Marriage, Home Office Deduction, and Dumb Money

By Harry Sit

Work continues to consume a lot of time and energy of me. From what I can tell, the economy has really turned around. Here are some noteworthy articles I read lately.

Getting Married To Save Money On College Tuition? by Jonathan at My Money Blog. So many policies key off marriage. They are misguided and outdated. If you are married, you are poor students. If you are not married, you are a resourceful family’s kids.

The Home Office Tax Deduction by Nickel at Five Cent Nickel. I’m taking the home office tax deduction for the first time this year. I used to think the home office deduction is only for depreciation, which is then recaptured when you sell the home. Actually many other expenses count too and they are not subject to recapturing. I’m not claiming depreciation.

Investors Buying Stocks Again by Allan Roth at The Irrational Investor. See also Are We Buying High All Over Again? by Carl Richards at New York Times. Some day I should take a closer look at those mutual funds flow data. My theory is investors are just trend-following with a lag. If the trend is long-lasting, and you go against the flow, you will buy or sell too soon.

Do Financial Planners Have Something To Learn From Suze Orman and Dave Ramsey? by Michael Kitces at Nerd’s Eye View. Kitces writes for a financial planner audience. He laments that all the CFPs in the country added together don’t have as much reach as three mass marketing gurus: Suze Orman, David Bach, and Dave Ramsey.

The gurus and CFPs serve different markets for sure. The gurus’ products are free or inexpensive. Their messages are simple and actionable. Once you go beyond the simple messages, however, you will find the gurus no longer satisfying. It’s no coincidence that the three gurus focus on controlling spending and getting out of debt.

Does Asset Allocation Matter? (Will I Run Out of Money in Retirement?) by Mike Piper at Oblivious Investor. Mike says other factors, such as years in retirement and withdrawal rate are much more important to a retirement portfolio than asset allocation. It’s true. It’s also true for a portfolio before retirement. How many years you contribute and your contribution rate are more important than asset allocation. I remember when I first started in saving for retirement, I called the 401k customer service center to reallocate my $150 into three mutual funds. Pretty funny when I think about it now.

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Posted on March 12, 2011 under News. Keywords: .

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5 Comments on Marriage, Home Office Deduction, and Dumb Money

  1. TJ on March 12, 2011
     

    I thought even if you didn’t claim depreciation, you are penalized as if you did when you sell. Hence many avoid this deduction by having non-business related items in the room.

  2. Tim Lawler on March 13, 2011
     

    Great synopsis of these topics. I love the comment about getting past the 3 gurus, and I completely agree. They are good for the average American that has no clue what to do with their finances, but when you start to build up wealth or complex income streams, you need to seek more professional help. Keep up the great posts and resources!

  3. TFB on March 13, 2011
     

    @TJ – Thanks for the heads-up. I read IRS Publication 587 again and come to the conclusion I should just go ahead and claim the depreciation.

  4. hmc on March 16, 2011
     

    Why not take home depreciation?
    Home depreciation deducts your income which is usually at higher tax rate than the tax rate when you recaptured value (as a capital gain).

  5. TFB on March 16, 2011
     

    @hmc – My original thought was that it isn’t worth the hassle to keep track of the depreciation over many years only for the benefit of a tax rate differential. The depreciation is very small to begin with because the home office is very small. Now the IRS publication says I must exclude from the tax-free gain depreciation I *could* take whether I actually took depreciation or not, I might as well take it.

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