Provided by Roy Neal

The stock market is unsettled … and perhaps its fluctuations are unsettling you. It’s a stressful time for the economy and Wall Street, and you may be concerned about your portfolio given what’s going on with oil prices, the real estate market, and rising unemployment figures. It may be a good time to review how your assets are invested.

Is your portfolio balanced? A balanced portfolio may help you ride out stock market turbulence. Stocks and mutual funds aren’t the only asset allocation choices you have, and you won’t be alone this winter if you decide to examine other investment options.

Fixed annuities and Treasuries become attractive to investors when the market turns volatile. Bonds tend to maintain their strength when stocks perform poorly; fixed annuities are simply contracts with insurance firms, not correlated to stock market performance (though certain types of annuities may enable you to take advantage of stock market gains while maintaining your principal). Fixed-income mutual funds, dividend income funds and bond funds also have their adherents.

Last but not least, you have cash, though cash holdings haven’t traditionally performed anywhere near the level of the stock markets.

Are you retired, or retiring? If you are, this is all the more reason to review and possibly even revise your portfolio. Frequently, people approach or enter retirement with portfolios that haven’t been reviewed in years. The asset allocation that seemed wise ten years ago may seem foolhardy today.

Often, people in their fifties and sixties feel they need to accumulate more money for retirement, and that feeling leads them to accept more risk in their portfolio than they should. In the absence of a salary, however, you’ll likely want consistent income and growth, and therein lies the appeal of a balanced investment approach designed to manage risk while encouraging an adequate return.

Why not take a look into your portfolio? Ask your financial advisor to assist you. You may find that you have a mix of investments that matches your risk tolerance. Or, your portfolio may need minor or major adjustments. The right balance may help you insulate your assets to a greater degree against financial ups and downs.

These are the views of Peter Montoya, Inc., not the named Representative or Broker/Dealer, and should not be construed as investment advice. Neither the named Representative or Broker/Dealer give tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.

Securities and Advisory Services offered through Private Client Services LLC, 2225 Lexington Rd, Louisville, KY  40206  Ph 502-451-0600.  Member FINRA, SIPC and Registered Investment Adviser.  Private Client Services LLC and Retirement and Estate Planning Services are unaffiliated entities

Bill Sahadi, CRS
910 638-0888
Broker/Owner Fore Properties
www.foreproperties.com/radio

Presented by Roy Neal

Planning financially for retirement may feel overwhelming. For some, that feeling is what keeps them from really focusing on and implementing a plan. If you haven’t started planning for your retirement – do yourself a favor and make TODAY the day you begin.

1. The earlier the better.
Time is definitely one of your greatest allies. A person who begins contributing a modest amount to a retirement plan in their early twenties could end up on par with someone who contributes much more aggressively but does not start until their mid-thirties. Even if you have to start small, start now. Whatever amount you can afford to set aside for later, do it – and let it grow. If you don’t have the luxury of starting young, don’t waste time worrying about it. Start now. You’ll never again be younger than you are today.

2. Be smart about what you’ll need.
Yes, it’s true – the senior discount is alive and well, and the general cost of living may be less for those who have retired. But don’t forget, there are other costs to consider. Your healthcare costs, for example, may be greater in retirement simply because you’re not as healthy as you were in your youth. Additionally, you’ll want to take inflation into account. If you plan your retirement based on the cost of living and income of your 30’s, by the time you hit your retirement years, you may find you greatly underestimated your needs.

3. Be smart about how long you’ll need it.
When Social Security was being developed, in the 1930’s, a male retiring in the United States was really only expected to live about 12 years past his date of retirement.2 However, the average life expectancy of a United States citizen has risen fairly steadily throughout the last fifty years.1 Depending on when you retire, you may need to plan for 20 or more years of income.

4. Take advantage of tax-deferred contributions.
It sounds like a no-brainer, but sometimes people determine how much they can afford to contribute to a retirement account based on their net income, rather than their gross income. You may decide you can only afford $50 less per paycheck, net. But remember that some contributions, like those to your 401(k) for example, may be made with pre-tax dollars. That means you can afford to contribute a bit more from your gross income and still only “miss” $50 from your net income. This is an important consideration.

5. Take advantage of matching contributions.
If your employer offers a 401(k) match – consider scrimping here and there in order to take maximum advantage of it. It’s a very positive domino effect. The more you contribute, the more you earn in matching contributions (up to the maximum allowable amount). Think of it this way – if your employer offers a 50% match, then for every $100 you don’t contribute, you’re missing out on $50 in “free money”. You’re also missing out on the growth potential of that money as well.

6. Do the math.
This might be the most important retirement tip of all. Block off some time to sit down and do some calculations. Consider the different levels of contributions you could make and calculate how far those could take you by the time you reach retirement. Once you see what you COULD achieve, you may be more motivated to increase your contributions.

