TAX CUTS, TARIFFS & TREATIES - Wild Apricot...2019/11/13 · Inflation Economic slowdown/recession...
Transcript of TAX CUTS, TARIFFS & TREATIES - Wild Apricot...2019/11/13 · Inflation Economic slowdown/recession...
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Ken Wundrow | Experience Consulting1TAX CUTS, TARIFFS & TREATIESKenneth Wundrow, EA | Experienced Consulting
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Ken Wundrow | Experience Consulting
HERE’S WHAT WE’LL COVER...
I. Tax Cut and Jobs Act 2017 (TCJA)
II. Tariffs and Treaties
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III. Annuities
IV. Questions
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Ken Wundrow | Experience Consulting3TAX CUT & JOBS ACT 2017 (TCJA)how well did that turn out?
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IT’S HARDER TO ITEMIZE NOW
● Income and RE tax deductions limited
● Miscellaneous deductions gone
● No more home equity interest deduction
AND… No more personal exemptions
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THERE IS GOOD NEWS...
The Standard Deduction Increased
Single: $12,200 Married filing joint: $24,400
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Ken Wundrow | Experience Consulting6
AND...
Single: $1,600 Married filing joint: $1,300
Additional Standard Deduction for Age or Blindness
Example: Single taxpayer over65 and blind
Standard deduction: $15,400
Double for age AND blindness
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Ken Wundrow | Experience Consulting
● Watch for high medical combined with charitable
● Consider transfer of appreciated investment
● Beware of the $10,000 tax deduction limitation
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DOUBLING UP DEDUCTIONS CAN STILL WORK...
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Ken Wundrow | Experience Consulting
Qualified Charitable Deduction
● Must be qualified charitable organization
● Must from an IRA, no employer plan
● The IRA owner must be 70 ½ or older
● Transfer to charity satisfies required minimum distribution
● No inclusion in income / no charitable deduction
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A DIFFERENT APPROACH...
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Ken Wundrow | Experience Consulting
● No income inclusion means no tax
● Adjusted gross income is lower
○ May reduce social security inclusion
○ May increase includable medical deduction
● Reduces reportable income even if not itemizing
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WHY DOES IT WORK?
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Ken Wundrow | Experience Consulting10
ARE THERE STILL SOME CREDITS LEFT FOR US?
Residential renewable energy tax credit
Capped at
$1000 PER KILOWATT
Personal residence only.
30% OF EQUIPMENT COSTon principal or secondary residence
Non-refundable but can be carried forward.
Fuel Cell:Solar & Geothermal:
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Ken Wundrow | Experience Consulting11
AND ONE MORE...
Electric and Hybrid Vehicles:
GENERALLY $7,500Check online for car models with limited credits● https://www.fueleconomy.gov/feg/taxevb.shtml● Some credits are phasing out in 2019● Some credits are reduced on certain models
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Ken Wundrow | Experience Consulting
The Secure Act
● Passed The House but still waiting on The Senate’s vote.
● Likely to pass before year end
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Ken Wundrow | Experience Consulting
The Secure Act……what changes?
● Required minimum distribution age would be increased to 72
● No more 70 ½ requirement● No age restriction on contributions
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Ken Wundrow | Experience Consulting
Secure Act…...what else will it change?
● No more stretch IRA○ Non-spouse heirs have ten years to
distribute○ Includes Roth IRA’s
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Ken Wundrow | Experience Consulting15TARIFFS & TREATIESwhat’s their impact?
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Ken Wundrow | Experience Consulting
WHAT EXACTLY IS A TARIFF?
Import duty (tax) on certain goods
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○ Imposed on a specific country
○ Imposed on specific imports
○ Calculated as a percentage
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Ken Wundrow | Experience Consulting
WHO REALLY PAYS THE TARIFF?
The importer○ Generally passes on to the company
The importing company○ May eat the cost or pass some or all to the
consumer
The consumer○ May pay directly in higher costs○ Or indirectly through general inflation 17
Not the targeted country. One of three entities ultimately pays the tariff...
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Ken Wundrow | Experience Consulting
SO WHO REALLY BENEFITS?
● The imposing country increases duty (tax) revenue
● The industry targeted may benefit
○ Consumer buys domestic
○ Corporate tax collections may increase
○ May create additional employment within targeted industry
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Ken Wundrow | Experience Consulting
ARE THERE ADVERSE CONSEQUENCES?Tariffs are inflationary
○ They create higher prices on goods that had been imported
Tax on the economy
○ Higher prices cause consumer to put off purchases
○ Layoffs may be indirect result
Increased costs to company results in lower profits
○ Reduced stock value
○ Reduced dividends
○ Less demand for stock19
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Ken Wundrow | Experience Consulting
LET’S LOOK AT AN EXAMPLE
● Steel was $X per ton but is now $X + 15%
● Purchasing company was an appliance manufacturer
● The steel they purchased to manufacture the appliance costs more
● Cost is passed through to the consumer
● The consumer decides against purchasing that new appliance
● Appliance company profits suffer
● They in turn order less steel as demand drops
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15% tariff on imported steel forces company to switch purchasing to US steel manufacturer.
