Six Recovery Tax Incentives for Individuals

The American Recovery and Reinvestment Act provides tax incentives for first-time homebuyers, people purchasing new cars, those interested in making their homes more energy efficient, and parents and students paying for college.

Here are six things the IRS wants you to know about ARRA tax incentives for individuals:

1. First-Time Homebuyer Credit Taxpayers who haven’t owned a principal residence during the past three years prior to the purchase date of a home before Dec. 1 of this year may be eligible to receive a credit of up to $8,000 on an original or amended 2008 tax return. They can also wait and claim the credit on their 2009 return.
2. New Vehicle Purchase Incentive Qualifying taxpayers can deduct the state and local sales and excise taxes paid on the purchase of new cars, light trucks, motor homes and motorcycles. The deduction per vehicle is limited to the tax on up to $49,500 of the purchase price of each qualifying vehicle and phases out for taxpayers at higher income levels.
3. Making Work Pay and Withholding The Making Work Pay Credit lowered employees’ tax withholding rates this year and has already put more money into the pockets of wage earners. Self-employed individuals will have an opportunity to claim this credit when they file their 2009 return. Taxpayers who fall into any of the following groups should review their tax withholding rates to ensure enough tax is currently being withheld: multiple job holders, families in which both spouses work, workers who can be claimed as dependents by other taxpayers, workers without a valid social security number, some social security recipients who work and pensioners. Failure to adjust your withholding in these situations could result in potentially smaller refunds or in limited instances may cause you to owe tax rather than receive a refund next year.
4. Tax Credit for First Four Years of College The American Opportunity Credit can help parents and students pay part of the cost of the first four years of college. The new credit modifies the existing Hope Credit for tax years 2009 and 2010, making it available to a broader range of taxpayers. Eligible taxpayers may qualify for the maximum annual credit of $2,500 per student.
5. Certain Computer Technology Purchases Allowed for 529 Plans ARRA adds computer technology to the list of college expenses that can be paid for by a qualified tuition program, commonly referred to as a 529 plan. For 2009 and 2010, the law expands the definition of qualified higher education expenses to include expenses for computer technology and equipment or Internet access and related services.
6. Energy-Efficient Home Improvements The credit for nonbusiness energy-efficient improvements is increased for homeowners who make qualified improvements to existing homes. Qualifying improvements include the addition of insulation, energy-efficient exterior windows and energy-efficient heating and air conditioning systems.

For more information on this and other key tax provisions of the Recovery Act, visit the official IRS Website at IRS.gov/Recovery.

or http://www.EvergreenPlanning.org

NAPFA Launches Consumer Education Series

NAPFA Launches Consumer Education Series to Help

Americans Better Understand Personal Financial Issues:

Web-based education program to touch on topics ranging from

basic money issues to complex estate and investment topics

Arlington Heights, IL (July 8, 2009) – The National Association of Personal Financial Advisors (NAPFA), the country’s leading professional association of Fee-Only financial advisors, has been a vocal advocate for consumer protection in the financial industry. Now NAPFA is gearing up to further educate people on a variety of topics in an effort to help Americans become educated consumers of financial planning advice and products.

The Consumer Webinar Series is a year-long initiative beginning August 7, 2009 that will provide an opportunity for anyone in the country to learn about a wide range of financial issues from NAPFA-Registered Financial Advisors. Each month a new session will be conducted live online. Consumers can attend the live session after registering for free, or listen to an audio file after the program. The instructors NAPFA has recruited for the various sessions are among the industry’s leaders in truly comprehensive financial planning and includes members of NAPFA’s National Board of Directors, past NAPFA national chairs, educators, and authors.

“Each session is intentionally designed to help attendees better understand a specific issue and why it is of particular importance to them,” said NAPFA National Chair Diahann W. Lassus, CFP^®, CPA/PFS. “We want attendees to take something away from the sessions that helps them tackle these issues at home. As an industry we have done a poor job of helping consumers increase their financial knowledge. This program, along with the successes of the Your Money Bus Tour, is NAPFA’s way of doing its part.”

The series will include 12, one-hour sessions delivered via the internet. The individual sessions will be conducted from 1 to 2 pm Eastern time and will include:

August 7, 2009 – Money 101: Knowing the Basics

September 4, 2009 – Kids & Money

October 2, 2009 – What is Financial Planning?

