest deduction.

Reevaluate what your options are: Do you keep your home equity loan? Should you combine with your first loan?

529 plans

 In 2017, 529 plans were only for qualified higher education expenses, now they are can be used for qualified expenses for k thru 12. Even though you can use these funds sooner to cover educations expenses for a child, the best option might be not to use it for this purpose because the money has not had enough time to grow in this tax deferred account.

Estate taxes

In 2018, you won’t owe federal estate taxes unless you have an estate of greater than 11.2 mil and if you are married it’s 22.4 mil. Fewer people will owe estate taxes as a result of this new tax law.

Roth Ira Conversion

A Roth Ira conversion is where you can convert a traditional IRA to a Roth. You have to pay taxes at the time you convert. So, let’s say you paid taxes on 10k of the Roth balance at the time you converted and the market went down after you converted. Your Roth balance decreased to 8k but you paid taxes on 10k worth of it before. This is not a good thing. In this case, you were able to fix this problem by what is called “recharacterize”.  Recharacterize is when you turn the Roth back into a Traditional Ira so you could undo or reverse the conversion.  You can longer use this loophole as of 2018.

Kiddie Tax

As of 2018, kids under 24 who have unearned income will pay the same rate as trust.

Corporate Tax Rate

Federal rate on corporate income will go down from 35% to 21%.

Small businesses

Small businesses often referred to as “pass through”, sole proprietor, partnership, LLC, S-corps will get a 20% deduction to their income. This could be a significant tax cut for them.

Alimony

Starting in 2019, alimony will not be tax-deductible and the recipient will no longer have to pay taxes on the money they receive.

Flexible Spending Accounts

FSA a way to put pretax funds away for qualified medical expenses. The contribution limit was increased from $2,600 to $2,650 in 2018. These funds could be used for medical expenses not covered by your medical insurance such as co-pays, deductibles, dental and vision care. You do have to spend it by the end of the year. Use it or lose it!

Health Savings Account

A HSA account is for individuals who have a high deductible medical insurance plan. Families can put away $6,900 in 2018 in this account, versus $6,750 in 2017. Contributions are 100% tax deductible. The money you put in these accounts is not taxed, the money you take out is not taxed as long as you are using it for qualified expenses and potential investment gains on this money is also not taxed.

There you have it folks, these are some of the most relevant tax law changes that will affect us, best of luck in 2018 managing your taxes! Always seek advice for your particular tax situation, knowledge is power.

Thank you Ric Edelman for helping us understand these new tax law changes.

 

What is the new credit card check out fee?

 

Are you ready for another credit card fee? Ready or not starting Sunday retailers will begin passing on a credit card fee called the check out fee unto customers. Beginning January 27th, retailers will start charging what they call the payment card surcharge. This surcharge comes from a settlement reached between merchants and credit card companies in 2012 to defray swiping costs.

 

What you need to know:

 

  • If a retailer charges the surcharge, they must make it clear on the receipt.

 

  • Retailers are not allowed to add the surcharge fee to debit card or prepaid card purchases.

 

  • Before the actual purchase, retailers have to inform customers they are charging this additional fee.

 

  • Retailers can offer a discount from the surcharge if customers pay with cash, a debit or a check.

 

  • Not all states are adding the surcharge. California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas will not be adding that extra fee.

 

There is a limit

 

Retailers must limit the amount of the surcharge to the applicable merchant discount rate. The merchant discount rate is the amount banks charge retailers for providing credit card services. The average discount rate is between 1% – 3%. There are some cases where the merchant discount rate exceeds 4%, however the new surcharge cannot exceed 4%.

 

Next time you go buy something at a store or online, find out if you are being charged the check out fee if you live in the states that allow it. You might want to consider paying in cash or debit card instead.

A lifetime of free checking

When Bank of America announced its new monthly debit card fees, customers got upset. They started looking for ways to get around these fees by checking out better offers at other banks. One Long Island credit union in particular has been attracting these customers by offering new account holders guaranteed “fee free” checking accounts for life. Bethpage Federal Credit Union is offering new customers who open a Bethpage Bonus checking account a lifetime of no debit card fees, no transaction fees, no monthly maintenance fees, no minimum balance fees and no ATM fees for using other banks’ ATMs. The only fees they charge are the insufficient funds and overdraft fees. According to the New York Times, this credit union has opened 1,500 new checking accounts- double the regular account openings for a three-week period.  Since more big time banks are trying to add all kinds of fees to customer accounts, offers such as the one this credit union is offering is sure to attract the customers these big banks are letting slip away.

Our moves are being tracked!

According to a recent report by CreditCards.com, top credit card companies are using a high-tech marketing technique that enables them to modify their online offers based on how online shoppers browse the web. By using this technique, credit card companies say they are better able to meet shopper’s needs. Credit card companies even have the capability of offering a different interest rate based on who is looking up the rate.

 While many folks will see this as an invasion of privacy, this method of marketing will undoubtedly continue and perhaps get more intrusive, only time will tell. Although the Internet has been around for a while, it’s still young and it seems like businesses and marketers are just tapping into the potential monetary growth and commercial value advertising on the Internet can bring.

Most likely we’ll see that our information will become more compromised and used to other people’s advantage. 

Read more about the CreditCards report here.

Debit fees slashed?

Looks like MasterCard and Visa will be negatively impacted by the Federal Reserve’s proposed cuts on the amount these credit card companies can charge merchants for debit card transactions. Part of the proposed plan is to cap the so –called interchange fees that are charged merchants at 12 cents per transaction versus what was charged last year – 44 cents, which is a reduction of 73 percent. Interchange fees are the fees that the merchant bank pays a customers’ bank when the customer pays with a debit card. According to reports by Bloomberg and Reuters, the credit networks charge merchants an average of 1 percent of the purchase price.

The banks will not like this plan if it goes through. They would get a much lower fee than the .44 cents they are used to getting as part of processing transactions. Consumers on the other hand might also be negatively impacted. The cuts aimed at banks will almost certainly trickle down to consumers in the form of added fees or higher costs for using a debit card. The Fed will have to decide by April 21 of next year on whether or not to make this plan a done deal. If the plan goes through, the rule would go into effect in July of 2011.

Financial Literacy Oversees

The financial literacy trend is growing strong and spreading. That is a good thing. Hopefully, it will not be a trend that fades away. Doesn’t look like it so far. Recently,  David Finney President of Champlin College in Burlington, Vermont announced that the school is opening a new Center for Financial Literacy. The goal of the program is to raise the financial skills of students from kindergarten through college, teachers and adults in general.

According to Finney, people are spending more than they earn and more education about managing money is necessary. It’s true, there is no better time to get everyone involved in learning how to manage and budget their earnings than now.  A healthy economy, like Finney says, is dependant on financial literacy. If more people are pro-active about their finances and are able to ask the right questions and understand the answers, many of the woes of their home economy could be solved or just downright prevented.

The opening of this center at Champlin is an example of the effort to ramp up financial education in the United States, but the U. S. is not the only place this is happening. Oversees more financial literacy classes are also popping up. In Kanpur, India for example, the Reserve Bank of India recently organized a financial literacy camp designed to educate the public about the importance and role of financial literacy in daily lives.

What do you think? Do you agree with having more financial literacy education? Do you think it will help the U.S. on a large scale in the future?