The tax plan passed at the end of 2017 has a bonus for parents whose children attend private elementary and high schools. You can now use funds from a 529 savings plan to pay for these expenses. In South Carolina and other states that allow a tax deduction for 529 plan contributions, this change can mean significant savings on your state income taxes.
For example, the Charleston, SC both Porter-Gaud and Ashley Hall have high school tuition that exceeds $23,000 per year. By using the SC Future Scholar program as the funding vehicle for this tuition, families can save between $1,150 and $1,610 on their state income taxes.
To take advantage of this income tax break, simply open a Future Scholar 529 plan and fund the plan with the money you will be sending to the private school anyway. Then, request the plan send the money to the students account at the school of your choice. By using the 529 plan as a middle man in the transaction you will save yourself 5% to 7% on your annual tuition expenses by lowing your state income tax liability for the year you make the contribution.
It is also important to understand any sales charges associated with your 529 plan investments. In South Carolina you can open a 529 plan directly with the sponsor and avoid sales charges and loads. If you go through a broker your savings could be negated by the additional expenses. Another good reason to work with a fee-only financial advisor.
While there are no limits to the amount you can contribute each year to a 529 plan, you should understand that contributions are considered gifts. Contributing more than $14,000 per parent per year can be complicated but there are strategies to contribute much more in a single year and stretch the tax benefits of doing so.
You should also understand how using this tax saving strategy will impact your savings goals for post high school education. College expenses will still need to be planned for and funded, so have a plan in place to address both education funding needs. Talk to your tax professional or financial advisor about not only maximizing the tax advantages of a 529 plan for college- but for private elementary and high school as well.
Even the most independent among us, if fortunate to live long enough, may experience a decline in mobility or health that can strip away our independence and diminish the quality of our lives. Great advances in medicine have extended our average life expectancy to a record high of 78.7 years. Living longer means more years spent in the struggles that accompany old age. Add to that the increase in geographic mobility of our families and the result is millions of seniors left behind, hungry and alone.
Meals on Wheels has been guided by a single goal since the first known U.S. delivery by a small group of Philadelphia citizens in 1954 – to support our senior neighbors to extend their independence and health as they age. What started as a compassionate idea has grown into one of the largest and most effective social movements in America, currently helping nearly 2.4 million seniors annually in virtually every community in the country.
You can help today!
At this time of year, when we all gather with our families to share the love of the holiday season, we want to take some time to help those who are less fortunate. Yes, our stockings are hung, but there are those who have no stockings and those who have no place to hang a stocking, or are simply too sick to hang a stocking. This is the first of twelve pleas for your support to make this holiday a better time for all. A plea to do your part in bringing "Peace on Earth and goodwill to man"
I begin with the American Red Cross because in time of disaster they are often the very first on the scene. Let me share some of the ways the Red Cross makes a difference in the lives of those in need.
Wherever the is need you will find the Red Cross. Ninety percent of Red Cross workers are volunteers. An average of 91 cents of every dollar the American Red Cross spends is invested in humanitarian services and programs.
Please join me in making a donation to help support the mission of this charity. And please share this with your friends and neighbors. #12DaysofChristmasCharityChallenge
This month we hear from clients Bob and Bobbie S.
"Life is short and we all need an adventure once in a while. We had a wonderful adventure this year that we will never forget and highly recommend to all. We went on a tour of the Canadian Rockies and Glacier National Park In Montana.
At Glacier National Park you can ride the 'Red Jammers Buses' along the Logan Pass. You can take a gondola ride to the top of the mountains in Banff National Park (Canada), or catch a Snow-Coach ride to the Columbia ice fields, you can even ride the rapids in Jasper. Best of all some of the most dramatic mountain scenery in the world can be found in the Canadian Rockies.
If you are looking for adventure and you love to take pictures of magnificent mountain ranges, ice fields, and beautiful lakes and rivers, this type of tour just might be for you."
Thank you for sharing, Bob and Bobbie!