November 6, 2009 – Protecting What You Have

December 4, 2009 – Investments: The Basics

January 8, 2010 – Investments: Advanced Concepts

February 5, 2010 – Managing Your 401(k)

March 5, 2010 – Leaving a Legacy

April 2, 2010 – Women and Money

May 6, 2010 – Financial Planning and Small Business Owners

June 4, 2010 – Your Retirement

July 1, 2010 – Financial Windfalls

Registration for the 2009 sessions is open now. Learn more about the Consumer Webinar Series by visiting http://www.napfa.org/consumer/ConsumerWebinarSeries.asp. In addition to registering for the sessions, consumers can learn more about the topics and the NAPFA-Registered Financial Advisors who will be instructing the sessions.

“We hope people will take advantage of this opportunity to better themselves and their families. Only through education will consumers be better capable of addressing their own financial situations,” added Lassus.

Members of the media who would like to learn more about the Consumer Webinar Series can contact Benjamin Lewis of Perception, Inc. at 301-963-7555 or Benjamin.lewis@perceptiononline.com.

About NAPFA

Since 1983, The National Association of Personal Financial Advisors (NAPFA) has provided Fee-Only financial planners across the country with some of the strictest guidelines possible for professional competency, comprehensive financial planning, and Fee-Only compensation. With more than 2,100 members across the country, NAPFA has become the leading professional association in the United States dedicated to the advancement of Fee-Only financial planning.

For more information on NAPFA, please visit www.napfa.org.

S&P UNVEILS NEW MUTUAL FUNDS RATING SYSTEM

September 11, 2009

S&P UNVEILS NEW MUTUAL FUNDS RATING SYSTEM

Standard & Poor’s on Monday will roll out an updated rating system to analyze mutual funds that it says will rely less on the rearview mirror approach on more on the here-and-now. The new product, which will be available to financial advisors and their clients through S&P’s MarketScope Advisor platform, will rank more than 20,000 mutual funds based on a bottoms-up analysis of a fund’s underlying holdings using existing S&P equity research tools. “We think investors should look at the underlying securities in the portfolio to determine if it’s undervalued and of high quality," says Todd Rosenbluth, director at S&P’s equity research services. “They should also look at other factors such as volatility, expense ratio and turnover.” Past performance will also be a factor, but it won’t be a chief determinant of how a fund is ranked. S&P’s new rating system will rank funds on a scale of one (lowest) to five (highest). Funds will be ranked by decile within their asset category. Rosenbluth says S&P will assign ratings for funds with track records of as little as six months, rather than use a minimum three-year performance history that he says is the industry standard. “We think we can analyze a fund once we have sufficient information about the portfolio,” he says. Fund rankings and price data will be refreshed weekly, as of the close of trading the prior Friday.

20 Ways to Celebrate Financial Planning Week

Financial Planning Week is Oct 5-11 - Spread the word!

FPA offers these suggestions to celebrate Financial Planning Week:

• Balance your checkbook
• Make a monetary contribution to your favorite charity
• Start a savings account for a child, vacation or a gift for yourself
• Help teach your children how to save and spend wisely
• Get your estate in order: Create or revise your will and other estate-planning documents
• Call your financial planner and share your appreciation for their service
• Pay off a credit card
• Get a head start on college — investigate college planning options
• Establish an emergency fund
• Evaluate your employee benefits and begin planning for open enrollment
• Develop your holiday spending budget
• Plan for year-end tax strategies
• Purchase a session with a financial planner for a relative, friend or colleague
• Give a relative, friend or colleague a subscription to a personal finance magazine
• Invite a financial planner to speak at your workplace
• Review your insurance coverage
• Write down your financial goals and revisit them periodically
• Start using personal finance software to help you better understand your money
• Look up three financial terms that have baffled you and resolve to understand them
• Talk to a relative about their plans for long-term care

for more information go to

http://www.fpaforfinancialplanning.org/WhatisFinancialPlanning/FinancialPlanningWeek

http://www.evergreenplanning.org

The Fundamentals Never Change

The Fundamentals Never Change



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The best of times to become first-time homeowners—how the tax law (and parents) can help

Practice Alert
Despite improvement in some areas, it's still the worst of times for many homesellers, particularly those who bought near the peak of the market. Thanks to dramatic drops in selling prices, it's also the best of times for those looking to become homebuyers, particularly those who can turn to well-off parents or grandparents for financial assistance. This Practice Alert surveys why it's a good time, taxwise, to buy a home, and a good time, taxwise, to help make homeownership a reality for children or grandchildren.

