Archives For Todd Burkhalter

The Final Stretch

December 27, 2011 — Leave a comment

Weekly Update – December 27, 2011


It looks like the stock market got a shot of holiday cheer as major U.S. indexes logged better than 3% gains last week. The Dow is now up 6% for the year, and the S&P 500 is back in positive territory. While many were calling for a so-called “Santa Clause rally,” others were concerned that fears surrounding Europe’s situation would continue to be a drag on the markets.[i] Last week however, Europe’s troubles were of little account as stocks rallied to their third weekly gain in four after Congress approved an extension of the payroll tax cut to ensure taxes won’t increase on January 1.[ii] In addition, tentative signs of improvement seen in government reports on personal spending, income, and housing, all helped boost equity markets last week.[iii]


What’s in store for the week ahead? With Wall Street closed for business on Monday, a number of major players on vacation, and few economic reports expected, trading volume will probably be light. Even so, there is something interesting we would like to share with you. According to the Stock Trader’s Almanac, the five trading days before January 1, and the two trading days that follow, typically generate abnormally high returns, yielding positive returns in 31 of the last 41 holiday seasons.[iv] Of course, past performance cannot be relied upon to predict future results, and other factors must be considered, but the trend is worth noting. 


While many investors have already closed their books for the year, we head into the final stretch eager to end 2011 in the black. Regardless of what happens during the final four trading days of the year though, we encourage you to take comfort in knowing we will keep an eye on things for you. Again we urge you to relax and enjoy some well-deserved time with your family and friends.


Stay tuned for my annual recap due next week!


Monday –

U.S. Holiday Observed – Christmas Day
Tuesday –

Consumer Confidence, S&P Case-Shiller HPI

Wednesday – EIA Petroleum Status Report

Thursday – Jobless Claims, Chicago PMI, Pending Home Sales





Gasoline rose to a six-week high after a U.S. government report that durable goods orders increased last month signaled an improving economy. Prices advanced 8% this week, capping the biggest weekly gain since March.[v]


While some workers are worried about smaller paychecks next year, more than 1.4 million low-income earners will see their wages go up on New Year’s Day. Minimum wage rates in Arizona, Colorado, Florida, Montana, Ohio, Oregon, Vermont, and Washington will rise between 28 and 37 cents per hour on January 1, thanks to state laws requiring that minimum wage keeps pace with inflation.[vi]


The total value of Americans’ retirement assets stood at $17 trillion at the end of September – a drop of 7.5% from the record high of $18.4 trillion recorded on June 30, 2011.[vii]


Shoppers will return $46.28 billion in holiday merchandise, a record high, according to the National Retail Federation. At brick-and-mortar stores, holiday returns can boost business because it gets shoppers into the store once more. “If people return something, there’s a 70% chance they will buy something else,” said Britt Beemer, retail analyst and chairman of America’s Research Group.[viii]


Naughty or Nice?

December 12, 2011 — Leave a comment

Weekly Update – December 12, 2011


Yet again, investors found themselves watching Europe last week – no surprises there – and were apparently pleased with what they saw. Word of a “new deal” incited a rally in stocks Friday that pushed the Dow Jones industrial average up 187 points, or 1.6%, the S&P 500 up 21 points, or 1.7%, and the Nasdaq up 50 points, or 1.9%.[i] All major domestic indexes finished positive for the week on a wave of optimism.


What is this “new deal” everyone’s talking about? Basically, the 17 nations that use the euro agreed to sign a treaty that allows a central authority to oversee their budgets more closely. The agreement is made up of fiscal rules designed to prevent countries from veering further into crisis mode, and to rescue them if they do. The Friday proposals also commit the countries to put their €500 billion ($670 billion) European Stability Mechanism bailout fund into action next year, instead of in 2013.[ii]


While Britain chose not to support the plan, the majority of EU members are hailing this as a new beginning. German Chancellor Angela Merkel expressed that Europe has “…achieved a breakthrough to a stability union. A fiscal union, or stability union as I call it, will be developed further, step by step in the years to come.” And French President Nicolas Sarkozy confidently boasted, “We’re doing everything we can to save the euro.”[iii]


Whether this deal will be a new beginning for Europe, or turns out to be little more than political posturing, only time will tell. Either way, we are confident their debt saga is far from over. While tighter fiscal controls are definitely a crucial ingredient in mending this crisis, Friday’s agreement is only a partial solution, and we have seen agreements like this deteriorate before. Until a clear path to fiscal austerity has been established for the region, the markets will keep responding to hype and headlines.


