Last minute tax tips that could save you money...

Fund an individual retirement account (IRA)
Remember that you have until April 17th to make a contribution that could reduce your taxes for 2017.  If you’re married, you can also fund an IRA for your spouse.  If your spouse doesn't hold a job outside the home, he or she may qualify for a full IRA contribution and deduction.  Both you and your spouse can contribute up to $5,500 each (plus another $1,000 if you are over 50) if one has sufficient earned income to cover both contributions.  Important note for retirees:  The key is you must have "earned" income.  Pension, Social Security, Dividends and distributions from other retirement accounts do not count as earned income.

Be sure to check the IRA deduction limits or give us a call to discuss.

https://www.irs.gov/retirement-plans/ira-deduction-limits

Fund a health savings account (HSA)
This is an account that is similar to an IRA in that you can make a tax-deductible contribution by April 17th for 2017. The limit is $3,400 for an individual, and $6,750 for a couple or family.  There is also a $1,000 catch-up contribution if you're age 55 or older.

Try IRS Free File

Is your tax situation fairly simple?  Are you willing and able to spend an hour or so in front of a computer?  If so, there are many options to file your taxes (both Federal and State) for free.  Check out this link >>>

https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free

Don't shy away from a home office tax deduction

The eligibility rules for claiming a home office deduction have been loosened to allow more filers to claim this break. Self Employed people who have no fixed location for their businesses can claim a home office deduction if they use the space for administrative or management activities, even if they don’t meet clients there.  However, you must use the space exclusively for business.

Many taxpayers have avoided the home office tax deduction because it has been regarded as a red flag for an audit. If you legitimately qualify for the deduction, however, there should be no problem.

One home office trap that used to scare away some taxpayers has been eliminated. In the past, if you used 10% of your home for a home office, for example, 10% of the profit when you sold did not qualify as tax-free under the rules that let homeowners treat up to $250,000 of profit as tax-free income ($500,000 for married couples filing joint returns).

Since 10% of the house was an office instead of a home, the IRS said, 10% of the profit wasn’t tax-free. But the government has had a change of heart. No longer does a home office put the kibosh on tax-free profit. However, you do have to pay tax on any profit that results from depreciation claimed for the office after May 6, 1997. It’s taxed at a maximum rate of 25%. (Depreciation produces taxable profit because it reduces your tax basis in the home; the lower your basis, the higher your profit.)

It's been a wild ride...

There is no doubt that we have seen volatility lately that had been absent for some time.  You have to go back to the surprise of an elected Donald Trump to find volatility like this.  However, even that massive move in the market was short lived and started an incredible rally.  Technology had been one of the biggest benefactors of the rally over the past couple of years and has been very involved in the recent increase in volatility. 

We have included 2 charts of an ETF we have used in the past (not currently in portfolios), symbol FTEC.  FTEC is a fund investing in the biggest names in the technology sector...Apple, Google, Facebook and Microsoft to name a few. 

The first chart shows activity year to date.  Pretty volatile?  Some would say "heck yes!" and be ready to jump ship. Including today's nice jump to end Q1, the fund is barely positive.  However, if you had timed it perfectly and bought the low and sold the high (nearly impossible by the way), you could have walked away with a cool 15% profit.  Or, you could have timed it really bad and lost 10% if you got scared out yesterday only to kick yourself today.

Let's put things in perspective for a minute.  Now please refer to the second chart showing a span of 2 years.  Looks a little different doesn't it?  An investor who bought shares anytime between April and July 2016 and held until today would be up ~ 62%!  If you had bought the fund exactly a year ago you would be up ~ 27%.

The moral of this story is that you need to establish expectations and a sell strategy whenever you venture into a trade or an investment allocation.  Truth be told, we bought FTEC for clients in December of 2015 and added in April 2016.  First we entered the trade with a 5% (Neutral) allocation.  Later we added to increase our allocation to 7% which according to our investment policy is the most we allow for an Overweight allocation to a sector or individual stock.  Those positions were sold in January 2017 for a profit of approximately 20%.  Yes, we did miss out on some additional gains but our goal going into the trade (as with most sector-based or individual stock investments) was to consider selling when we reached a 20% gain.  At the time we felt it was prudent to realize the gain and reallocate. 

The Financial sector has been an exception to that 20% rule.  We currently hold ~7% in Financials in most accounts with an unrealized gain in excess of 50%.  The difference here is that financials are less expensive than the market as a whole, pay decent dividends and we feel it makes sense to hold banks in a rising interest rate environment.

If you would like to talk about anything we have discussed here prior to your next meeting, please call or email us to set up an appointment.