First-time homebuyer credit. Individuals who become first-time homebuyers in 2009 are entitled to a refundable tax credit if they make their move before Dec. 1, 2009. The refundable tax credit (claimed on Form 5405) is equal to the lesser of 10% of the purchase price of a principal residence or $8,000. (Code Sec. 36)

A taxpayer is a first-time homebuyer if he (or spouse, if married) had no present ownership interest in a principal residence in the U.S. during the 3-year period before the purchase of the home to which the credit applies. (Code Sec. 36(c)(1)) IRS guidance states that a taxpayer who owns a property formerly used as their residence that's been rented out for the past three years may qualify for the credit.

Any home purchase (including, presumably, coops and condos) qualifies but only if (1) the property isn't acquired from a person related to the buyer (under detailed rules in Code Sec. 36(c)(5)); and (2) the basis of the property in the hands of the buyer is not determined by reference to the adjusted basis of the property in the hands of the person from whom it was acquired, or under Code Sec. 1014(a) (property acquired from a decedent). (Code Sec. 36(c)(3)) A home under construction by a taxpayer is treated as purchased by him on the date he first occupies it. (Code Sec. 36(c)(3)(B))

No credit is allowed if: (a) the taxpayer disposes of the home (or it ceases to be a principal residence) before the close of a tax year for which a credit otherwise would be allowable; (b) the taxpayer is a nonresident alien; (c) the taxpayer's financing is from the proceeds of tax-exempt mortgage revenue bonds; or (d) the D.C. homebuyer credit is allowable for the tax year the residence is bought. (Code Sec. 36(d))

The homebuyer credit phases out for taxpayers with modified adjusted gross income (MAGI) between $75,000 and $95,000 ($150,000-$170,000 for joint filers) for the year of purchase. MAGI is AGI for the tax year increased by any amount excluded under Code Sec. 911 (foreign earned income and foreign housing exclusions), Code Sec. 931 (income derived from American Samoa) or Code Sec. 933 (income from Puerto Rico). (Code Sec. 36(b)(2))

If the credit is claimed on a principal residence purchased in 2009, the credit is recaptured if the home ceases to be the taxpayer's principal residence within 36 months from the date of purchase. (Code Sec. 36(f)(4)(D)(ii))

Eligible first-time homebuyers who purchase a principal residence after Dec. 31, 2008, and before Dec. 1, 2009, may elect on an amended return to treat the purchase as made on Dec. 31, 2008. (Code Sec. 36(g))

RIA observation: The election effectively allows eligible first-time homebuyers who make a timely purchase in 2009 to put the $8,000 credit in their pockets quickly, instead of having to wait until they file their 2009 returns.

RIA observation: To help buyers that need downpayment and closing cost assistance when buying a home eligible for the first time homebuyer tax credit, a number of state housing finance agencies are offering special short-term second loans to qualified buyers. These loans carry little or no interest and may be repaid with the homebuyer tax credit refund. For details, and which states are participating, go to http://www.ncsha.org/section.cfm/3/34/2920 .

Other tax benefits produced by first time homeownership. Often, first time homeowners also will become a first time itemizers due to the deductions for interest and property taxes, enabling them to deduct expenses (e.g., medical, charitable, miscellaneous itemized deductions) they couldn't claim before.

RIA observation: Buying a first-time home late in the year may only yield a small amount of taxes and mortgage interest paid for 2009 (unless the buyer pays a substantial amount for “points”), and, as a result, the purchaser may wind up claiming the standard deduction in 2009 before he becomes an itemizer in 2010. The home purchase can help in this situation, too. For 2009, taxpayers who claim the standard deduction instead of itemizing deductions may under Code Sec. 63(c)(7) claim an additional standard deduction for State and local property taxes paid. The deduction can't exceed the lesser of State and local property taxes actually paid or $500 ($1,000 for joint return filers). Taxes taken into account in arriving at adjusted gross income under Code Sec. 62(a) (i.e., taxes deducted as trade or business expenses in computing the taxpayer's adjusted gross income) aren't taken into account in computing the additional standard deduction for property tax.