7. Trim the fat.
Keep careful track of your spending for one month (if you bank online, you may have access to tools that help you do this). After one full month, sit down and take a careful look at what you spent money on. Did it all make sense? Was some of it frivolous? Any regrets? Taking a close look at exactly where your money is going is often the best way to discover areas that need improvement, and ways you could adjust your spending habits. Add up all the money you feel you spent unnecessarily, then add that amount to the contribution math you did previously … how much further might that extra monthly contribution have taken you?

8. Get help.
These retirement tips are intended to help you get started down a path toward, potentially, a more successful retirement. But they’re just that – a starting point. While it’s definitely important to educate yourself and understand your finances, seeking the assistance of a financial professional may be one of the best moves you could make.

This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information should not be construed as investment, tax or legal advice. The publisher is not engaged in rendering legal, accounting or other professional services. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. If assistance or further information is needed, the reader is advised to engage the services of a competent professional.

1 – google.com/publicdata?ds=wb-wdi&met=sp_dyn_le00_in&idim=country:USA&dl=en&hl=en&q=life+expectancy [10/29/10]
2 – http://www.newretirement.com/Planning101/Retiring_Too_Soon.aspx [10/25/10]

Securities and Advisory Services offered through Private Client Services LLC, 2225 Lexington Rd, Louisville, KY 40206 Ph 502-451-0600. Member FINRA, SIPC and Registered Investment Adviser. Private Client Services LLC and Retirement and Estate Planning Services are unaffiliated entities

by Roy Neal

GMIBs. GMWBs. GMABs. GLWBs. What do these acronyms mean? If you own a variable annuity or think you might want to own one, they stand for a new class of living benefits that make these investments even more attractive.

Variable annuities are tax-deferred investments structured to pay you benefits over a set number of years, and a death benefit to your beneficiaries. They let you invest some of your annuity assets in investment subaccounts that suit your investment styles and goals.

Additionally, these annuity contracts often come with riders that guarantee certain benefits regardless of how the markets perform: GMIBs, GMWBs, GLWBs, and GMABs.

Guaranteed minimum income benefit (GMIB). A GMIB ensures that the annuity payments that come your way are at least a specified minimum amount, even if your investment subaccounts perform poorly (the insurer picks up the slack). How is the minimum payment amount figured out? It is based on the insurance company’s estimation of the future value of the initial annuity investment.1

Guaranteed minimum withdrawal benefit (GMWB). If the principal of your variable annuity shrinks due to a market downturn, you can use this rider to recoup the amount of your entire initial investment. If you own a variable annuity with a GMWB with a 10% withdrawal rate, you can withdraw 10% of your entire investment each year until the initial investment amount has been recouped. That’s useful if the value of your annuity should decline. If you started your variable annuity with a $200,000 investment and it is now worth $180,000, you can use the 10% GMWB to withdraw $20,000 of the original principal amount each year until the entire $200,000 is recovered thanks to the guarantee set by the insurance company.2

Guaranteed lifetime withdrawal benefit (GLWB). This means guaranteed income payments for life. Let’s say your variable annuity has an account balance of $100,000 and is structured to pay out $5,000 a year for 20 years. With a GMWB for life, you will continue to receive $5,000 a year from the insurer even if you have recouped the original principal and even if the account value falls due to poor investment returns.3

Guaranteed minimum accumulation benefit (GMAB). A GMAB gives you the confidence of knowing that after a set period of years, you will have at least X dollar amount of assets in your variable annuity. Usually, the GMAB is established for the end of a 10-year period, i.e., in ten years, the insurer guarantees that your annuity contract will be valued at a minimum of $100,000, even if the market drives the actual value down.4

Long-term care insurance options. This is certainly a new wrinkle in variable annuities and worth knowing about. Some variable annuities now allow you to pay long-term care benefits from the life insurance death benefit promised in the annuity contract. While this will reduce the amount of the death benefit, it can certainly help during your life. If you don’t choose to spend some of the death benefit on long-term care, then the entire death benefit will be received by your heir. You can also choose to receive the cash value of the death benefit as an income stream.5

Very interesting, isn’t it? If you’d like to know more about the new living benefits in variable annuities, why not talk to a qualified insurance or investment professional today? These new annuity options may give you more financial confidence – and financial choices – for retirement.

Please note that variable annuities are long-term investment vehicles designed for retirement purposes. Investing in variable annuities involves market risk, including possible loss of principal. Investors should carefully consider the product’s investment objectives, risks, limitation, charges, and expenses. The variable annuity prospectus and underlying sub-account prospectus contain this and other important information. These prospectuses should be read carefully before investing.

These views are those of the author and should not be construed as investment advice. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.

