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Tuesday, October 31 2017

Client Question 1
How many years of my life is my benefit based upon? The answer is that your personal social security benefit is based upon your highest 35 years of earned income. So, for people playing the S corporation low wage game, or wiping out income every year with bonus depreciation, or whatever, they will see a tremendously reduced monthly check at retirement.
 
Client Question 2
What is the average benefit I can expect? Social Security tells us the average benefit in America in 2017 for a single person is about $1,360 monthly. Do you know what it took to get this benefit? Thirty-five years of an average annual inflation-adjusted income of $25,000. 
 
Client Question 3
What is the earliest age I can draw my benefit? Nearly everyone knows the generic answer to this, which is age 62 but there are other circumstances where you can draw earlier.
 
Client Question 4
Shouldn’t I draw at age 62 and invest my money like my financial advisor suggests? Let’s see, the Social Security benefit increases by 8% every year you wait to draw after full retirement age. That increase is tax-free and that increase is risk-free. In your 60’s you cannot afford to take any risk, and an investment advisor suggesting this approach will need to earn 12% just to offset the tax difference, plus another 3-4% to offset the additional risk, meaning the investment advisor needs to earn 15% annually just to match the Social Security risk-free, tax-free increase. Since 1871 the S&P 500 has earned a little less than 6% annually. In my mind, taking the chance of obtaining a 15% return for a high-risk investment at retirement age is one of the single worst financial decisions that can ever be made. 
 
Client Question 5
The biggest question of all is “When should I draw my own benefit?” That’s actually simple Madam client-just tell me what day you will die! This sarcastic answer is an answer to illustrate that there is no “one answer fits everyone”. There are three factors involved in the decision: first, what kind of average life expectancy do we have in America and in your ancestry?; second, what kind of personal health issues do you have that will affect your life expectancy?; and third, what kind of financial situation are you in and who will be drawing on this account besides you?

Posted by: Shelli Dodson AT 06:58 pm   |  Permalink   |  Email
Tuesday, October 31 2017

With the prospect of new lower individual tax rates on the horizon for 2018, the average taxpayer or business owner should generally accelerate deductions to 2017 and delay income until 2018. Often overlooked in the planning arena are the low capital gains rates experienced by many Americans.
 
                2017 Capital Gain Rates (01/2013 Tax Act)

 
If net capital gain is from:

Then maximum capital gains rate is:

Collectibles

28%*

Gain on Qualified Small Business Stock Equal to the Section 1202 Exclusion

28%*

Un-recaptured Section 1250 Gain

25%*

Rate when taxpayer is in 39.6% personal bracket

20%*

Other gain & qualified dividends when the regular tax rate is higher than 15%

15%*

Other gain & qualified dividends when the regular tax rate is 15% or lower (Single <$37,650, MFJ <$75,300 taxable after exemptions)

0%
 

 
When an individual is in the 15% or lower individual tax bracket in 2017, their capital gains rate is 0%, and if the capital gain is what causes their ordinary income tax bracket to go higher than 15%, only the excess capital gains are taxed at 15%.
 
With all of that in mind, in layman’s terms if an individual’s taxable income is less than the amounts below based on their filing status, their capital gains rate for 2017 is 0%.

                        Capital Gains Planning-2017 Amounts

 

Single

Married-Joint

Married Separate

Head of Household (+1 child)

Income at the top of the 15% bracket

 
$37,950

 
$75,900

 
$37,950

 
$50,800

Standard Deduction based on filing status

 
+6,350

 
+12,700

 
+6,350

 
+9,350

Personal exemptions based on filing status no children

 
 
+4,050

 
 
+8,100

 
 
+4,050

 
 
+8,100

Maximum taxable income (without itemizing) for 0% capital gains rate

 
 
=$48,350

 
 
=$96,700

 
 
=$48,350

 
 
=$68,250


                               Client Worksheet for Capital Gains Planning

Client Name:                                                                  Filing Status:                       2017

Filing status bracket limit

 

Filing status standard deduction

 