When it comes to investing, rather than reacting to every shred of nice (or naughty) news, we still believe it is better to have a long-term plan and stick to it. We take great pleasure in helping you do just that!



Monday – Treasury Budget

Tuesday – Retail Sales, Business Inventories, FOMC Meeting Announcement

Wednesday – Import and Export Prices, EIA Petroleum Status Report

Thursday – Jobless Claims, Producer Price Index, Empire State Manufacturing Survey, Industrial Production, Philadelphia Fed Survey

Friday – Consumer Price Index

2011 Tax Planning Tips

November 21, 2011 — Leave a comment

Year-end tax planning is especially challenging this year because of ongoing uncertainty related to whether Congress will enact sweeping tax reform. And even if there is no major tax legislation in the near future, Congress will still have to deal with a number of tricky issues in 2012, such as what to do about the expiration of the Bush-era tax cuts on December 31st. Regardless of what steps are taken, spending a little time on tax planning now is a good idea.


While my primary expertise lies in wealth management, I have worked with both internal and external  CPA friends to compile these tips for you. Before acting on any of the advice in this communication, we suggest you consult with your personal tax professional. If you don’t have one that you enjoy working with, please let me know and I will introduce you to one of our trusted associates. First consider these 13 Tips….


Get Organized

This is an excellent time of year to get your financial house in order. Gather cash receipts to help you calculate possible deductions and miscellaneous payments. Do you have a hobby or activity that generates income? If so, any losses might also be eligible for deduction. Have you made home improvements? Charitable contributions? Get all of your documentation together early to make your life a little easier in April.


Contribute the Maximum to Your Retirement Plan

You have until April 17, 2012 to make IRA contributions for 2011, but the sooner you get your money into the account, the sooner it has the potential to start growing tax-deferred. Making deductible contributions also reduces your taxable income for the year. You can contribute a maximum of $5,000 to an IRA for 2011, plus an extra $1,000 if you are 50 or older. This limit can be split between a traditional IRA and a Roth IRA if you desire, but the combined limit is still $6,000.[i]The amount you can contribute to a Keogh plan depends upon the type you choose.[ii]


Check Your IRA Distributions

You are required to make minimum distributions from your traditional IRA by April 1st following the year in which you reach age 70 ½. Failing to take out enough triggers a 50% excise tax on the amount you should have withdrawn based on your age, life expectancy, and the amount in the account at the beginning of the year.[iii]



If you would rather give the distribution to charity, you will be happy to know that the qualified charitable distribution (QCD) provisions were renewed for 2010 and 2011, allowing individuals age 70½ or over to exclude up to $100,000 from gross income that is paid directly from their individual retirement accounts (excluding SEP or SIMPLE IRAs) to a qualified charity. The excluded amount can be used to satisfy any required minimum distributions that you must otherwise receive from your IRA.[iv]



Fatten Your 401(k)

Tax-deferred investing is a smart choice because it allows your money to grow tax-free until you withdraw it. Maximize your 401(k) contributions, up to $16,500 or $22,000 if you will be age 50 or older in 2011.


Go Loss-Harvesting

Selling investments such as stocks that have experienced losses, can help to offset any taxable gains you have realized during the year. If your losses are more than your gains, you can use up to $3,000 of excess loss to decrease other taxable income. If you have more than $3,000 in excess loss, it can be carried over to the next year. You can use that loss to offset any 2012 gains, plus up to $3,000 of other income. Losses can be carried over every year for as long as you live.[v]

Delay Some of Your Income

Income is taxed in the year it is received – but why pay tax today if you can pay it tomorrow instead? Depending on your circumstances, you may want to push some of your income into 2012. It’s tough for employees to postpone wage and salary income, but you may be able to defer a year-end bonus into next year. If you are self-employed or do freelance or consulting work, you have more flexibility. Delaying billings until late December, for example, can ensure that you won’t receive payment until 2012. Postponing your income is a good idea if you expect to be in a lower tax bracket next year.[vi]


Give Attention to Your FSA

This time of year is when you probably need to specify how much salary you’ll contribute to your flexible spending account. Not only is it appropriate to review your changing needs, but tax-free withdrawals can then be taken from these accounts for medical, dental, and child-care costs. You will forfeit any balance left in these accounts at the end of the year, so take advantage now by filling prescriptions early, making medical or dental appointments, or scheduling elective surgeries.