Citations.
1 investopedia.com/terms/g/gmib.asp [11/11/08]
2 investopedia.com/terms/g/gmwb.asp [11/11/08]
3 lidp.com/living-benefits-defined.html [11/11/08]
4 finance.yahoo.com/how-to-guide/retirement/18308 [11/11/08]
5 investopedia.com/printable.asp?a=/articles/pf/08/variable-insurance.asp [11/11/08]

Securities and Advisory Services offered through Private Client Services LLC, 2225 Lexington Rd, Louisville, KY 40206 Ph 502-451-0600. Member FINRA, SIPC and Registered Investment Adviser. Private Client Services LLC and Retirement and Estate Planning Services are unaffiliated entities

Provided by Roy Neal

In any stock market climate, proper asset allocation matters. In a down market, you could argue that it matters more than anything else.

Did you have a well-diversified portfolio during the fall of 2008? That was a time when the importance of having a bond allocation and proper equity diversification really hit home. Nearly all investors were hit hard, but some were hit harder than others. What percentage of your portfolio was held in Treasuries (or cash) at that time?

Wise asset allocation may help you as the market recovers. Yes, even diversified portfolios lost money at the end of 2008 and the start of 2009. Yet with rebalancing, these same portfolios may be poised to take advantage of a rebounding market.

You might say there are two schools of thought when it comes to diversification and asset allocation – hands off, and hands on.

Modern Portfolio Theory. In 1952, a University of Chicago Ph.D. candidate named Harry Markowitz published a thesis – a brief, provocative paper that called for investors and money managers to see risk with new eyes. That was the start of Modern Portfolio Theory, which still has many advocates today.

Before MPT, money managers and investors tended to look at investments in isolation: if a stock had performed well in 1948, it was a good stock and it would probably perform well in 1949. They analyzed a stock almost like they would analyze a business.

In his paper, Markowitz basically said “You guys are going about this the wrong way.” He first assumed that all investors wanted to avoid risk (which he defined as standard deviation from expected portfolio returns). He then contended that you should measure the risk level of a whole portfolio instead of individual securities.1 (In other words, if you want to include a security in your portfolio, you should think about how that will alter the risk level of your entire portfolio, rather than simply consider the risk of the security.)

MPT asserts that for every portfolio, there exists an “efficient frontier” – an ideal asset allocation among diversified asset classes that should efficiently balance maximum return and minimum risk.2 Markowitz further developed the theory with economists Merton Miller and William Sharpe, and it eventually won a Nobel Prize in economics.

MPT has its fans – but also its critics. In the last 20 years or so, many investment advisors and money managers have practiced a buy-and-hold style of portfolio management using the diversification principles of MPT. But as the markets dropped in 2008-09, critics pointed out the danger of buying and holding – you can “hold” positions too long. In the crisis, some investment advisors took more of a hands-on approach to portfolio management – others had always done so.

How long is the long run? If history is any guide (and it may not be), the longer your investment horizon, the more sense buy-and-hold can make – at least when it comes to stocks. For example, $1 invested in stocks in 1929 would be worth $759 in 2009, whereas $1 invested in bonds in 1929 would only be worth $74 today. The critics counter that argument with the fact that the S&P 500 traded at the same level in mid-2009 as it did in summer 1997. Stretch or contract different windows of time and you can reach all kinds of conclusions.2

The bottom line. The buy-and-hold adherents and critics certainly agree on one thing: diversification is hugely important. If your assets are allocated across 10 or 12 “baskets” instead of one or two, for example, you are theoretically less affected by the whims of the financial markets.

So what is “proper” asset allocation for you? Only you and your financial advisor can determine that. Your time horizon, preferred investment style, accumulated assets, life goals and financial objectives – these all have to be taken into consideration. It’s worth a conversation, today.

These are the views of Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional.

Please consult your Financial Advisor for further information.

Citations.
1 biz.yahoo.com/edu/bi/ir_bi5.ir.html [6/8/09]
2 financial-planning.com/fp_issues/2009_6/buy-and-hope-2662103-1.html [6/1/09]

Securities and Advisory Services offered through Private Client Services LLC, 2225 Lexington Rd, Louisville, KY 40206 Ph 502-451-0600. Member FINRA, SIPC and Registered Investment Adviser. Private Client Services LLC and Retirement and Estate Planning Services are unaffiliated entities

2011 is here and there is much to report. Congress has restored the estate tax, cut the payroll tax and retained and/or restored a variety of tax breaks.

Here’s a look at some recent developments in federal tax law – not just the changes for 2011-2012, but also the decisions (some quite recent) that may impact your 2010 return. This is by no means a tax planning guide, just an update on what has changed and what hasn’t.

Before we get started, some news about filing your 2010 federal return:

• Due to a lag in IRS processing systems, you will need to wait until at least mid-February to file your return if you are going to claim …
  o itemized deductions on Schedule A
  o the Higher Education Tuition & Fees deduction
  o the Educator Expense deduction
• This year, the federal income tax deadline is April 18. That’s because April 15 is a holiday in the District of Columbia (Emancipation Day).
• Correspondingly, all taxpayers who file for an extension this year will have until October 17 to file their 2010 returns.1

Here’s a look at the numerous revisions, alterations and restorations to federal tax law affecting tax years 2010, 2011 and 2012.