The holidays may be on your mind now, but taking steps to reduce your income tax bill for 2017 could make for a merrier April. If you wait until the start of the New Year to think about income taxes, you will be too late. To help us understand the steps we should be considering, we enlisted the help of Myrtle Beach CPA Bart Buie.
With the proposed changes to deductibility of state and local income taxes it makes sense to accelerate the current year deduction. That means you should make your estimated tax payments In December of 2017 rather than waiting until January of 2018. You may even want to purposely over pay your state income taxes this month to get a bigger deduction when you file in 2018. Don’t worry if you overpay you will get that refunded to you in April of 2018.
Business owners should be doing a pro forma income tax calculation now to be sure they are minimizing their taxes. With rates purportedly going down in 2018, it makes sense to push as much income as possible into the new year. That means any billing should be delayed to the end of the month, if possible, so that the receipt will post to your books in 2018. Also, business owners should be looking to pay all the bills they have incurred in calendar year 2017 before December 31, even if they are not due until January of 2018. This will reduce 2017 taxable income by increasing expenses for the year.
Bart also talks about purchasing equipment needed for your business now. He offers an example of purchasing a work vehicle in December to qualify for a 2017 deduction, even though your payment may not begin until 2018.
December is also the last month to establish 401(k) and solo 401(k) plans to save on 2017 income taxes. Bart points out that an S-Corp with one employee can establish a plan before year end and the business owner can then make a salary deferral contribution in 2017; with the company match being made by their tax filing deadline in 2018. Because an S-Corp is a pass-through entity, the matching contribution will still lower your income tax bill for 2017.
Bart also encourages clients to accelerate charitable donations. If you have planned giving, you can go ahead and make the contribution to reduce your tax liability.
Don’t forget to look for chances to offset any realized capital gains with any capital losses available. You can use losses to offset 100% of any gains you claim plus $3,000 of other taxable income. There is talk of eliminating your ability to designate which lot of stock you sell in the future, so now would be a good time to review your accounts for places where the FIFO accounting method might be a negative for you. Be careful not to run afoul of the thirty-day wash sale rule as you implement this strategy.
Even adults can score some freebies on Halloween.
Krispy Kreme is giving out free donuts for Halloween at participating locations. With the promotion, you can get any doughnut you want (even a fancy Halloween-themed creme-filled number) for free. So you’re not stuck waiting in line to just get an original glazed (even though they are delicious).
Krispy Kreme’s Facebook event for the promotion says that the deal excludes grocery and convenience stores, and is not available at Krispy Kreme stores in Mobile or Foley AL, Jersey City NJ, Iowa, Louisiana, or Nebraska.
Fortune reports that Chipotle will be giving anyone who shows up to one of its stores in costume on Halloween a burrito, burrito bowl salad, or taco for just $3, and By texting “Boorito” to 888222, patrons will be entered into a contest for a year of free burritos, as long as they don’t live in Alaska, Hawaii, or Canada.
Hey! We need your help. To kick off 2018 Oak Street Advisors will be doing a blog series "100 Financial Planning Questions answered in 100 days"
What questions would you like to see answered in this series?
To get you started here are some of the categories we plan to cover:
While there is a laundry list of topics to discuss from President Trump’s vague tax reform initiative, I’m going to focus on how various rumblings about the tax plan on 401(k) plans could affect not only those employer plans, but what could possibly develop into a great shift of assets out of 401(k) plans and into other retirement vehicles.
First, know that Trump stated that there will be no change to the way 401(k) plans are run, and the tax advantages inherent with said plans.
Yes, it’s 2017 and we get our tax plan details via Twitter.
However, there have been rumors from Republicans that to pay for the tax cuts they propose, they will limit most of the deductions Americans use today to lower their taxable income. One of the ways representatives are ideating to make up for the proposed tax cuts would be to lower the limits on deductibility of 401(k) contributions.
One proposal calls for lowering the deduction limits in such plans from $18,500 in 2018 to only $2,400 annually. This is a significant decrease and if it moves forward, could forever change the approach many businesses take in designing an employer-sponsored retirement plan.
