Mid-December Update

Reduce Your Tax Burden Before Year-End:  Tax Planning 







The new tax law has added a wrinkle to year-end tax related planning; A higher standard deduction ($18,000 for individuals and $24,000 for married couples). For those 65 and older the standard deduction rises to $13,600 for singles and $26,600 for married couples. Turbo Tax estimates that 90% of returns will take the standard deduction, up from 70% before the changes took place. Which means for many that focusing on lowering taxable income will bear more fruit than maximizing deductions. While the following is not considered tax advice because each situation is different, here are 3 strategies that may work:

  1.  Harvest Losses:  Some of your holdings in taxable accounts may be down, especially with the recent volatility. You may consider “harvesting” those losses. A common strategy is to sell the position at a loss, purchase a comparable ETF for 30 days and then buy back the original position. The losses you create can be used to offset gains in other places, you can use $3,000 of excess losses to reduce other income and the balance of losses can be carried over to future years. In our office, we go through every account looking for these opportunities.
  2. Increase Retirement Savings:  If you have a Qualified retirement plan (401k, SEP IRA, Simple IRA, etc.) you can increase your contributions before year-end, reducing your taxable income this year. For your 401k and other employer-sponsored plans, you can fund up to $18,500 a year or $24,500 if you are 50 or older
  3. Consider a QCD (Qualified Charitable Distribution):  If you are over 70½, you are required to take distributions from your IRAs, which are fully taxable. And if you are taking the standard deduction – you will no longer get tax deductions for charitable contributions. Here is where the QCD works like magic. If you are writing checks to charities and you no longer get deductions – and you are over 70½ – stop writing those checks and make the contribution directly from your IRA. You will end up with the best of both worlds; a tax break for the donation and the higher standard deduction.

Each year the group BSMG (Broker’s Service Marketing Group) sends me a handy chart that summarizes all of the tax laws, which can be found here.

Mid-December Update

Year-End Volatility For Equities:  Global Equity Market Overview


Major U.S. equity indices stabilized in November as markets reassessed October’s pullback. The Dow Jones Industrial and S&P 500 indices made up of larger cap stocks rebounded over 1.5% in November, outpacing the tech-heavy Nasdaq index for the month.

Emerging market equities rebounded in November as the dollar’s rise slowed and investors found value in various developing economies. Ongoing tariff and trade tensions have been hampering capital investment and trading arrangements for companies in the emerging markets.

Many hope that U.S. companies will use excess cash for capital investment rather than for stock buybacks, which has been a primary use of cash for many domestic companies.

Some analysts expect that the Fed’s perceived slow down in rising rates, along with the trade and tariff arrangements that occurred as a result of the G20, may prove positive and supportive for the markets following weeks of rampant volatility. Some companies have been holding back on hiring and capital expenditures until a resolution is finally achieved on trade.

There is a growing notion that the markets are headed towards a period of lower capital appreciation because of subdued economic and earnings growth. Economically sensitive sectors including industrials and consumer discretionary have pulled back in sync with technology and energy since the beginning of October.

Sources: S&P, Dow Jones, FRED, Bloomberg




Happy and Healthy Holidays to All!