Tax benefits in helping kids become homeowners. Those able to help their children or grandchildren become first-time homeowners can do so in a number of tax-wise ways:

Make cash gifts. The annual per-donee gift tax exclusion ($13,000 for 2009), makes it possible for parents to give children major assistance with the downpayment for a home purchase. Each parent can give $13,000 to the child, for a total of $26,000, and if the child is married, each parent can do the same with the son- or daughter-in-law, for a total gift-tax-free amount of $52,000 (grandparents also can chip in).

RIA observation: Gifts excludible under the annual exclusion are advantageous from an estate tax point of view. Though not subject to gift tax, they are excludible from the donor's gross estate and therefore also escape estate tax and/or generation skipping transfer (GST) tax. And because excludible gifts aren't included in “adjusted taxable gifts” (a decedent's post-'76 taxable gifts within the meaning of Code Sec. 2503, namely total gifts less certain deductions and exclusions, other than gifts includible in the decedent's gross estate), they aren't added to the donor's taxable estate for purposes of computing the estate tax and so they don't push the taxable estate into higher brackets as taxable gifts do.

Make gifts of appreciated assets. Instead of making a cash gift to help with the downpayment, a parent or grandparent may consider gifting appreciated stock, mutual-fund shares, and other securities that have been held for more than one year to their children if the latter are lower-bracket taxpayers. The children can then sell the securities. This turns a gain that would be taxed at 15% if the parents sold the securities into a tax-free gain.

Reason: The holding period for property acquired by gift includes the donor's holding period if the property has the same basis for gain or loss in whole or in part in the hands of the donee as it would have in the donor's hands. (Code Sec. 1223(2); Reg. § 1.1223-1(b)) And under Code Sec. 1(h), a zero tax rate applies to most long-term capital gain (as well as dividend) income that would otherwise be taxed at the regular 15% rate and/or the regular 10% rate.

To avoid transfer tax consequences, the value of the gift of appreciated securities shouldn't exceed the annual exclusion.

Make a low-interest loan. A parent can consider giving a child a loan (instead of, or in addition to, a gift of cash or securities) to make first-time homeownership possible.

The loan can cause complex imputed interest problems under Code Sec. 7872 if it's a “below market interest” loan. If a below-market (or interest-free) loan is a “gift loan” (that is, a below-market loan where the forgoing of interest is in the nature of a gift) that exceeds $10,000, it's treated as: (1) a loan to the borrower/donee in exchange for an interest-paying note, and (2) a gift to the borrower of the funds to pay the interest. The amount of the gift equals: the forgone interest—excess of interest payable at the applicable federal rate (AFR) over actual interest payable—if the loan is a demand loan (i.e., one payable on demand); or the excess of the amount loaned over the present value (using a discount rate equal to the AFR) of all payments required under the terms of the loan, if the gift loan is a term loan. (Code Sec. 7872)

However, a parent can avoid all of these problems—and still give the child a major break—by charging the child interest at the appropriate AFR, which is very, very low these days. For example, for loans made in September, the short-term AFR (term loans with a term not exceeding three years) is .84%, the mid-term AFR (term loans over three years but not over nine years) is 2.83%, and the long-term AFR (term loans over nine years) is 4.29% (all rates for a monthly period of compounding). (See AFR Rates for September 2009 in yesterday's Newsstand e-mail.)

Source: Federal Tax Updates on Checkpoint Newsstand tab 8/20/09

Five Core Fiduciary Principles Interest SEC Commissioners

Details of core fiduciary principles and differences

between fiduciary and ‘arm’s length’ standards discussed

Washington, DC – August 3, 2009 – The Committee for the Fiduciary Standard,

a group of investment industry leaders, took their fiduciary message to Washington on

July 29th. The Committee met with SEC Commissioners, a Treasury official and

Congressional staff.