Additional Itemized deductions

 

# personal exemptions times $4,000

 

Maximum 0% capital gains taxable income limit

 

Less estimated taxable income

 

Equals amount of capital gains to recognize this year

 



  


Posted by: Shelli Dodson AT 07:58 am   |  Permalink   |  Email
Monday, October 30 2017

Did you go green?  You may get some back if you bought any of these:

Credit amounts for qualified vehicles. Following is a list of the credit amounts for qualified vehicles that are autos and are manufactured by well-known companies, using the latest data published by IRS (model years are in parentheses):

  • Audi A3 e-tron (2016-2017), $4,502
  • Audi A3 e-tron ultra (2016), $4,502
  • BMW i3 Sedan with Ranger Extender (2014-2017), $7,500
  • BMW i3 Sedan (2014-2017), $7,500
  • BMW i8 (2014-2017), $3,793
  • BMW X5 xDrive40e (2016-2018), $4,668
  • BMW 330e (2016-2018), $4,001
  • BMW i3 (60Ah) Sedan (2017), $7,500
  • BMW 740e (2017), $4,668
  • BMW 530e (2018), $4,668
  • BMW 530e xDrive (2018), $4,668
  • BMW 740e xDrive (2018), $4,668
  • MINI Cooper S E Countryman ALL4 (2018), $4,001
  • FCA North American Holdings, Fiat 500e (2013-2017), $7,500
  • Chrysler Pacifica PHEV (2017), $7,500
  • Ford Focus Electric (2012-2017), $7,500
  • Ford C-MAX Energi (2013-2017), $4,007
  • Ford Fusion Energi (2013-2018), $4,007
  • General Motors Cadillac ELR (2014, 2016), $7,500
  • General Motors Cadillac CT6 PHEV (2017), $7,500
  • General Motors Chevrolet Volt (2011-2018), $7,500
  • General Motors Chevrolet Spark EV (2014-2016), $7,500
  • General Motors Chevrolet Bolt (2017), $7,500
  • Kia Soul Electric (2015-2017), $7,500
  • Kia Optima PHEV (2017), $4,919
  • Mercedes-Benz smart Coupe/Cabrio EV (2013-2016), $7,500
  • Mercedes-Benz B-Class EV (2014-2017), $7,500
  • Mercedes S550e PHEV (2015-2017), $4,043
  • Mercedes-Benz GLE550e 4m PHEV (2016-2017), $4,085
  • Mercedes-Benz C350e PHEV (2016-2017), $3,000
  • Mitsubishi i-MiEV [Electric Vehicle] (2012, 2014, 2016, 2017), $7,500
  • Nissan Leaf (2011-2017), $7,500
  • Porsche 918 Spyder (2015), $3,667
  • Porsche Panamera S E Hybrid (2014-2015), $4,752
  • Panamera 4 E-Hybrid (2018), $6,670
  • Porsche Cayenne S E-Hybrid (2015-2018), $5,336
  • Tesla Roadster (2008-2011), $7,500
  • Tesla Model S (2012-2017), $7,500
  • TeslaModel X (2016-2017), $7,500
  • Tesla Model 3 Long Range (2017), $7,500
  • Toyota Prius Prime Plug-in Hybrid (2017), $4,502
  • Toyota Prius Plug-in Electic Drive Vehicle (2012-2015), $2,500
  • Toyota RAV4 EV (2012-2014), $7,500
  • Volkswagen e-Golf (2015-2017), $7,500
  • Volvo XC90 or XC90 Excellence (2018), $5,002
  • Volvo XC60 (2018), $5,002
  • Volvo S90 (2018), $5,002
  • Volvo XC-90 T8 Twin Engine Plug in Hybrid (2016-017), $4,585
Posted by: Shelli Dodson AT 05:08 pm   |  Permalink   |  Email
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    Dodson & Pope, CPA PLLC
    1095 Evergreen Circle, Suite 200, The Woodlands, TX 77380
    Phone: 936-443-0370   Email:
    Dodson & Pope

     

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