While they plan to lower limits inside 401(k) plans, they intend to increase limits for after-tax contributions in Roth IRAs and therefore, would probably do the same for Roth 401(k) contributions. Clearly motivating Americans to pay the taxes now so they can pay for their tax plan, rather than incentivize savers to defer paying taxes until retirement.
These changes will motivate employers to adopt Roth 401(k) options, switch to SIMPLE IRA plans (that have very specific limitations in plan access and contribution limits) or simply get rid of these plans altogether. If employers continue to reap the benefits of tax deductions for Roth 401(k)s, just as they do for traditional and Roth 401(k) plans currently, then we may see things continue as is.
However, if the government eliminates those tax benefits for employers to pay for the tax cuts we will see the demise of the majority of 401(k) plans. This reduces tax benefits for both employers and plan participants. In such a scenario, we would see a great transfer of assets from 401(k) plans to Roth IRAs from both employers and employees. A great opportunity for advisors- with many setbacks for investors.
First, savers will be able to access ALL of their principle within a Roth IRA. Currently, 401(k) plans limit borrowing to 50% of the account balance or $50,000. I don’t see this as a benefit to Roth IRA owners. If anything, it will allow for more opportunity for account depletion by gaining access to a much larger pile of retirement money that was previously inaccessible.
Second, in reducing the matching component of a traditional or Roth 401(k) plan, I see a reduction in the number of Americans who save for retirement. We all know Americans don’t save enough for retirement now, imagine how many fewer would without the monetary incentive to receive “free money” from employer matching contributions.
Lastly, the effect on the small business owner needs to be discussed. Yes, Trump plans to lower corporate taxes for C-Corps to 20% and down to 25% for other small business entities. However, losing the ability to max out their 401(k) accounts with both their contributions as an employee and matching from the business ($53,000 in 2017) would be detrimental to middle class small business owners. Many are used to deferring tens of thousands of 401(k) contributions each year, so limiting this to $2,400 would certainly deter small business owners from establishing or maintaining a costly 401(k) plan.
Don’t get me wrong, I LOVE a Roth IRA and Roth 401(k) for younger investors. And millennials tend to better savers then past generations, as we watched first hand as the previous generations struggled through the Great Recession and are currently weathering life with what seems to be insurmountable student loan debt. However, the change proposed by the government will truly only benefit that generation. Older investors moving to a Roth vehicle, especially those planning to receive less taxable income in retirement compared their current employment income, are left out to dry.
Now, the government could allow business owners to continue to make non-elective deferrals through Roth 401(k) plans, but based on the way things are looking to be structured, I highly doubt that benefit would remain as Trump’s plan calls for taxation now to pay for the cuts rather than incentivizing savers to defer taxes until they withdraw assets in retirement.
Financial planning and investment management are about connecting your resources to the lifestyle you want to live. Investments are neither good nor bad. What matters is do they help you reach your goals. People who are clear on what they want from their life and their money can find happiness no matter the balance in their checkbook.
To make that clear we are highlighting some clients who are living well and achieving their goals. This month we are featuring E. Monroe, who recently returned from a work/pleasure trip to Alaska. This is certainly on my bucket list and maybe on yours too.
I work for a local travel agency. My primary role is to facilitate travel for the group of clients we
serve. Many are retirees and part of a neighborhood travel club or one of the other types of
travel groups we serve.
Ninety percent of the time, I am in the office coordinating the many aspects of group travel.
Every once in awhile, I will have the good fortune to travel with our larger groups, as was the
case this summer.
My Alaska cruise and land tour was not something I picked as a vacation for myself. It was a
work trip. Although I am always excited about the opportunity for a new experience, it was hard
to wrap my head around going to someplace where the high temperatures would struggle to hit
60 in August. But I am so glad I went!
Our cruise departed from Vancouver, Canada. We secured a hotel allowing the group to arrive
the day prior, which is always recommended. Several couples flew in a day or two early and
enjoyed tours of this beautiful city.