1.  The federal income tax brackets remain at 10%, 15%, 25%, 28%, 33% and 35% for 2011-2012.

The ordinary taxable income brackets for TY 2011 are set as follows, reflecting minor COLAs:

• Single Taxpayers:
  o 10% bracket has a ceiling of $8,500
  o 15% bracket starts @ $8,501
  o 25% bracket starts @ $34,501
  o 28% bracket starts @ $83,601
  o 33% bracket starts @ $174,401
  o 35% bracket starts @ $379,151
• Married Filing Separately:
  o 10% bracket has a ceiling of $8,500
  o 15% bracket starts @ $8,501
  o 25% bracket starts @ $34,501
  o 28% bracket starts @ $69,676
  o 33% bracket starts @ $106,151
  o 35% bracket starts @ $189,576
• Head of Household:
  o 10% bracket has a ceiling of $12,150
  o 15% bracket starts @ $12,151
  o 25% bracket starts @ $46,251
  o 28% bracket starts @ $119,401
  o 33% bracket starts @ $193,351
  o 35% bracket starts @ $379,151
• Married Filing Jointly or Qualifying Widow/Widower:
  o 10% bracket has a ceiling of $17,000
  o 15% bracket starts @ $17,001
  o 25% bracket starts @ $69,001
  o 28% bracket starts @ $139,351
  o 33% bracket starts @ $212,301
  o 35% bracket starts @ $379,1512

2.  The payroll tax paid by employees and the self-employed has been reduced by 2.0% in 2011.

This means many Americans will effectively get a 2% raise this year. The reduced withholding could mean as much as $2,136 in savings, as earnings up to $106,800 are subject to payroll tax. No phase-outs apply, and if taxpayers are married, both spouses can get the individual deduction.3,4

Two related notes:

• The partial credit for payroll taxes paid by employers is gone this year.5
• As a result of this payroll tax holiday, the Making Work Pay credit is gone for 2011. However, many taxpayers can still claim the Making Work Pay credit for 2010 ($400 for individual taxpayers, up to $800 for taxpayers married filing jointly, income phase-outs applicable).6

3.  The estate tax is back for 2011- 2012.

For this year and next, the federal estate tax is set at 35% with a $5 million individual exemption.4 Please note that:

• The $5 million individual exemption is portable. This means that an executor may elect to transfer an unused $5 million individual estate tax exemption (upon the death of one spouse) to the surviving spouse. So with this new portability, a married couple could potentially transfer up to $10 million of assets without incurring federal estate tax.7
• In 2011, an executor of an estate for a decedent who died in 2010 may choose between two options in administering said estate. That executor can elect to
  o Subject the estate to the 2011 federal rules (35% estate tax, $5 million estate exemption, stepped-up basis for appreciated assets per IRC rule 1014).
  o Subject the estate to the 2010 federal rules (0% estate tax and the $1.3 million modified carryover basis for appreciated assets in the estate, which becomes $3 million for assets passing to a surviving spouse).8

4.  The estate tax, the gift tax and the generation-skipping tax (GST) have all been reunified for 2011-2012.

They all have top rates of 35% with $5 million individual exemptions. The individual estate and gift tax exemptions are portable between married couples; the GST exemption is not. The GST has been restored for 2011; it was 0% in 2010.4,8

The annual gift tax exclusion remains at $13,000 per donor in 2011. A single taxpayer may gift up to $13,000 to an unlimited number of individuals. The lifetime exclusion (see above) is $5 million.4

In addition to the annual exclusion, an unlimited gift tax exclusion is allowed for amounts paid on behalf of a donee directly to an educational organization for tuition. Likewise, amounts paid directly to health care providers also qualify for the unlimited gift tax exclusion.9

5.  Tax rates on capital gains and dividends haven’t been hiked.

In 2011 and 2012, the long-term capital gains rate is

• 0% for taxpayers in the 10% and 15% brackets.
• • 15% for everyone else.4

6.  Traditional IRA owners who go Roth this year can’t defer income resulting from the conversion into subsequent tax years.

In 2010, you had that option; this year, you don’t. If you went Roth in 2010, you have until October 17, 2011 to choose whether you wish to divide the income from the conversion between your 2011 and 2012 federal returns.4

7.  High earners won’t be bitten by “stealth income taxes” during 2011-2012.

The Pease and PEP limitations – repealed for 2010 – are now on holiday through 2012. A quick explanation if you’ve never heard of them: the Pease provision cancels out up to 80% of the amount of a taxpayer’s itemized deductions if his or her AGI exceeds a certain level. In other words, you can deduct the full amount of your itemized deductions in 2011. The PEP (personal exemption phase-out) whittles away at the personal exemption benefit for taxpayers who reach certain AGI levels.4,10

8.  The charitable IRA rollover is back – at least for 2011.

In federal tax law, this is known as a Qualified Charitable Distribution – a tax-free donation of IRA proceeds to a qualifying charity or nonprofit. Given the generous $5 million individual estate tax exemption now in place, there may be less impetus to make such gifts – but nonprofits are just glad the opportunity is back.

