Rate Watch 2018 – January

If you followed along with us last year, you may remember our Rate Watch 2017 articles where we tracked the interest rate used for the Southern California Edison grandfathered pension.

Rate Watch 2017 – August
Rate Watch 2017 – July
Rate Watch 2017 – June
Rate Watch 2017 – May

Since our last Rate Watch post in September 2017, we wanted to write a quick recap article of the last few months of interest rate changes as we look towards the official announcement in the fall.

Edison uses the minimum present value third segment rate for the grandfathered pension plan. The August rate is the one that is specifically used for the plan’s lump sum value calculation, and the official announcement is made by SCE to its employees in late September or early October.

Rate Watch January 2018 Chart

The rule of thumb with the pension is: when interest rates decrease, the value of your lump sum payout increases and vice versa.

Since August, we have seen the rate fall from 4.36 down to 4.11. While it is still very early in the year, and this number does not directly impact lump sum values for the pension, we find it important to keep track of where the number is at and where it could be heading towards the fall.

If you think that retirement is on the horizon and want to make sure you maximize your pension benefit, then schedule a free consultation to learn what we do for SCE employees and how we have helped 100’s of them retire with confidence.

*These are not current plan rates for Southern California Edison’s pension plan, they are minimum present value third segment rates from the IRS. Official plan rates are derived from the minimum present value segment rates table (https://www.irs.gov/retirement-plans/minimum-present-value-segment-rates) . Plan rate changes are made by Southern California Edison on an annual basis.


Joe OcchipintiJoe Occhipinti
Wealth Advisor
Warren Street Wealth Advisors

 

 

 

 

Joe Occhipinti is an Investment Advisor Representative of Warren Street Wealth Advisors, a Registered Investment Advisor. The information posted here represents his opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Past performance may not be indicative of future results. All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals may materially alter the performance, strategy, and results of your portfolio.Historical performance results for investment indexes and/or categories, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing historical performance results.Economic factors, market conditions, and investment strategies will affect the performance of any portfolio and there are no assurances that it will match or outperform any particular benchmark. Nothing in this commentary is a solicitation to buy, or sell, any securities, or an attempt to furnish personal investment advice. We may hold securities referenced in the blog and due to the static nature of content, those securities held may change over time and trades may be contrary to outdated posts.

 

Tax Deductions Gone in 2018

Tax Deductions Gone in 2018
What standbys did tax reforms eliminate?
Provided by Aileen Danley, CFP®, MBA

Are the days of itemizing over? Not quite, but now that H.R. 1 (popularly called the Tax Cuts & Jobs Act) is the law, all kinds of itemized federal tax deductions have vanished.

Early drafts of H.R. 1 left only two itemized deductions in the Internal Revenue Code – one for home loan interest, the other for charitable donations. The final bill left many more standing, but plenty of others fell. Here is a partial list of the itemized deductions unavailable this year.(1)

Moving expenses. Last year, you could deduct such costs if you made a job-related move that had you resettling at least 50 miles away from your previous address. You could even take this deduction without itemizing. Now, only military servicemembers can take this deduction.(2,3)

Casualty, disaster, and theft losses. This deduction is not totally gone. If you incur such losses during 2018-25 due to a federally declared disaster (that is, the President declares your area a disaster area), you are still eligible to take a federal tax deduction for these personal losses.(4)

Home office use. Employee business expense deductions (such as this one) are now gone from the Internal Revenue Code, which is unfortunate for people who work remotely.(1)

Unreimbursed travel and mileage. Previously, unreimbursed travel expenses related to work started becoming deductible for a taxpayer once his or her total miscellaneous deductions surpassed 2% of adjusted gross income. No more.(1)

Miscellaneous unreimbursed job expenses. Continuing education costs, union dues, medical tests required by an employer, regulatory and license fees for which an employee was not compensated, out-of-pocket expenses paid by workers for tools, supplies, and uniforms – these were all expenses that were deductible once a taxpayer’s total miscellaneous deductions exceeded 2% of his or her AGI. That does not apply now.(2,5)

Job search expenses. Unreimbursed expenses related to a job hunt are no longer deductible. That includes payments for classes and courses taken to improve career or professional knowledge or skills as well as and job search services (such as the premium service offered by LinkedIn).(5)

Subsidized employee parking and transit passes. Last year, there was a corporate deduction for this; a worker could receive as much as $255 monthly from an employer to help pay for bus or rail passes or parking fees linked to a commute. The subsidy did not count as employee income. The absence of the employer deduction could mean such subsidies will be much harder to come by for workers this year.(2)

Home equity loan interest. While the ceiling on the home mortgage interest deduction fell to $750,000 for mortgages taken out starting December 15, 2017, the deduction for home equity loan interest disappears entirely this year with no such grandfathering.(2)

Investment fees and expenses. This deduction has been repealed, and it should also be noted that the cost of investment newsletters and safe deposit boxes fees are no longer deductible.  In some situations, investors may want to deduct these fees from their account balances (i.e., pre-tax savings) rather than pay them by check (after-tax dollars).(5)

Tax preparation fees. Individual taxpayers are now unable to deduct payments to CPAs, tax prep firms, and tax software companies.(3)

Legal fees. This is something of a gray area: while it appears hourly legal fees and contingent, attorney fees may no longer be deductible this year, other legal expenses may be deductible.(5)

Convenience fees for debit and credit card use for federal tax payments. Have you ever paid your federal taxes this way? If you do this in 2018, such fees cannot be deducted.(2)

An important note for business owners. All the vanished deductions for unreimbursed employee expenses noted above pertain to Schedule A. If you are a sole proprietor and routinely file a Schedule C with your 1040 form, your business-linked deductions are unaltered by the new tax reforms.(1)

An important note for teachers. One miscellaneous unreimbursed job expense deduction was retained amid the wave of reforms: classroom teachers who pay for school supplies out-of-pocket can still claim a deduction of up to $250 for such costs.(6)

The tax reforms aimed to simplify the federal tax code, among other objectives. In addition to eliminating many itemized deductions, the personal exemption is gone. The individual standard deduction, though, has climbed to $12,000. (It is $18,000 for heads of household and $24,000 for married couples filing jointly.) For some taxpayers used to filling out Schedule A, the larger standard deduction may make up for the absence of most itemized deductions.(1)


 

Aileen Danley

Aileen Lau Danley CFP®, MBA
Relationship Manager
CERTIFIED FINANCIAL PLANNER®
Warren Street Wealth Advisors

 

 

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Warren Street Wealth Advisors, LLC is a Registered Investment Advisor. The information posted here represents opinion and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional.  Nothing in this commentary is a solicitation to buy, or sell, any securities, or an attempt to furnish personal investment advice. We may hold securities referenced in the blog and due to the static nature of content, those securities held may change over time and trades may be contrary to outdated posts.

Citations.

1 – forbes.com/sites/kellyphillipserb/2017/12/20/what-your-itemized-deductions-on-schedule-a-will-look-like-after-tax-reform/ [12/20/17]
2 – tinyurl.com/y7uqe23l [12/26/17]
3 – bloomberg.com/news/articles/2017-12-18/six-ways-to-make-the-new-tax-bill-work-for-you [12/28/17]
4 – taxfoundation.org/retirement-savings-untouched-tax-reform/ [1/3/18]
5 – tinyurl.com/yacz559c [1/8/18]
6 – vox.com/policy-and-politics/2017/12/19/16783634/gop-tax-plan-provisions [12/19/17]