Once on board the Celebrity Millennium our agents were working on details for our group, and
the guests were enjoying the restaurants and lounges while waiting for their staterooms.
Finally that festive moment arrives when all are on board, the muster drill is complete, the ship
horn sounds to alert you that we are underway.
The ship navigates through the Inside Passage; a coastal route for oceangoing vessels along a
network of passages which weave through the islands on the Pacific coast of North America.
Current weather conditions will dictate your experience here. Ours was misty fog, which lent to
an eerie quality on these calm waters.
Ketchican, The Salmon Capital of Alaska was our first port day. This city, as common in Alaska,
is only accessible by sea or air and boasts an average yearly rainfall of 12.5 feet on the liquid
sunshine gauge. I was happy to see our group really taking advantage of the many shore
excursions available. Mine was my first ever kayak experience with a guide who gave us a
wonderful tour around the active harbor. Whales were present, although we only saw their
spout. I learned about the 5 different types of salmon here!
Icy Straight Point was our next stop. The bustling city of Hoonah (population 350) with it’s proud
and resourceful natives, the Tlingit, taught us about what it takes to survive in this remote land.
Juneau is the state capital, accessible by sea or air only. The highlight here was a whale
watching expedition. We saw humpbacks splashing their massive tails, orca schools and an
island of sea lions.
Skagway, a town born from the 1898 Gold Rush, is accessible by land and we were greeted
with the first true day of sunshine here! Our excursion took us through some breathtaking
scenery, complete with salmon running to spawn in a stream with bear trampled banks. Our
destination was the camp where the Iditarod dogs train in the summer time.
Hubbard Glacier is the longest glacier in Alaska. We woke to this amazing sight from our
balcony. Weather conditions allowed our captain to position the Millenium only a quarter mile
away from this natural wonder.
At the end of the cruise, the ship docked in Seward, one of the oldest and most quaint
communities in Alaska. Here, coaches transported us to the closest airport in Anchorage. Some
chose to spend an extra day here, and about 35 of us continued on a land tour that included
Talkeetna, Denali National Park and Fairbanks. We saw a moose, a rare sighting of a wolf, dall
sheep, 3 grizzly bear and a distant view of Denali (formerly Mt McKinley).
So, in closing I will just say GO! Take that trip to Alaska! It is an amazing experience and very
different depending on when you travel in that short window of late May through mid
If you have an experience you would like to share please give me a call, I would love to hear from you!
We all know that Experian surrendered 143 million US citizens’ personal information recently- so you have about a 50/50 chance of having your information compromised. And yes, Experian is giving you a year (really? Only 1 year!?) of free identity protection that should help prevent identity theft. However, you can take action to help further protect yourself- it’s called a credit freeze.
A credit freeze prevents any new potential creditors from checking your credit history and score. If a hacker or criminal has your name, social security number, DOB, home address, dog’s name, IQ number, or shoe size and tries to open an account unbeknownst to you- they shouldn’t be able to because that lender would first go to look at your credit file but aha! it is not accessible. *However, there are certain situations where companies can access your credit file even if it’s frozen per South Carolina state law*
So how do you initiate a credit freeze?
PO Box 9554
Allen, TX 75013
PO Box 105788
Atlanta, GA 30348
PO Box 6790
Fullerton, CA 92834-6790
OR- you can do it online, again you must do it for each company by following these links:
*Make sure to remember any usernames, passwords or PIN numbers associated with each freeze initiated
Even if this is done, I still recommend getting a copy of your credit report AT LEAST once a year. Every year, you are entitled to a free copy of your credit report from all three agencies, so please do not get suckered into paying for one.
Personally, I pulled one of my free credit reports yesterday, will view another at the end of the year, and the final in June of 2018- just to make sure nothing fishy is going on with my credit file from the Equifax breach. I highly encourage you to implement the same strategy to do your own monitoring of your credit file.
Unfortunately, in these situations there is only so much you can do, so good luck!