Happy Thanksgiving !

Please note our office will be closed on Thursday, November 22 and Friday, November 23, 2018 in observance of the Thanksgiving holiday.  Normal operating hours will resume on Monday, November 26, 2018.

Feel free to contact me should you have any questions or if you have specific needs that require special attention.  You can reach me at 239-287-3789 or via email at pmcintyre@namcoa.com.

Have a safe and happy holiday!

 

IRS Provides Guide for New Tax Law

Last week the Internal Revenue Service (IRS) issued a new publication to help taxpayers learn about the recent tax reform law and how it affects their taxes.  The IRS estimates they will need to create or revise more than 400 taxpayer forms, instructions and publications for the filing season starting in 2019 — more than double the number of forms it would create or revise in a typical year.

While the 2018 Tax Cuts and Jobs Act includes tax changes for both individuals and businesses, this publication  —  Tax Reform Basics for Individuals and Families— is specifically geared to individual taxpayers. According to the IRS, the publication breaks down the law in easy-to-understand language and highlights the changes that taxpayers will see on their 2018 federal tax returns they file in 2019.

Specifically, the new guide provides important information about:

  • Increasing the standard deduction
  • Suspending personal exemptions
  • Increasing the child tax credit
  • Adding a new credit for other dependents
  • Limiting or discontinuing certain deductions

IRS Tips to Prepare for 2018 Federal Tax Filing

Federal Income Withholding

What You Need to Know

  • Due to tax changes in the Tax Cuts and Jobs Act, many taxpayers’ withholding went down in early 2018, giving them more money in their paychecks in 2018.
  • You may receive a smaller refund – or even owe an unexpected tax bill – when you file your 2018 tax return next year, especially if you did not adjust your withholding after the withholding tables changed.Other changes that affect you and your family include increasing the standard deduction, suspending personal exemptions, increasing the child tax credit, adding a new credit for other dependents and limiting or discontinuing certain deductions.

What You Need to Do

  • Use the IRS Withholding Calculator to perform a paycheck checkup to help you decide if you need to adjust your withholding or make estimated or additional tax payments now.
  • Use your results from this calculator to submit a new Form W-4, Employee’s Withholding Allowance Certificate, to your employer.
  • Make estimated or additional tax payments if the withholding from your salary, pension or other income doesn’t cover the 2018 income tax that you’ll owe for the year. Form 1040-ES, Estimated Tax for Individuals also has a worksheet to help you figure your estimated payments.

To download IRS Publication 5307, Tax Reform Basics for Individuals and Families, Click here.

New IRS tax limits for retirement plans in 2019

The Internal Revenue Service recently released some of its annual cost-of-living adjustments that will affect the 2019 tax year, such as contribution limits to qualified retirement plans.  The following are some of the important changes to keep in mind.

401(k) contributions:  Elective deferrals for 401(k) participants will be $19,000, increased from $18,500. The same limit also applies to defined contribution plans such as 403(b)s, most 457 plans and the federal Thrift Savings Plan.

IRA contributions:  The limit on annual contributions to an IRA is increased to $6,000 for 2019 from $5,500. And the additional catch up contribution limit for participants age 50 and older remains at $1,000, for a total of $7,000.

Roth IRA income limits:  The IRS increased income limits on who can contribute to a Roth IRA.  The income phase-out range for single filers is modified adjusted gross income between $122,000 and $137,000 in 2019. (That’s up from $120,000 to $135,000 in 2018.) Married couples filing jointly have a phase-out range with MAGI between $193,000 and $203,000, an increase of $4,000 on either end.

Within a phase-out range, contributions are limited, eventually reaching zero.

Traditional IRA deductions:  The income limit for deducting contributions to traditional IRAs will increase in 2019. Single taxpayers covered by a workplace retirement plan have a phase-out range between $64,000 and $74,000, up from $63,000 to $73,000.  

The phase-out for married couples filing jointly will be $103,000 to $123,000, if the spouse making the contribution is covered by a workplace plan. That’s an increase from between $101,000 and $121,000.

Defined benefit plan:  The limit on the annual benefit received under a traditional pension plan will increase to $280,000, from $275,000.

