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February 26, 2010 |
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Here are a few timely topics and another thought-provoking Nick Murray Article.
Best,
John A. Frisch, CPA/PFS, CFP
President & Founder |
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The Progress Perspective |
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by Nick Murray
The world is still emerging from a financial panic and an economic seizure which has few parallels in history, and none in our lifetimes. A global debt bubble metastasized in the single-family home market, and manifested as a whole new generation of mind-bogglingly complex mortgage derivatives, which turned out to be, in Warren Buffett’s memorable phrase, "financial weapons of mass destruction." In response to the functional insolvency of the banking system and the total cessation of the credit function, Western governments plunged into deficits of historic proportions. No one can currently imagine how the accretion of public debt can be reversed, and hyperinflation scenarios grow like weeds in the blogosphere as gold makes new record highs (if only in nominal terms).
Even as global economic activity and equity markets continue their remarkable recoveries, this is The Great Gettin’-Up Morning of catastrophism. Equities had essentially no return in the ten years through 2009, and surely the future looks at least equally bleak. Such is the self-hypnosis of extrapolation. Such is the pathology of pessimism.
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1st Time Homebuyer Tax Credit |
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If you're in the market for a new home and hope to take advantage of the first-time homebuyer tax credit, you'll need to purchase a principal residence before May 1, 2010 (or before July 1, 2010 if you enter into a written binding contract prior to May 1, 2010). If you--and your spouse, if you're married--did not own any other principal residence during the three-year period ending on the date of purchase, the credit is worth up to $8,000 ($4,000 if you're married and file separate returns). If you--and your spouse, if you're married--have maintained the same principal residence for at least five consecutive years in the eight-year period ending at the time you purchase a new principal residence, the credit is worth up to $6,500 ($3,250 if you're married and file separate returns).
The credit is reduced if your modified adjusted gross income (MAGI) exceeds $125,000 ($225,000 if married filing a joint return) and is completely eliminated if your MAGI reaches $145,000 ($245,000 if married filing a joint return). You can't claim the first-time homebuyer tax credit if the purchase price of your principal residence exceeds $800,000. Other limitations and provisions also apply.
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Multiple Initiatives from Obama Budget |
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The proposed 2011 budget submitted by President Obama offers multiple new initiatives, including several small business tax incentives, provisions intended to promote college affordability, and tax benefits targeting the middle class. The budget that ultimately emerges from Congress will likely differ significantly from that proposed by the President, but the proposed budget is valuable in that it provides a framework for discussion over the next few months. The proposed budget includes:
- For businesses -- A new tax credit of $5,000 for each new hire made by an employer, a one-year extension of 2009 bonus depreciation and Section 179 expensing limits, and requirements for employers who do not offer retirement plans to implement automatic IRAs for employees.
- For students -- Expanded Pell Grant limits, a permanent American Opportunity tax credit, and a proposal to strengthen income-based repayment plans for student loans (overburdened borrowers would pay only 10% of discretionary income in loan payments and remaining debt would be forgiven after 20 years).
- For individual taxpayers -- A return of the top two marginal tax rates to 39.6% and 36% in 2011, and an expanded 28% tax bracket; a permanent extension of the current 0% and 15% rates on long-term capital gain, with a new 20% rate for higher-income individuals; permanent extension of the federal estate tax and the alternative minimum tax (AMT) rules and exemption amounts, at 2009 levels.
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New Credit Card Provisions This Week |
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The Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 included several provisions that became effective on February 22, 2010. Some of these changes could affect you:
- Credit card companies are prohibited from increasing annual percentage rates (APRs) that apply to existing balances unless (1) the index on which the rate is based changes, (2) the APR was a promotional rate that has expired, (3) you failed to comply with a hardship workout plan, or (4) you're more than 60 days past due on the account; if an increase in APR is the result of you falling 60 days past due on the account, the rate will be restored to what it was before the increase if you make timely minimum payments for six months
- If different APRs apply to separate portions of an outstanding balance, the amount of any payment beyond the minimum payment due must be applied to the portion of the balance with the highest APR.
- If you're under age 21, you won't be able to get credit unless you have a cosigner over age 21 or can demonstrate an ability to repay the debt.
- You can't be charged an over-the-limit fee unless you authorize the credit card company to complete the transaction that causes the balance to exceed your credit limit.
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Special Rules for Haiti Donations |
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If you make a qualified charitable contribution after January 11, 2010, and before March 1, 2010, for relief efforts associated with the January 12, 2010, earthquake in Haiti, you can treat the contribution as if it were made on December 31, 2009. As a result, if you itemize deductions on Form 1040, Schedule A, you can elect to claim the deduction for the Haitian relief contribution on your 2009 federal income tax return. To qualify, the contribution must be made in cash. To facilitate charitable donations made via text messages, a telephone bill showing the name of the organization, and the date and amount of the contribution, will satisfy charitable deduction recordkeeping requirements.
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| About Us: Located in Woodbridge, VA, Alliant Wealth Advisors (formerly Millennium Capital Management Corp) was founded to help a select group of families achieve all that is important to them financially. To achieve our mission we use a consultative wealth management process, which includes both investment consulting and advanced planning. Our approach assumes that every client is unique; every client has varying needs and objectives; and no two clients share the same risk tolerances, time horizons and dreams. In addition to providing our expertise we work with clients' existing advisors and, where there is a gap to fill, we use our own outside experts in the fields of tax, legal and high-end Insurance. |
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