To be tax-free, the donor must be 70½ or older and the donation has to take the form of a direct transfer (a rollover) from your IRA trustee to the qualifying charity, nonprofit foundation or nonprofit organization. (You can also make a tax-free donation of IRA proceeds to a fund held by a community foundation, but not a donor-advised fund.) You cannot claim a charitable tax deduction from this move.11

Will this opportunity stick around after 2011? We don’t know. It is set to sunset at the end of the year.

• The Tax Relief Act of 2010 gives donors who make such Qualified Charitable Distributions before through January 31, 2011 the option to have them treated as QCDs on their 2010 federal tax returns.11

9.  The Small Business Jobs Act of 2010 extended some tax breaks and put some tax changes into play for small companies in 2011.

The SBJA was passed into law during September 2010, and its recently enacted laws will affect both 2011 and 2010 federal returns.

• Full business expensing is permitted for 2011, just as it was in 2010. The IRC Section 179 expense deduction limits of 2010 remain in effect this year. A small business can write off 100% of the expense of qualifying equipment or computer software made in 2011 with a $500,000 limit. The capital expenditures can be on new or used equipment. Your company has to be profitable in order for you to take full advantage of the write-off, and you can’t take complete advantage of it if you have spent more than $2 million on qualifying capital in the given tax year.12,13
• 100% exclusion possible on gains from small business stock. If you bought such stock after September 27, 2010, any gain may qualify for a 100% exclusion under IRC § 1202.).13
• The bonus first-year depreciation has been extended. If your company purchases new tangible or intangible property in 2011 (which includes buildings, machinery and equipment, vehicles, furniture, software and even patents and copyrights), your company can claim 100% of its cost as long as your business uses the property before 2012. This 100% depreciation also applies for tangible or intangible property bought after September 8, 2010. You can also claim 50% depreciation on purchases of this kind made from January 1 – September 7, 2010 as long as the tangible or intangible property is put into service prior to 2013. (Real property is not eligible for this tax break.) 12,13
• The deduction for start-up expenses has doubled. The Small Business Jobs Act of 2010 raised it to $10,000 for 2010 and subsequent tax years. Phase-outs on this deduction now kick in at $60,000 worth of startup expenditures (previously, it was $50,000).13
• Some businesses may be able to claim a major health care tax credit. Does your business have 25 or fewer full-time employees? Are you paying most of them less than $50,000 annually? Do you pick up the tab for 50% or more of their health insurance premiums? If so, you may be able to deduct up to 35% of the money you spend on those premiums in tax years 2010-2013. To get the full 35% credit, you must have 10 or fewer full-time employees with annual wages averaging $25,000 or less. Above that, phase-outs apply. The tax break is unavailable if you have more than 25 full-time employees or if you pay your full-time employees average wages of more than $50,000.12,13
• The carryback period for eligible small business credits under IRC § 38 was extended from 1 year to 5 years. This was put into effect for the 2010 tax year. Such credits may be used to offset both regular tax liability and AMT liability.13
• The depreciation deduction has increased for business-owned vehicles. The SBJA increased the maximum deduction for a passenger automobile first placed in service in 2010 to $3,060. The maximum deduction for a truck or van first placed in service in 2010 increased to $3,160. Remember that the car or truck has to be totally used for business purposes to take full advantage of the deduction.14
• In 2011, the holding period for S corporations is reduced by 2 years. The SBJA cut the holding period from 7 years to 5 years for 2011. So if your C corp elected to convert to an S corp as recently as 2006, it can sell appreciated assets this year without paying the built-in corporate level tax. This provision only applies in TY 2011.15

10.  Employers must begin reporting employee health care benefits on Form W-2 in either 2011 or 2012.

This is an effect of the Affordable Care Act. For informational purposes, employers are now required to report the value of the health insurance coverage they offer to employees on W-2s. The IRS is offering employers a one-year grace period, however: it has deferred the reporting requirement for TY 2011, so this year it is optional. Reporting the value of the health care coverage to the IRS will not affect the taxable income of your employees.16

11.  Landlords must abide by new IRS reporting requirements.

Prior to 2011, only full-time property managers and some lessors had to file 1099 forms with the IRS as a consequence of doing business. The Small Business Jobs Act of 2010 changed that.

Anyone who receives rental income in 2011 has to file a Form 1099 for all payments of $600 or more made to service providers – handymen, plumbers, carpenters, landscapers, electricians, any individual or company providing a service linked to your residential or commercial rental property. You don’t need to file 1099 forms for purchases of goods for your rental property, only services. Only aggregate annual payments of $600 or more for services have to be reported.

