Year End – What do I do now?

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As usual taxes vest on December 31. The question is what should you do? Each person gets $12,200 standard deduction and if you’re over sixty-five or blind you get another $1650. So, to itemize, you need to have deductions that exceed $24,400 for a married couple or $12,200 for an individual. So what does all that mean. It means that you might not be able to use your local and state tax deductions, or use your medical deductions or use your charitable deductions. So, you need to do some math before rushing off to get some extra deductions to ensure that they do you some good. Second of all, for now Capital gains are at 23.8% (if you’re subject to the Obamacare surtax) or 20% if you’re not. Couples don’t go above the 19% rate until they exceed $78,971 in taxable income. That means that unless your gross income is over $100,000, you don’t need to try and sell those stocks. Even then, you don’t go above 23.8% until you exceed gross income of over $190,000. So, you don’t need to lock in those capital gains rates.

If you have a business, check to see that you’ve been paid all of your reimbursements for the year. That’s tax free money to you and if you are a single member, LLC or sole proprietorship that you deduct your health insurance and pick up all those expenses you paid as part of your business, but forgot to run through your business.

If you are an employee, remember to get reimbursed, if you can, because unreimbursed employee business expenses are not deductible anymore.

Lastly, Merry Christmas.

Democrats control Virginia Government

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What does that mean for your taxes? Will they try and roll back the 2017 Federal Tax cuts by decoupling from the Federal Income tax? Or will they simply raise rates on sales, income and gasoline taxes? Budget desires include increased Medicaid funding, infrastructure, and schools. Because the Virginia Constitution requires a balanced budget, the only solution will be to raise taxes. There are really no other states to flee to from Virginia if you work here. Perhaps Tennessee and Kentucky. West Virginia, Maryland and DC all have higher tax rates than Virginia. Retirees may start spending 184 days in Florida. And for high wage earners most of these tax increases will not be deductible on your Federal income taxes. So, if you live in Virginia be prepared.

Asset Forfeitures and Balancing the Budget

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One little known source of revenue to the Federal Government is the ability to forfeit assets used in a crime. Let’s take the current defendant du jour, Jeffrey Epstein, a billionaire, who has been accused of sex trafficking and sexual abuse of minors. He allegedly used his plane to transport underaged women to various properties owned by her for illicit purposes. On that basis, if proven, the plane and the properties where these young women were taken could be forfeited. There are allegations that he paid people not to testify against him, that would open up his vast portfolio for potential forfeiture, if proven. In other words, a billionaire, may lose everything to asset forfeiture. In truth his fortune pays about 3 minutes of interest of U.S. Government debt, but if a few more billionaires are snagged, you could start to get some real money.

Mandatory Disclosure of Tax Return information

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Congress is seeking a copy of the President’s Tax returns. What is the possibility that they could seek yours as well. The answer is the right is very limited. The right to tax return information is spelled out in Section 6103 of the Internal Revenue Code. Congress does not have a blanket right to an individual’s return information. Only certain committees have that right, and it can only be shared in a Closed Executive Session Meeting of that Committee. Sec. 6103(f). That means that only members of that Committee can be present and see the returns.
So what happens if someone does leak a person’s tax information. If its willful, they face a $5,000 fine and up to Five years in prison. If its accidental its a $1,000 fine and up to one year in prison. Sec. 7213 and 7213A. And if that person works for the United States (query do Congressmen or their staffs work for the United States), they are to be immediately terminated. Cases construing 18 U.S.C. Sec. 597 refers to election of Federal Officers as members of Congress. Thus, it would appear that any Congressman who leaks return information upon conviction would no longer be allowed to serve in office. So, there are protections which include some pretty stiff consequences.

Merry Christmas you filthy animal

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We have a triple whammy as we enter the new year. New tax rules with more limited itemized deductions, a Government shutdown, and rising interest rates. Historically, when rates rise real estate prices go down or stagnate, when the Tax Act of 1986 was passed and took full effect with the loss of subsidies for investment in real estate, real estate prices plummeted. This could get ugly. The moral is this. If you want to buy real estate, it might be a good time to wait for prices to drop a little (especially if we have a drawn out government shutdown in the DC area). This of course has to be balanced with the risk that interest rates may rise further. So, be careful out there. Oh, and have a Merry Christmas and remember to celebrate Christ’s birth as the reason for the season.