Tax Reform 101: How the Tax Reform Law Impacts Self-Employed

Currently, there are about 55 million people in the self-employed community and with one in five taxpayers becoming self-employed every day, that number is expected to grow. If you have taken the plunge into being a business of one or...

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source https://blog.turbotax.intuit.com/tax-reform/tax-reform-101-how-the-tax-reform-law-impacts-self-employed-41705/

Weekend Reading for Financial Planners (Sep 29-30)

Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the big industry news that the CFP Board has stated it will “affirmatively oppose” any states that attempt to regulate financial planning, in light of the potential cost and regulatory patchwork that could otherwise emerge with different states that have different standards… but without actually setting forth what the organization thinks the ideal Federal regulation of financial planning would look like, and setting the CFP Board at odds with the Financial Planning Association, which has spent years building and deepening its state-level advocacy relationships and capabilities.

Also in the news this week were several other articles about the CFP Board, including the kick-off of the CFP Board’s public forums discussing the new Standards of Conduct to take effect next October of 2019 (and what CFP certificants want in terms of education, support, or simply clarification regarding those rules between now and then), and another article questioning whether the CFP Board has spent too much in time and resources promoting the high standards of the marks and not enough actually enforcing those standards to clean up bad actors (though the CFP Board indicates that it plans to enforce more effectively once the new standards take effect next year).

From there, we have several articles around cash flow and budgeting strategies with clients, including one on how to help clients better track and categorize their spending (based not on wants versus needs to determine what’s essential and what’s discretionary, but simply by helping them reflect on what they spent that actually brought them enjoyment, and what they subsequently regretted, and focusing there first to figure out what to cut), a second on how retirees might plan their retirement expenses based not on their estimated spending habits in retirement but instead based on how they plan to spend their time in retirement (and then figure out what those lifestyle activities will cost), and the last exploring what it really means to be “middle class” (and the challenges in seeing high-income households as “middle class” even though they work in a high-cost-of-living area that means their dollars really don’t go very far).

We also have a few additional articles around credit cards and borrowing, including a look at whether it’s worthwhile to have all clients freeze their credit reports now that it’s free (by national law) from all three major credit bureaus, the prospective benefits of “credit card churning” to rack up travel points with new-card bonuses, and why parents with college-aged children should be filling out the FAFSA even if they don’t think they’ll be eligible for financial aid (because many discover they actually were eligible after the fact, as even some merit-based aid programs also require a FAFSA to be filed!).

We wrap up with three interesting articles, all around the theme of building relationships (with friends, or with clients): the first looks at how the single greatest driver to turning an acquaintance into a friend and then ultimately a confidant is simply spending enough time (which could amount to dozens or hundreds of hours) to really deepen the relationship; the second offers up some better questions besides “What Do You Do?” to more quickly build rapport with someone you’re meeting the first time (in an effort to create more ‘multiplex’ ties beyond just the context of work); and the last looks at what it really takes to create a powerful mentor relationship, which is about more than just finding someone who wants to mentor you, but finding someone who is just far enough ahead of you on the journey to be able to provide insight about what comes next, but is close enough to where you are now to still remember what it was like to be there, too.

Enjoy the “light” reading!

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source https://www.kitces.com/blog/weekend-reading-for-financial-planners-sep-29-30-2/

The Section 199A Tax Benefits Of REITs Over Direct Real Estate Investments

While there are many tax and investment benefits to investing directly in real estate, not everyone wants to be a hands-on landlord. For those who buy a substantial amount of real estate, it’s often cost effective to hire a property manager to delegate such management tasks to. For everyone else, the most appealing option is simply to become a “pooled” real estate investor with others, through a Real Estate Investment Trust (REIT), which allows some of the pass-through tax benefits of real estate investing, but with better management economies of scale and more diversification than what most investors can feasibly access with limited dollar amounts to invest.

Under the Tax Cuts and Jobs Act of 2017, though, REITs have been afforded a new tax preference: the IRC Section 199A deduction for “pass-through” businesses, that allows for a 20% deduction of any qualified REIT dividends against that very income, resulting in an effective 20% reduction in the tax rate on REITs (where the top 37% tax rate becomes “just” 29.6% instead).