Unless Congress intervenes, such reporting will be demanded of all businesses, self-employed individuals and independent contractors come 2012.17

12.  The first-time homebuyer credit is gone.

It expired at the end of September 2010. You can take advantage of the credit on your 2010 federal return if you closed escrow on a home before October 1, 2010 and had a binding contract in place prior to May 1, 2010.13

13.  The personal exemption and standard deduction amounts have (barely) increased.

For 2011, the personal exemption amount increases by $50 to an even $3,700. Standard deductions are as follows for 2011:

• Single Taxpayers: $5,800
• Married Filing Separately: $5,800
• Head of Household: $8,500
• Married Filing Jointly or Qualifying Widow/Widower: $11,6002

14.  The AMT has again been patched.

As part of the Tax Relief Act of 2010, the Alternative Minimum Tax exemptions were increased to these levels for 2011:

• Single Taxpayers and Heads of Household: $47,450
• Married Filing Separately: $36,225
• Married Filing Jointly or Qualifying Widow/Widower: $72,45018

15.  The self-employed may be able to use the self-employed health insurance deduction to reduce their SECA taxes in 2010.

This was a mid-year tax law change that happened as a result of the SBJA. For TY 2010, self-employed business owners may deduct the cost of health insurance for themselves and their family members as a business expense when calculating self-employment tax. (You can do this on Schedule SE, Line 3.) Prior to 2010, the self-employed could only deduct health insurance costs for income tax purposes (on Form 1040, Line 29). A worksheet on all this accompanies IRS Form 1040. The health coverage must be arranged under the umbrella of your business, and you must not be eligible to participate in an employer-sponsored health plan.18

16.  If you have a Flexible Spending Account, you can no longer use your FSA funds to pay for most over-the-counter medicines.

Insulin is a notable exception to this new rule. You can still use your FSA money for non-prescription medical or medically related items like crutches, wigs, contact lens solution and other items detailed within IRS Publication 502.4

17.  Investment brokers have to provide the IRS with cost-basis reporting in 2011 when it comes to the sale of certain assets.

They must report the original purchase price of stocks, REIT shares and foreign securities to the IRS in 2011 when these assets are sold. In 2012, they will have to follow new rules for cost-basis reporting for mutual funds, bonds, options and many ETFs.4

18.  If you own more than $50,000 in foreign financial assets, you may be subject to a new IRS reporting requirement.

You may have to meet additional reporting and disclosure requirements in 2011 in addition to filing an FBAR (Report of Foreign Bank and Financial Accounts). This new reporting requirement may impact hedge fund investors who previously didn’t have to file FBARs. Consult your tax advisor.4

19.  The state and local sales tax deduction option is back for 2011 (and you can also claim it on your 2010 return).

Do you live where there are no local or state income taxes? Once again, you have the choice of taking a deduction for state sales taxes instead of the state income tax deduction for 2011 (and 2010).18

20.  The $250 classroom supplies deduction for teachers is back for 2011 (and may be claimed for 2010).

Are you a K-12 educator who pays for classroom expenses out-of-pocket? Then you are able to take an above-the-line deduction to offset up to $250 of such costs.18

21.  The higher education tuition and fees deduction is back for 2011 (and may be claimed for 2010).

The limit on this deduction is $4,000. (And if you’re reading this item, don’t forget about the American Opportunity Credit, a credit of up to $2,500 that can be used for the first four years of college and applied to the tuition costs and other higher education expenses.)18,19

22.  The adoption credit is larger – and it has been made refundable.

As you file your 2010 return, note that it is now $13,170 per child as opposed to $12,150 in 2009. As it is refundable, an eligible taxpayer can qualify for the credit even if he or she doesn’t owe any federal income tax. The adoption must be documented, so that means you can’t claim this credit via eFile.18

23  The Earned Income Tax Credit eligibility limit has increased to $48,362 and the Child Tax Credit has been expanded.

The result: more middle class and working class families may qualify for these credits. The CTC is a credit of up to $1,000. Under the new laws, you can claim the CTC if a child was no older than 16 in 2010 lived at home for more than half of 2010, and is claimed as a dependent on your 2010 federal return.19

24.  If you bought a home in 2008 or 2009, you may have to repay up to 100% of any federal homebuyer credits related to the purchase on your 2010 Form 1040.