Simple plans:  The contribution limits regarding SIMPLE retirement accounts increased to $13,000 from $12,500.

For more information, please contact us.

Do you need help with your 401(k) plan?

Naples Asset Management Company, LLC (“NAMCOA”) is a federally registered REp2investment advisor, (RIA) and has the capabilities to help the employees of most employers manage their individual 401k, 403b or other retirement plan type.

To see if your plan qualifies for assistance,  please contact us  or phone Tom Cooper, CFP 352.857.7273, who can research your plan to see if you qualify.

 

“Good” Inflation: Rising rates and falling stocks

Over the past week, the Dow fell by 4%, more than halving its ytd gains through Friday 1/19 (all time high).   Bonds continued the decline started in mid-December, bringing losses during the current ‘bond rout’ to -5.7% year to date.  That is a one week decline in the Dow of 4% and a four-week decline in long-bond prices of 5.7%.  Balanced investors have seen stocks gain and bonds lose, putting most investors (moderately conservative to moderately aggressive) at a mild gain or loss so far this year.  Generally, diversification across asset classes reduces volatility when bonds go up, stocks generally are weaker and vice versa.    When the classes move together differentiation across risk profiles diminishes.  Stocks remain in a strong uptrend and given the substantial gains over the past few months, equity centric investors should be able to take this in stride (or they shouldn’t be equity-centric) as 4% is a small blip in a strong multi-quarter uptrend awash in investor optimism, all-time low cash levels, all-time high exposure to stocks and financial assets and expectations of higher wages, earnings and GDP growth.   In this light, a rebound, or ‘buy the dip’ would not be surprising.  The new feature though is that volatility has returned.

The ‘bond rout spilling into equities’ explaination has to do with relative attractiveness.  If rates keep rising, bond prices are hurt, while becoming more attractive (due to higher yields) to equity investors, putting pressure on equity prices.  At some point, earning safe interest attracts enough investors from stocks to weaken stock prices.  The S&P 500 dividend yield is now 1.8%, similar to what can be found offered on 18 month CD.

Rate have climbed due to rising inflation expectations.  Inflation is expected to, finally, exceed the 2% goal set by the Federal Reserve ‘in the coming months’.  Current thinking is that a tight labor market is pushing AHE (average hourly earnings, +2.9% Jan ’18 vs Jan ’17), combined with more take home pay (via tax reform), will result in more spending from consumers and investment from business.  This will take time but markets have already priced it all in.  Just like the stock market has priced in exceptional earnings growth to match its exceptional valuations.  The chart below shows us that we’ve been in a tightening labor market for years without being able to hold above 2.0% inflation but briefly.

infl vs unemplmnt

Given the new feedback loop between stocks and bonds, perhaps we shouldn’t be so excited about inflation, even if its ‘good’.  On the bright side, the past few years has seen 3.25% as a top in 30yr bond yields and perhaps a decline in rates near term may help both bond holders and stock investors alike.

401(k) and Retirement Plan Limits for the Tax Year 2018

On October 19, 2017, the Internal Revenue Service announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for the tax year of 2018.

Highlights of Changes for 2018

The contribution limit for employees who participate in 401k, 403b, most 457 plans, and the federal government’s Thrift Savings Plan is increased from $18,000 to $18,500.

The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs and to claim the saver’s credit all increased for 2018.

Click here to view the  2018_plan_limits

Diversified – Real Income

The Real Income™ portfolio strategy does not use leverage, derivatives, or short-selling. Portfolios are constructed with 25-35 securities consisting of various types of liquid REITs.

The property types include apartments, regional malls, shopping centers, lodging, office, industrial, self-storage, data centers/tech, and a variety of health care related facilities. All portfolio companies are classified into one of three categories, and portfolios maintain allocations to each within the following risk categories:

  • Core (40% to 70%): Companies with superior balance sheets, established track records, and moderate growth
  • Value Add (20% to 50%): Companies with moderate leverage, established track records, and high growth potential, both internal and external
  • Opportunistic (0% to 25%): Companies with high leverage, unproven track records, and high growth potential, both internal and external.

For the most recent portfolio update, click this link: Real Income Portfolio 09-30-2017