“We felt strong interest from everyone we met. Although no specific

commitments were made, our takeaway was that all participants understand and believe

in the application of the five core fiduciary principles to any and all who provide (or

purport to provide) investment advice,” says Harold Evensky, a member of the

Committee and president of Evensky & Katz, a registered investment adviser.

The Committee met with SEC Commissioners Elisse B. Walter and Luis A.

Aguilar. During the course of their discussions, the Committee addressed how the five

core principles would apply in various circumstances where advice is given to an

investor. The Committee also pointed out sharp differences between the fiduciary and

arm’s length standards. In addition, the Committee briefed an official from the Treasury

Department and Congressional staff.

“We saw Washington at its very best. The keen sense of the vital role of the

fiduciary standard, and the historic opportunity to ‘do what’s right for investors’ were

palpable in our meetings,” says Knut A. Rostad, Chair of the Committee and the

Regulatory and Compliance Officer at Rembert Pendleton Jackson, a registered

investment adviser.

The five core principles of the fiduciary standard are:

• Put the client’s best interests first;

• Act with prudence; that is, with the skill, care, diligence and good

judgment of a professional;

• Do not mislead clients; provide conspicuous, full and fair disclosure of

all important facts;

• Avoid conflicts of interest; and

• Fully disclose and fairly manage, in the client’s favor, unavoidable

conflicts.

The Committee announced its formation in June for the purpose of working to

ensure that any new legislation or rulemaking “meets the authentic fiduciary standard,

as presently established in law.” The Committee has:

• Called on Congress to adopt the authentic fiduciary standard in Wall Street

reforms and asked that Congress ensure that investors’ best interests are made the

number-one priority in new legislation

• Introduced the five core principles of the authentic fiduciary standard

• Urged investors, professionals and all interested market participants to ‘vote’ in

support of the five core fiduciary principles by signing the Committee’s online

petition

• Been invited by staff members of the House of Representatives Committee on

Education and Labor to provide assistance on HR 2989, a Bill intended to

introduce fiduciary and fee disclosure requirements for those who give advice to

retirement plan participants.

The Committee’s members are recognized leaders in the investment and financial

advisor profession:

• Blaine Aikin, fi360

• Clark M. Blackman II, Alpha Wealth Strategies, LLC

• Gene Diederich, Moneta Group

• Harold Evensky, Evensky & Katz

• Sheryl Garrett, Garrett Planning Network

• Roger C. Gibson, Gibson Capital, LLC

• Matthew D. Hutcheson, Independent Pension Fiduciary

• Gregory W. Kasten, Unified Trust Company

• Kate McBride, Wealth Manager

• Fred Reish, Reish, Luftman, Reicher & Cohen

• Ronald W. Roge, R. W. Roge & Company

• Knut A. Rostad, Rembert Pendleton Jackson

Fee-Only: Financial Advice That Is Not Part of a Sales Process

It may seem unnatural to pay upfront for investment advice; however, if you are comparing our services with those of another adviser, you might consider the following:

We are generally able to deliver substantial value in not only saving our clients money, but also delivering advice that’s suited to your needs and not tied to any sales agenda. Our value derives from independence, objectivity, and fiduciary responsibility. Very few planners in the world offer a range like this.

Quality and Value

• Objective Advice - The only money we receive is directly from you, our client. Commission paid advisors are compensated based on whether you buy the product they recommend - this represents a significant conflict of interest. Our advice is not rendered as part of a sales process. There are no hooks or hidden agendas.

• Independent Advice - The investment universe we have available to choose from is not limited by any company paying us to recommend their product or type of service. The plan we create for you is not conditioned in any way on you implementing your solution through us. We never receive third-party compensation from suppliers or vendors.

• Fiduciary – As a member of the FPA, NAPFA, Garrett Planning Network and the CFP Board, I am required to always place your best interest above that of my own. As a Fee-Only advisor, you are the only one paying me, which aligns our interests and removes conflicts of interest.

• Cost Effective – How much are you paying to invest your money? You'll pay more for my plan up-front, but the difference in implementation and ongoing costs is significant when using appropriate no-load funds with low expense ratios, and with lower turnover and capital gains distributions. You will also be free from that point on from the higher ongoing costs of ownership of a limited range of investment products offered by commission paid advisors.

http://www.EvergreenPlanning.org