This is more likely if you bought your home during 2008. Most taxpayers will merely have to repay 1/15 of their credit in 2010. Consult your tax advisor.20

25.  Most unemployed individuals will have to report 100% of their 2010 federal jobless benefits as taxable income.

Not everyone who is unemployed realizes this. In 2009, the first $2,400 of federal unemployment insurance came to you tax-free. There was no such tax break offered for 2010.20

26.  No more real estate tax deduction for those that don’t itemize.

This is just a reminder that you can’t claim this deduction on your 2010 federal return. The additional standard deduction for property taxes went away at the close of 2009.20

27.  No more sales tax deductions for buying a new car or truck.

You won’t be able to claim these tax breaks for 2010, as they faded away at the end of 2009.20

This Special Report is an update of 2010 and 2011 tax law changes, and is not intended as a guide for the preparation of tax returns. The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Roy Neal and Peter Montoya Inc. to recipients. No information herein was intended or written to be used by readers for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions. Readers are cautioned that this material may not be applicable to, or suitable for, their specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. Readers are encouraged to consult with professional advisors for advice concerning specific matters before making any decision, and Roy Neal and Peter Montoya Inc. disclaim any responsibility for positions taken by taxpayers in their individual cases or for any misunderstanding on the part of readers Roy Neal and Peter Montoya Inc. assume no obligation to inform readers of any changes in tax laws or other factors that could affect the information contained herein.

Citations.

1. irs.gov/newsroom/article/0,,id=233910,00.html [1/4/11]
2. irs.gov/pub/irs-drop/rp-11-12.pdf [12/10]
3. bloomberg.com/news/2011-01-18/it-s-not-too-early-to-think-about-2011-taxes.html [1/18/10]
4. online.wsj.com/article/SB10001424052748703675904576063903166546250.html [1/8/11]
5. turbotax.intuit.com/tax-tools/tax-tips/IRS-Tax-Return/Summary-of-Federal-Tax-Law-Changes-for-2010-2017/INF12041.html#2011 [1/19/11]
6. walletpop.com/2011/01/19/dont-forget-about-the-making-work-pay-credit/ [1/19/11]
7. naepc.org/journal/issue07a.web [12/20/10]
8. blogs.forbes.com/hanisarji/2011/01/02/new-year-different-rules-2011-estate-tax-gift-tax-gst-tax-rules/ [1/2/11]
9. turbotax.intuit.com/tax-tools/tax-tips/Tax-Planning-and-Checklists/The-Gift-Tax/INF12036.html [1/27/11]
10. taxpolicycenter.org/press/press-resources-pease.cfm [1/18/11]
11. ctphilanthropy.org/s_ccp/bin.asp?CID=14889&DID=45124&DOC=FILE.PDF [12/17/10]
12. money.cnn.com/2011/01/17/smallbusiness/small_business_new_tax_credits/ [1/17/11]
13. journalofaccountancy.com/Web/20113750.htm [1/14/11]
14. irs.gov/formspubs/article/0,,id=177054,00.html [10/14/10]
15. s-corp.org/2010/09/28/president-signs-big-relief/ [9/28/10]
16. irs.gov/newsroom/article/0,,id=220809,00.html [1/14/11]
17. realtor.org/wps/wcm/connect/f9c47a804427e7068bf5eb34cafa6d66/government_affairs_issue_brief_rep_rules_1099rev.pdf [1/18/11]
18. irs.gov/newsroom/article/0,,id=233927,00.html [1/4/11]
19. bloomberg.com/news/2011-01-18/children-can-mean-extra-tax-deductions-and-credits.html [1/18/11]
20. smartmoney.com/personal-finance/taxes/whats-new-on-the-2010-form-1040-1295384880669/ [1/20/11]
21. montoyaregistry.com/Financial-Market.aspx?financial-market=finding-a-tax-preparer&category=31 [1/28/11]

Securities and Advisory Services offered through Private Client Services LLC, 2225 Lexington Rd, Louisville, KY  40206 Ph 502-451-0600.  Member FINRA, SIPC and Registered Investment Adviser.  Private Client Services LLC and Retirement and Estate Planning Services are unaffiliated entities

Retirement & Estate Planning Services, Inc. specializes in working with individuals and businesses in planning and achieving their financial goals.

What are your goals and dreams? At our firm, we work for you – analyzing your needs and wants, formulating a financial strategy that is both attainable and comfortable.  Knowledge and working together we can help you use your resources to help create a brighter financial future.

Why do you need a lifetime financial guide? Today’s financial markets are becoming increasingly more complicated.  Selecting the investment options that are best for you from the thousands of options can be overwhelming without professional guidance. Can you separate emotion from objectivity when you are making decisions about your money?

Do you have the time, training or temperament to plan and manage your own investments successfully? Few individuals or businesses can afford costly mistakes, such as not planning for the impact of inflation or taxes on investments.

Working with a financial professional can make a difference. We take a proactive style of management, not a passive.  In January you wear heavier clothes, the 4^th of July you wear something lighter.  Because the weather changed you changed, because the markets change you need to change with them.

Please call us at the office 295-7088 if I can be assistance to you or someone you know.

Securities and Advisory Services offered through Private Client Services LLC, 2225 Lexington Rd, Louisville, KY  40206 Ph 502-451-0600.  Member FINRA, SIPC and Registered Investment Adviser.  Private Client Services LLC and Retirement and Estate Planning Services are unaffiliated entities

Please visit our website at http://www.plan4retire.com

Phone: 910-295-7088
Mobile: 910-585-0115
Fax: 910-295-7388

TUESDAY

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THURSDAY

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Presented by Roy Neal

Content provided by Peter Montoya, Inc.

