Friday Financial Five
Friday, December 26, 2014
{Reposted from Dec. 19, 2014}
Extension of individual tax breaks
Congress finally approved retroactive individual tax breaks for 2014, known as “the extenders”. Teachers will be able to deduct up to $250 for classroom supplies paid for out of pocket. Workers who pay for parking or use mass transit may be able to reduce pre-tax income by up to $250 per month for the cost of commuting. Itemizers will be able to deduct state and local sales tax. Subject to income limitations, a tuition deduction of up to $4,000 may apply to qualified tuition, fees and related expenses for college and graduate school. And finally, those over 70 ½ can again gift $100,000 from IRA accounts to eligible charities.
Various outlooks for 2015
As the year closes out, firm outlook reports differ on the economic drivers heading into 2015. It will be the third year of President Obama’s second term. According to S&P Capital IQ, the S&P 500 has returned an average of 16 percent in the president’s third year since 1945. International economies are weaker and dealing with a slower application of stimulus, according to Schwab. Neuberger Berman cites geopolitical conflicts, such as those between Russia and Ukraine, that may disrupt energy supplies and local economies. BlackRock Global expects volatility to continue, while RBC sees corporate profits and conservative earnings forecasts as the driver for any continued stock appreciation.
Consumer Price Index dips with oil prices
The CPI, the all-important inflation measure, recorded its biggest drop in six years. While this will get the attention of the Federal Reserve Board, it’s not expected to lead to a more immediate raise in interest rates. The index fell 0.3 percent in November, the largest decline since 2008. A large part of the drop is attributed to the decreasing price of crude oil, which is at its lowest price in over five years.
Obamacare sign-ups surging
The U.S. Department of Health and Human Services reports that almost 2.5 million people have participated in Open Enrollment in the Federally Facilitated Marketplace, with roughly half new customers and half renewing. There were no reports of any capacity constraints or website malfunctions, despite one million enrolling in the last week. These numbers only represent the 37 states served by www.Healthcare.gov and the White House goal of having 9 million enrolled by the end of next year seems within reach. Consumers have a new deadline of February 15th next year to sign up or face a possible fine.
Holiday season can bring liability
No one wants to be Scrooge, but homeowners do need to protect themselves from the possibility of millions of dollars in liability costs. Over the holidays, homeowners are usually most at risk hosting parties where guests consume alcohol or slip and falls are possible due to icy conditions on the property. Home insurance policies typically have $300,000 or $500,000 in underlying liability protection. For higher net worth individuals where the underlying coverage isn’t sufficient, an umbrella policy adding a million dollars or more in coverage might be in order.
Dan Forbes is a regular contributor on financial issues. He is a CFP Board Ambassador. He leads the firm Forbes Financial Planning, Inc in Providence, RI and can be reached at [email protected].
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