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Ken Wundrow | Experience Consulting
SO HOW DOES IT IMPACT THE STOCK MARKETS?
Inflation
Economic slowdown/recession
Global impact
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Ken Wundrow | Experience Consulting
Inflation: higher prices create inflationary periods.
● Interest rates climb● Wages must keep up
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SO HOW DOES IT IMPACT THE STOCK MARKETS?
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Ken Wundrow | Experience Consulting
Economic slowdown/recession: economy depends on balance between supply and demand.
● Higher prices or lagging wages create constriction in demand.
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SO HOW DOES IT IMPACT THE STOCK MARKETS?
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Ken Wundrow | Experience Consulting
Global impact: tariffs can directly impact global markets.
● Global economic contraction occurs● Ripple effect impacts domestic stock market
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SO HOW DOES IT IMPACT THE STOCK MARKETS?
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Ken Wundrow | Experience Consulting
AND THEN THE TREATIES...
Treaties are designed to promote:
Security against global unrest
○ Iran nuclear treaty
○ NATO
Economic and expansion directives
○ NAFTA
World policy
○ Paris Accord25
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Ken Wundrow | Experience Consulting
SO HOW DO THEY IMPACT STOCK MARKETS?
Direct Impact
Fear of global unrest causes investors to become protective
○ Move from stocks to shelters (gold, cash, bonds)
Global conflicts left unresolved disrupt supply chains
○ Mideast oil
○ General delivery routes for imported goods
■ Gulf of Hormuz or the Suez Strait
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Ken Wundrow | Experience Consulting
SO HOW DO THEY IMPACT STOCK MARKETS?
Indirect Impact
Global policy treaties incentivize certain industries
○ Paris Accord was a boon to environmental companies
○ Brexit impacts British and European economies
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Ken Wundrow | Experience Consulting
ADVICE FOR THE INVESTOR
● Pay close attention to the issues● Keep your portfolio balanced
○ Domestic vs. Global○ Growth vs. Value style holdings○ Short-Term vs. Long-Term investing○ Income vs. Growth○ Expansion vs. Recessionary holdings
● Think globally act locally○ Vote for candidates who consider the longer/bigger
picture, not how long they can stay in office
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Ken Wundrow | Experience Consulting
IDEAL PORTFOLIO
Not always what you hold but how you position it
● 10 years plus horizon for income need
● Potentially income never needed
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Protection / Income Now
Conservative Exposure & Income Next
Growth Now & Income Later
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Ken Wundrow | Experience ConsultingANNUITIESdemystified...
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Ken Wundrow | Experience Consulting
DEFINING FIXED ANNUITIESFixed interest rate
○ No market style investing
○ Interest rate competitive with the bank CD market
Stated term○ Interest guaranteed for the term of the annuity
■ 3,5,7,10-year term lengths
■ Annuity company levies penalty for early withdrawal
○ Money can be withdrawn at end of term period
■ Growth will be taxed when distributed
■ Can carry tax penalty for early distribution
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Ken Wundrow | Experience Consulting
DEFINING VARIABLE ANNUITIES
Market style investments○ This is the “variable” part of the title
Two styles of benefits○ Death benefit
■ Step up benefit preferred
■ Could be critical care provision
○ Income generation
■ Annuitization
■ Withdrawal benefit
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Ken Wundrow | Experience Consulting
DO(S) AND DON’T(S)
Fixed Annuities
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Surrender early
Annuitize without:
○ In depth consultation
○ Very good reason
Overload:
○ With available cash
○ In one term length
○ Too long of term length
Allow for taxes at distribution
DO DON’T{ {
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Ken Wundrow | Experience Consulting
DO(S) AND DON’T(S)
Variable Annuities
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Remember what you bought for○ If for growth or death benefit, don’t annuitize○ If for income, make sure you take it
Consider what influences you○ If it’s fear of market, a variable annuity is an expensive hedge○ If it’s fear of risk, a variable annuity is not the right product○ If it’s for a guaranteed inheritance
■ The death benefit is taxable■ An enhanced death benefit is crucial
DO {
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Ken Wundrow | Experience Consulting35
QUESTIONSand comments...
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Ken Wundrow | Experience Consulting
This Seminar Presented By
Kenneth Wundrow, EA | Experienced Consulting
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