Fall is the time to consider some year-end financial moves – little and not-so-little things you might do to plan to improve your financial position.

You could put more in your 401(k) before they play “Auld Lang Syne”. As you only get one chance to save for retirement and an annual deadline to make retirement plan contributions, you could in crease your final retirement plan deferrals of 2009 to the maximum allowed by your plan, assuming your finances permit you to do so. Contributions to traditional IRAs and 401(k)s are usually made with pre-tax dollars and thereby could help you reduce your tax bill.1

If you haven’t contributed to your IRA or Roth IRA for 2009, you have until April 15, 2010 to make that move. You can contribute up to $5,000 to an IRA (or spread up to $5,000 of contributions across multiple IRAs) for tax year 2009; those over age 50 may contribute up to $6,000 to their IRAs for 2009.2 If your modified adjusted gross income (MAGI) is into six figures, this may reduce or even prohibit Roth IRA contributions depending on your filing status.

You could try to harvest some losses. You might want to sell some losers to offset some winners (not every security was a winner this year) and counterbalance capital gains. Keep in mind that if you are in the 10% or 15% federal income tax bracket for 2009, you won’t have to pay capital gains tax – that break extends into the 2010 tax year as well. If you want to sell, sell carefully – you don’t want to generate so much income that you creep into a higher tax bracket.3

You could try to pick up some tax credits. Are you thinking about buying a home? The up-to-$8,000 first-time homebuyer credit has been extended to the end of April and complemented by its new variant, the up-to-$6,500 credit for move-up buyers. Remember, the phase-out limits on that credit just rose – they are now $125,000 for single filers, and $225,000 for joint filers. The home has to have a price tag of $800,000 or less and it must be your primary residence. A first-time homebuyer is defined as someone who hasn’t owned a home within the past three years; a move-up buyer is defined as a buyer who has lived in the same primary residence for a stretch of five consecutive years or longer.4

How about some energy credits? If you make your principal residence more energy-efficient or purchase solar hot water heaters, geothermal heat pumps, wind turbines or other qualifying alternative energy equipment to heat or cool your home, you can qualify for a tax credit for up to 30% of the cost of the improvements. There is a maximum tax credit limit to $1,500 for improvements put in service in 2009.5

Do you have sons or daughters in college? The Hope Credit has become the American Opportunity Tax Credit, a credit of up to $2,500 toward qualifying college expenses. Phase-outs kick in at $80,000 MAGI for single filers, $160,000 MAGI for joint filers.6 Additionally, you could contribute a little more to a 529 plan before the year ends.

Prepay some deductible expenses. If you are pretty sure you will be in the same tax bracket or a lower one in 2010, think about making a thirteenth payment on your home loan in 2009 to boost your mortgage interest deduction, or prepaying your property taxes if your financial situation lets you do so.

Spend that FSA money. Do you have a Flexible Savings Account for your healthcare expenses? Think about getting some new glasses or braces, or find some way to use that money – money you might lose after December 31, unless your employer allows you the extended-access option to your 2009 FSA funds (in which case you’ll still have to use them by March 15 of next year).7

Sit down with your financial professional for a portfolio review. See how (well) you’ve done this year. Think about next year, and what you might do as the economic recovery progresses. Discuss some of the different aspects of your financial situation. If you want a better understanding of where you are at financially, this is the chance to gain it.

Roy Neal offers Financial Planning in Ohio through Private Client Services, LLC, A Registered Investment Advisor. Securities and other Investment Advisory Services offered through Woodbury Financial Services, Inc. Member FINRA, SIPC and Registered Investment Adviser. Retirement and Estate Planning Services, Inc, Private Client Services, LLC, and Woodbury Financial Services, Inc. are unaffiliated entities.

These are the views of Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Professional for further information.

Citations.

1 foxbusiness.com/story/personal-finance/retirement-advice-ages/ [12/26/08]

2 irs.gov/retirement/article/0,,id=202510,00.html [11/10/09]

3 usatoday.com/money/perfi/taxes/2007-06-15-mym-capital-gains_N.htm [6/15/07]

4 money.cnn.com/2009/11/05/news/economy/Extending_unemployment_benefits/index.htm?postversion=2009110612 [11/5/09]

5 irs.gov/newsroom/article/0,,id=206875,00.html [11/13/09]

6 irs.gov/newsroom/article/0,,id=205674,00.html [11/6/09]

7 bankrate.com/finance/money-guides/use-fsa-money-so-you-don-t-lose-it-1.aspx [2008]

The information contained in this message is intended only for the use of the addressee. If you are not the intended recipient, any use, copying, disclosure, dissemination or distribution is strictly prohibited. If you are not the intended recipient, please notify the sender immediately by telephone for instructions regarding its return