Tax Deductions Extension: Property Tax, Sales Tax, College Tuition and More
My trusted tax source CCH reported that a tax extenders bill in the House is on the fast track to approval and enactment. It’s called American Jobs and Closing Tax Loopholes Act (HR 4213). It extends many expired tax breaks by one more year. Here are the major ones for individuals:
$500 or $1,000 property tax deduction for people who don’t itemize. This was originally for 2008 only. It was extended once for 2009. See previous post. Now it will be extended a second time for 2010.
Sales tax deduction. This primarily benefits people in states without an income tax on wages: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Sales tax paid can be deducted on the federal tax return. The deduction was originally for only two years, 2004 and 2005. It was subsequently extended through 2009. Now it will be extended again for one more year through 2010.
Pay More for Quality Service
If I ask people "Would you pay more for better quality or service or do you go for a lower price?" I’d imagine most people will say they don’t just go for a lower price and they would pay more for something better. However, my observation tells me people aren’t willing to pay more for better quality or service nearly as much as they say would.
My local NPR station did its twice annual fund drive last week (or is it three times a year now?). I haven’t seen any stats but I’d estimate a large percentage of regular listeners don’t contribute. They listen to the NPR programs because they like the programs. They don’t contribute because other stations are free. Then why are they not listening to those other stations? Because they like the NPR programs. It goes in circles like that.
Somehow we are able to justify paying more for better quality on physical products. Many people pay more to buy Macs because they like the quality. We all drive different cars — some are much more expensive than others. We have more trouble with the concept of paying more for better service, and maybe especially so for some types of service versus others.
Tax Cost Calculator
I usually include a spreadsheet when I post something about numbers and calculation. That way you can play with your own assumptions. I didn’t do one in my post last week Dividend Tax Going Up, Moving to Munis. My bad.
Reader Random Poster asked:
"If you did not hold any value stock funds in your taxable account, but rather only, say, a total stock market index fund, would you still make the investment changes?"
Don’t Get Used to the Good Life
I heard there had been riots in Greece. People in Greece rioted because the Greek government cut public sector employees’ wages. The government cut their wages because it paid the employees too much in previous years. The European Union requires its members to keep the budget deficit to 3% but Greece was running 13% deficit and lied about it to the EU so it could pay the wages it couldn’t afford.
Instead of being content about having had some unusually good years, people are mad about being asked to go back to normal because they got used to the good times. Rioters threw fire bombs into a bank. Three poor bank employees who had nothing to do with the wage cuts died of inhaling smoke. How sad.
Lesson learned: don’t get used to the good life. It’s much harder to cut back than to spend the extra money. At the individual level, how do we make sure we are able to deal with an income reduction so we don’t riot in the streets?
Dividend Tax Going Up, Moving to Munis
When an investor invests in value stock funds and bonds in both a tax deferred account and a taxable account, there are basically two choices:
(A) Put taxable bonds in the tax deferred account and put value stock funds in the taxable account; OR
(B) Put value stock funds in the tax deferred account and buy tax-exempt muni bond funds in the taxable account.
Cap ATM Fees at 50 Cents
Wall Street Journal reported that some Senators proposed to cap the ATM fees at 50 cents in an amendment to the financial reform legislation.
The financial reform bill being considered in the Senate is S. 3217 Restoring American Financial Stability Act of 2010. The amendment that the newspaper referred to is S.Amdt. 3812, sponsored by Senators Tom Harkin (D-Iowa), Charles Schumer (D-New York), Bernard Sanders (I-Vermont), and Tom Udall (D-New Mexico). The meat of the amendment says:
(D) REGULATION OF FEES.–The regulations prescribed under paragraph (1)shall require any fee charged by an automated teller machine operator for a transaction conducted at that automated teller machine to bear a reasonable relation to the cost of processing the transaction, and in no case shall any such fee exceed $0.50.
Brokered CD and Bank Failures
I wondered how long that 0-star R-G Premier Bank of Puerto Rico would last (see previous post Treasure Hunting in Secondary CDs). Now I know the answer: six months.
Last week, the regulators closed R-G Premier Bank of Puerto Rico together with two other banks in Puerto Rico, Westernbank and Eurobank. Before they were closed, all three banks consistently offered the highest yield on brokered CDs at Vanguard, E*Trade and other brokers who get their brokered CD listings from BondDesk Group.
I bought the R-G Premier CD on the secondary market through Fidelity. I knew it was a weak bank when I bought the CD. So I made sure that I paid below the face value. Its failure actually would give a small boost to my expected yield.
1099 Filing Requirement in Health Care Reform Law
I read on FatWallet that a hidden gem in the new health care reform law will require a business to issue a 1099 Form to all vendors starting in 2012 if the business purchases $600 or more in goods or services in a year from that vendor.
Currently a business is only required to issue 1099s for payments for services, not goods, purchased from individual persons, not corporations, if the total payments to that person exceed $600 a year.
I find this quite unbelievable. Small business owners buying from Costco will have to send a 1099 to Costco at the end of the year. Because chain stores are often owned by different entities under a franchise agreement, a business buying from one store versus another under the same chain will have to track the corporate entities behind each one separately. What a nightmare.
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Investor's Manifesto by William Bernstein