Notably, the new Qualified Business Income (QBI) deduction under Section 199A is available for direct investments in real estate as well. However, direct real estate investments only qualify for the deduction if the amount of real estate investment activity amounts to a real estate “business” (where purely passive real estate investment income may not count), and is further limited for certain high-income individuals due to wage-and-depreciable-property tests that apply to married couples with taxable income above $315,000, and all other filers with taxable income about $157,500. By contrast, qualified REIT dividends simply obtain the 20% Section 199A deduction, implicitly counting as a real estate “business” (by virtue of a REIT’s size and scale), and without any high-income limitations on the deduction!

Of course, in the end, an investment in a REIT should be evaluated by its overall investment merits, and not just its tax treatment alone. Nonetheless, for otherwise equal real estate investments, going forward, REITs will be substantially easier to qualify for the full Section 199A deduction with fewer limitations for high-income individuals, and a tax benefit sizable enough that REITs almost (but not quite) enjoy tax benefits similar to the preferences for long-term capital gains and qualified dividends. Which means at a minimum, the relative improvement of tax treatment for REITs will mean they deserve a “fresh look” from an investment perspective… along with a re-evaluation of where they should be held from an asset location perspective (given that REITs held in a tax-preferenced retirement account will lose out on the new Section 199A deduction!).

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source https://www.kitces.com/blog/reit-real-estate-investments-section-199a-qbi-deduction/

Tax Reform 101 for Families

The new tax reform law that was signed into law on December 22, 2017, changed taxes for the majority of taxpayers beginning in tax year 2018(the taxes you file in 2019). How Are Families Impacted? The following infographic provides a...

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source https://blog.turbotax.intuit.com/tax-reform/tax-reform-101-for-families-33144/

#FASuccess Ep 091: Increasing The Value Of Advice By Focusing On Life-Centered Planning For Transitions Not Goals with Mitch Anthony

Welcome back to the 91st episode of the Financial Advisor Success podcast.

This week’s guest is Mitch Anthony. Mitch is the founder of an eponymous training and coaching firm for financial advisors on how to ask the right questions to have better conversations with clients. What’s unique about Mitch, though, is his truly unique gift for finding the right words for effective client conversations. From describing the value of financial planning itself based on the six principles of helping clients with their organization, accountability, objectivity, proactivity, education, and partnership, to simply making the point that in the end, the role of a good financial planner is to help clients find the balance between vocation and vacation and ensure that clients prepare so they don’t have to repair instead.

In this episode, we talk about the importance of language in financial planning. The difference between having good rapport with clients and really building a relationship with them, why asking clients the right questions is all about engaging them by making them feel like they’re answering the questions they’ve always wanted to talk about anyway, and why the best way to demonstrate the ongoing value of financial planning is not about helping clients to reach their goals, but instead helping them to prepare for and then navigate the never-ending stream of transitions that life throws at them anyway, which are also great opportunities for advisors to demonstrate our value and grow our businesses because money goes in motion when life goes into transition.

We also talk about how the real value of a financial advisor should be measured by their ability to impact a client’s return on life and whether they’re living the best life they can with the money they have, rather than the traditional focus on benchmarking and advisor’s return on investments, which as Mitch puts it, Standard and Poor’s is a poor standard for measuring value, how the life-centered planning approach helps to address the common client question of, “What have you done for me lately,” and the platform that Mitch is building aptly called ROL Advisor, to provide coaching and tracking tools that advisors can use with their clients to demonstrate these ongoing values.

And be certain to listen to the end, where Mitch shares his key insight for how new advisors, in particular, can set themselves on a better track to long-term success by doing whatever it takes to, as he puts it, surround themselves with greatness and find opportunities to learn from best advisors they can before starting out on their own.

So whether you’re interested in learning about how “life-centered” planning improves client relationships, the “major motivator” for saving (other than retirement), or the best way to demonstrate the ongoing value of financial planning, then we hope you enjoy this episode of the Financial Advisor Success podcast.

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source https://www.kitces.com/blog/mitch-anthony-value-of-advice-life-centered-planning-transitions/

Celebrating Hispanic Heritage Month

This post can be found en Español here. Celebrating the culture and contributions of those who make up our diverse workforce is an important part of our corporate culture. Every year from September 15 to October 15 our country comes...

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source https://blog.turbotax.intuit.com/announcements/celebrating-hispanic-heritage-month-41661/

Tax Reform 101: 5 Reasons You Should Start Planning for Next Year Now

Even if you didn’t owe money this past tax season it’s more important than ever to plan for next tax season now. The idea of tax planning isn’t anything new, but with so many changes under the new tax reform...

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source https://blog.turbotax.intuit.com/tax-reform/tax-reform-101-5-reasons-you-should-start-planning-for-next-year-now-40971/