It is almost 2012 and now is the time to start thinking about tax planning strategies. Specifically, both the Patient Protection and Affordable Care Act (the "Health Care Act”) and the Tax Relief, Unemployment Insurance Reauthorization and Jobs Creation Act (the "Tax Relief Act”) were enacted into law in 2010 and offer certain tax planning opportunities.

1. Maximize your medical expense account
A medical expense flexible spending account, or FSA (Flexible Spending Account), allows you to use before-tax earnings to pay for medical or health care expenses not covered by your health insurance. Assuming a 25 percent tax rate, this means that for every $100 you allocate to your health care FSA you will avoid $25 in tax. The Health Care Act limits the maximum contribution to these types of accounts to $2,500 starting in 2013, so 2012 is the last year to use an FSA to pay for orthodonture work or other large medical expenses on a tax favored basis. You should check the specifics of your employer’s plan, but using before-tax dollars for medical expenses will maximize your health care dollars.

2. Is it time to sell?
The Tax Relief Act maintained the top capital gains and dividends rate of 15 percent for 2011 and 2012. In 2013, the top capital gains rate will increase to 20 percent and the top dividends tax rate will increase to 39.6 percent. The Health Care Act also created a new 3.8 percent tax on investment income that will increase your tax rate by 3.8 percent on investment earnings if you file jointly and make over $250,000. While the threshold is relatively high, it is not indexed for inflation and applies the tax to all investment earnings to the extent modified income exceeds the threshold. As we saw with the Alternative Minimum Tax, what seems like a tax on those with higher income will likely become a broad based tax after some period of time due to the impact of inflation. Given these temporary lower rates, and the looming 3.8 percent tax, you might consider whether it makes sense to sell some capital assets in 2011 or 2012. Of course, tax considerations are only one factor when determining whether to buy, hold or sell an investment.

3. Consider converting retirement assets
In 2010 there was a tremendous increase in conversions of traditional retirement assets to Roth 401(k)s or Roth IRAs due to the elimination of income limits on conversion and the one time opportunity to pay the conversion tax liability in 2011 and 2012. However, even without the ability to pay the tax liability over two years, converting to a Roth can still be a very powerful planning strategy. Roth retirement assets provide a tax-free asset that diversifies your retirement portfolio, allows for yearly retirement tax planning, and acts as a hedge against future tax rate increases. Roth IRA assets are also not subject to age 70 1/2 required minimum distributions or RMDs, which further enhances the power of the tax-free Roth growth.

4. Contribute to an IRA
Many individuals do not realize that they can contribute to an IRA no matter how much income they make. The income limits for IRA contributions only apply to determine if the contribution to the IRA is deductible from income. If you have earned income and are not at least age 70 1/2, funding an IRA even on an after-tax basis can be a powerful savings strategy and can help to make up for past under saving. And don’t wait to fund the IRA when you file your income tax return in April. You can make that contribution now and enjoy extra time to grow your retirement nest egg.

5. Make charitable contributions
The Tax Relief Act extended for 2011 only a prior tax law provision permitting individuals age 70 1/2 or older to use up to $100,000 per year of IRA distributions to make charitable contributions and avoid paying income tax on that amount. Absent this provision the individual would have to include the IRA amount in income and then take a charitable deduction. Given the limitations on charitable contributions and itemized deductions under current law, it is very likely that this two step process would result in the individual not receiving a charitable deduction in an amount to offset the income recognition.
If you are age 70 1/2 or older and you plan on making charitable contributions, by using your IRA funds you can maximize the tax benefit of that donation.

 

For all your real estate needs, contact Dave Higgins: higman@yahoo.com

If you are thinking about owning a piece of property to live in while wanting to have an extra section to help pay the bills, then you will find that there is an effective way to do it. Today, many people are considering the idea of buying a multi-family home, because this allows you to have your own space for you and your family while getting extra income from renting the other apartments. Keep in mind that as advantageous as this is, there are a few points that you have to consider.

The first thing to keep in mind is becoming a landlord will require some extra work. When repairs are needed, or a tenant does not pay the rent it can cause some unwanted worries. This being said it can also be a great way to start off allowing you to live, in some cases, rent free while getting monthly income to help pay down your mortgage.

Another point to remember is that when it comes to renting, is choosing the right tenants, you have to remember that you are in fact running a business, as you will be collecting an income from the home you are renting. Take the time to choose the right tenant, a credit check, otherwise you might find yourself in a situation where you will be losing money if your tenant does not pay up at the end of the month. If you are willing to put in the work, purchasing a multi-family home can be a great way to invest.

 

Contact Dave Higgins for all your real estate needs: higman@yahoo.com

Is it time to buy a home? According to a Gallup poll done on 1/17/2012, 67% of people polled say yes!
According to Gallup, "Overall, there is good reason for most Americans to think now is a good time to buy a house. Interest rates remain near historic lows. Home prices are down sharply, providing many incredible buys.”

According to the November 2001 National Housing Survey conducted by Fannie Mae, buyers cited their major reasons for buying a home. Here are the results:

80% Having a good place to raise children and provide a good education
79% Having a physical structure where you and your family feel safe
75% It allows you to have more space for your family
69% It gives you control over what you do with your living space

So despite what has been a negative sentiment towards the housing market, buyers and the general public still think that homeownership is the way to go.

 

For help with all your real estate needs, contact David Higgins: higman@yahoo.com

White distilled vinegar is effective for killing most mold, bacteria and germs due to it’s high level of acidity. Vinegar is a weak form of acetic acid that is made from the fermentation of sugars and starches. White vinegar has so many different uses in the home; it is considered the "miracle cleaner”. It is pocketbook friendly, all natural, safe for pets and nontoxic. Why would you use anything else?

It is a good idea to purchase two empty spray bottles, keep one full with pure white vinegar and the other with half water and half vinegar. This just makes it easier to dispense and have on hand at all times. A person can work wonders cleaning their home naturally just armed with vinegar and water. There are so many different uses for white vinegar in your home. Here are just a few ideas:

 

Vinegar mixed with water is an excellent cleaner for all kitchen surfaces like counter tops, refrigerators and stove tops.

 

To shine chrome fixtures simply make a paste of 2 tablespoons salt and 1 teaspoon white vinegar.

 

To clean wooden cutting boards simply just wipe with vinegar.

 

Clean refrigerator shelves with a solution of ½ white vinegar and water.

Did you know that soaking fruit and vegetables in 1 part vinegar to 3 parts water can remove up to 98% bacteria? Soak fruit and vegetables for at least 10 minutes then rinse to get best results.

Vinegar is also useful in the laundry. To decrease lint in laundry add ½ cup straight white vinegar to rinse cycle. To make your bright’s brighter add ½ cup vinegar to the rinse cycle.

If you have pets white vinegar is a good solution to have in house. If your dog has the mishap of getting sprayed by a skunk, use dilution of vinegar and water, rub dog’s fur then rinse with warm water. Repeat a couple times. To keep dogs from scratching their ears rub them with a cloth diluted with vinegar and water.

Vinegar is so versatile in the home. You do not have to worry about the vinegar smell remaining after you use it because the smell dissipates after it dries. So, for people who believe in living green and healthy, white vinegar is a must have in the pantry closet.

 

For all your real estate needs, contact Dave Higgins at higman@yahoo.com