Last Week in Review...

     A breakfast buffet of better than expected economic data hit the wires last week. In the housing arena, Housing Starts came in better than expected, while both the New York Empire State Index and the Philadelphia Fed Index reported positive manufacturing news. There was also decent labor market news, as Weekly Initial Jobless Claims fell by 13,000 in the latest week to 348,000 - the lowest level since March 2008! Meanwhile, Retail Sales rose in January by 0.4%, the largest gain since October.

     Remember, strong economic news often cause money to flow out of Bonds and into Stocks, as investors hope to take advantage of gains. That's partly what caused Bonds (including Mortgage Bonds, to which home loan rates are tied) to worsen late last week. 

     Also weighing on Bonds and home loan rates was the news that inflation is heating up. Despite the Fed's claim that inflation is moderating, the Core Consumer Price Index (CPI), which strips out volatile food and energy, rose to its highest levels since October 2008. Meanwhile, as you can see in the chart, the wholesale measuring Core Producer Price Index (PPI) rose double the expectations of 0.2%, coming in at 0.4%. Any hints of inflation can serve to spook Bond investors - causing both Bonds and home loan rates to worsen - as inflation can reduce the value of fixed investments like Bonds. This is one story to keep a close eye on in the weeks ahead. 

     The drama in Greece is another key story to monitor, as it also impacted Bonds and home loan rates last week. Greece sent the markets into the weekend with assuring messages that a deal for them to avoid default is close, and this sense of optimism weighed on Bonds and home loan rates. Our Bonds and home loan rates have benefitted from all the uncertainty in Greece, as investors have seen our Bond Market as a safe haven for their money. Time will tell whether this uncertainty and safe haven trading will continue. 

     The bottom line is that now is a great time to purchase or refinance, as home loan rates remain near historic lows. Let me know if I can answer any questions at all for you or your clients. 

Mileage Rate for 2012

     If you drive a car, truck or van for work, you'll want to make sure you know the standard mileage rates that the Internal Revenue Service (IRS) has set for 2012. 

     These mileage rates are used to calculate deductible costs for driving an automobile for business, charitable, medical and moving purposes. So when it comes to filing your taxes this time next year, you'll need to know these numbers! 

New for 2012

As of January 1, 2012, the standard mileage rates are as follows:

• Businesses = 55.5 cents per mile driven
• Medical or moving = 23 cents per mile driven
• Charitable organizations = 14 cents per mile driven

     You'll notice that the rate for business miles is unchanged from the mid-year adjustment that became effective on July 1, 2011. The medical and moving rate has been reduced by 0.5 cents per mile. 

Make Sure You Qualify

     Before you calculate your deduction, make sure you qualify. The IRS reminds taxpayers that they cannot use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.

     In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously. However, the IRS is accepting public comments on this policy.

Additional Option

     Although the IRS provides the standard mileage rate for ease and convenience, you're not required to use it. If you prefer, you can calculate the actual costs of using your vehicle instead of using the standard mileage rates.

     Remember, if you have questions or concerns, talk to a tax consultant or accountant to discuss your options and unique situation.