Accelerate Your Mortgage Payments



Unlike rent, which is paid in advance, mortgage payments are made at the end of your occupancy period. That means your January 1 mortgage statement represents interest for December, making it eligible for a tax break this year. By accelerating that payment even by just a day, you get an additional deduction for the interest paid. Don’t get greedy though. You can’t make your February, or any other upcoming, mortgage payment early to boost your year-end deduction amounts. Tax law generally prohibits write-offs for prepaid interest (although there is an exception for loan points in some cases). Note: Accelerating your mortgage payments may not payoff if you expect to be subject to the Alternative Minimum Tax (AMT). If you are unsure, discuss the matter with your tax professional.[vii]  

Go Green

Buyers of plug-in hybrids and electric cars benefit from a tax credit of $2,500 to $7,500, depending on the size of the battery in the car. The credit maxes out at $7,500 for cars with a 16 kWh battery pack, like the Chevy Volt. The credits were provided as part of the American Recovery and Reinvestment Act, otherwise known as the “stimulus bill.”[viii] In addition, energy-efficient home improvements to your principal residence such as installing a heat pump, qualify for credit of 30% of the cost, and can be claimed on your 2011 taxes.[ix]



Be Charitable



A gift to a qualified charitable organization may entitle you to a charitable contribution deduction against your income tax if you itemize deductions. If the gifts are deductible, the actual cost of the donation is reduced by your tax savings. For example, if you are in the 33% tax bracket, the effective cost of a $100 donation is only $67. As your income tax bracket increases, the real cost of your charitable gift decreases, making contributions more attractive for those in higher brackets. For a person in the highest tax bracket, 35%, the actual cost is only $65. Not only can the wealthy afford to give more, but they receive a larger reward for giving.[x] 


Give a Gift

This time of year, many people choose to donate items to charity instead of making a monetary contribution. Not only does this save you money and prevent perfectly good items from getting wasted, but charitable donations can be deducted from your taxes as long as you get written documentation of the donation.

Most gifts are not subject to the gift tax. For instance, you can give up to the annual exclusion amount ($13,000 in 2011) to any number of people every year, without facing any gift taxes. Recipients never owe income tax on the gifts. In addition to the annual gift amount, you can give a total of up to $5 million starting in 2011 in your lifetime before you start owing the gift tax.[xi]


Fund an Education

The American Opportunity tax credit is valued at $2,500 for 2011, up from $1,800 in 2008. Because a tax credit reduces your tax bill dollar-for-dollar, this basically means the government will give you up to $2,500 per year for each qualifying college student in your family. And unlike the old Hope credit, which only covered the first two years of college, the American Opportunity credit can be claimed for all four years of post-high-school education. You can get the maximum credit if you spend at least $4,000 in qualifying expenses, which now includes the cost of books, tuition, and fees.[xii]


Buy Something Nice

Sales taxes you have paid on the purchase or lease of a vehicle, the purchase of a boat or aircraft, or the purchase or renovation of a home may all be eligible for deduction against your federal income taxes. Additionally, people who claim the sales tax deduction don’t have to report any state income tax refund as taxable income in the following year. So if your sales tax deduction is about the same as your income tax deduction, you’ll probably come out ahead by taking the sales tax deduction.[xiii]


In conclusion:

I hope you will find some of these strategies useful as you go through your tax planning process. One of the ways we help our clients is by working hard to provide tax-smart investment strategies to minimize the impact Uncle Sam can have. In addition, we consider it our responsibility to educate you about things that could affect your financial future. As always, feel free to contact me with any questions, and to discuss points of interest with your tax professional as there may be crucial details involved in making your plan effective.

What will stop you from taking these steps?