Plan now for the tax impact of the health care law

 

Did you adopt the wait-and-see approach to tax planning this summer? With the Supreme Court decision on the health care act removing a level of uncertainty and the end of the year approaching, it’s time to stop waiting and start doing.
Here are three questions to consider.

• How will the increased medical deduction threshold affect me? Beginning in 2013, your unreimbursed medical expenses will have to exceed 10% of your adjusted gross income in order to claim an itemized deduction, unless you’re 65 or over. For your 2012 federal income tax return, the threshold is still 7.5%.
  
  Tip: Consider shifting elective medical expenses into 2012.

• Should I convert my Roth in 2012? Starting January 2013, a 3.8% tax on unearned income such as capital gains, dividends, and interest applies if your modified adjusted gross income (MAGI) is more than $200,000 ($250,000 for married filing jointly). Distributions from Roths do not increase your MAGI - but conversions do.
  
  To do: Calculate your tax exposure before year-end.

• Will the additional Medicare tax on earned income apply to me? The new 0.9% Medicare surtax takes effect in January 2013, and will apply when your compensation and self-employment income exceeds $200,000 ($250,000 when you’re married filing jointly). Your employer is only required to take your wages into consideration when withholding the tax.
  
  Result: Your estimated tax payments or withholding amounts might need to be adjusted next year.

Please call to discuss how the health care law will affect your taxes for 2012 and future years.

© MC 2012

aconner@atconnercpa.com

Home equity loans and lines of credit: Consider the pros & cons

 

It's a simple calculation. Deduct the outstanding balance on your mortgage from your home's market value. The difference is home equity. For example, if your house is worth $300,000 and your outstanding mortgage (including any other liens tied to the property) is $200,000, your home equity is $100,000. And as lenders are quick to point out, that equity represents a ready source of cash. It can be used to pay for emergencies, home improvement projects, debt consolidation, tuition payments, even a cruise in the Bahamas.

The two main vehicles for tapping your home's equity are home equity loans (HELs) and home equity lines of credits (HELOCs). With a HEL, you get the loan proceeds in a lump sum and establish payment terms (loan amount, payoff period, and interest rate). In that sense, a HEL is similar to an automobile or consumer loan. A HELOC, on the other hand, acts more like a credit card. The lender establishes a limit against which you may borrow, and the interest rate tends to be variable.
Before using the equity in your home to bolster your bank account or pay off high-interest debt, consider the following:

• A home equity loan is best used for a one-time goal, such as remodeling a kitchen. Using the proceeds for a project that increases the home's value may even pay for itself in the long run. A home equity loan provides the security of a fixed monthly payment, a stable interest rate, and a definite term (typically ten to fifteen years), making it a good choice for planning purposes. On the other hand, if your income suddenly dries up or your home's market value drops, you're still on the hook to make those payments.

• Home equity lines of credit provide more flexibility, making them useful for, say, a remodeling project to be completed over an extended period of time. You take on only as much debt as needed to complete the next step in the process. On the other hand, a line of credit's variable interest rate makes it more risky when rates are climbing. And like a credit card account, a line of credit is easy to abuse.

The decision to tap your home's equity using either of these vehicles will depend, to some extent, on your tolerance for risk. Remember, if you fail to make the required payments, your house is on the line.

Vacations: All-Inclusive vs. Seperate Food Expense

From Wallet Happy Vacations

After being stressed with life’s every day challenges, reaching the decision to take a vacation is, at most, the easiest yes you’ll ever say! After all, who wouldn’t pass up a weekend of pampering filled with spa treatment? Or, 7 whole days on the sunny beaches of the Caribbean Islands just to get away from it all? Even paying for the trip is a breeze with so many travel professionals partnering with destinations and resorts to offer unbeatable value! So you call up Wallet Happy Vacations, get your family together, book, pack and go!

Fast forward…

What happens after you’ve arrived to your destination and, after 2 days, have already spent more than $150 on just food? Yup! That seems to be the not so new but, new thing these days. Seems like where ever I go people are asking about the true benefit of booking an All-Inclusive vacation versus being surprised by the expense of food and entertainment with choosing not to have an All-Inclusive vacation.

So, the question today is: To be All-Inclusive or NOT to be?!

Before I tell you why I recommend the All-Inclusive option, allow me to provide the meaning of All-Inclusive for those who aren’t sure.

 All-Inclusive is having unlimited access to all of the amenities and food/beverage options you would otherwise have to pay separately for while on vacation. At most, the All-Inclusive resorts include some of the following under the All-Inclusive option to every guest during their stay:

·         Unlimited Meals

·         Unlimited Beverages(inclusive of alcohol)

·         Unlimited Use of in room Mini Bar

·         Unlimited Snacks

·         Unlimited SELECT Resort Non-Motorized Activities

·         Unlimited Resort Activities & Entertainment

·         Roundtrip Ground Transfers upon arrival to your destination

·         Tips & Taxes (Yes! It will include tips as well. But remember to take good care of the servers who took good care of you!)

Although I’ve traveled where the All-Inclusive added value is not offered, both, All-Inclusive and having a food expense have worked out rather well for me and my family. But, I’ll admit, the All-Inclusive vacations were the most fun and beneficial to us! Why? Well, for start, taking a teen anywhere food is is enough reason to book All-Inclusive! Besides not having to worry about the pricing of each person’s plate, there is also relentless entertainment from sun up to sun down and for all ages!  Remember, one of the concepts of the All-Inclusive option is to give people like you and I a break when it comes to having to pay for things we would paid for separately like food and activities. It’s a good idea to utilize this feature!

 Now, of course, we know the option to go without your family’s vacation being All-Inclusive could amount to as much as your monthly mortgage payment depending on how many your traveling with! Yup! It’s true.

The biggest question I ask my clients when vacation planning is, are you taking the kids? That pretty much sums it up! As a Travel Professional, I recommend that if you are taking children on vacation with you, you want to consider All-Inclusive packages or take a cruise. These options will cover all food & beverage expenses. Except for cruises where carbonated beverages are additional. Plus, with these options also comes unlimited activities and entertainment. The best thing about this is, the fee is paid upfront and incorporated in your package so there are no surprises!  

In sum, there are many options resorts will offer to you and your family to help make your vacation one that is memorable. The last thing you want is for your spending money to go on food for 7 days. Why not take advantage of your vacation and stay with resorts that will take care of you and your family including unlimited meals, beverages, snacks and entertainment? It’s a true money saver indeed!