April 9, 2018
By now I hope you have met with your tax-preparer and completed this year’s returns. 2017 taxes are not affected by the tax law that was recently passed. In most cases, your tax-bite will be less in 2018 than 2017 so if you did OK this year, you should do better in 2018.
One fly in the ointment for Maryland tax-payers is the limits the new law puts on State and Local Tax (SALT) deductions. In 2018 you will only be allowed to deduct up to $10,000 in State and Local Taxes, and this includes your Property Taxes. On your 2017 tax-form, look at Line #9 on the Schedule A, Form 1040 and see what number is recorded there. Next year that number is maxed-out at $10,000. Losing this deduction increases the income subject to Federal Tax and thus you may owe more to the Feds.
Taxes are complicated and what they take with one hand they may give with the other. The new law limited the (excruciating) pain caused by the Alternative Minimum Tax (AMT). It also decreased the percentages of tax owed through the progressive tax brackets.
A good question for your preparer would be; “If my income in 2017 were the same in 2018, what would be my result next April 15th? But wait, I would not ask them this before April 15th as they are extremely busy—you don’t want them to throw their calculator at you! But for a nominal fee, later this summer, they should be able to give you an educated guess. This could save you from surprises next year.
In other news, Kristen Owen’s Spring Cleaning seminar on April 5th was well attended, with about 30 folks showing up. We had attorneys Kathleen Hurd to speak on Wills and Estates, and Kyle Kirby to cover business structures and entities. Kristen, of course, spoke about financial matters. The bottom line, if you could not attend, is that Spring is a logical time to plan for the new year. In our personal financial lives, it is a time to take note of where we are, and then think about where we want to be.
Like most things in human life, change takes place incrementally. Humankind went from two bicycle repairmen designing, building and then flying the first airplane in 1903 to sending a rocket into the gravitational orbit of the Sun and Mars—oh, and don’t forget, the space-rocket had an electric car in the nose-cone! This happened in 115 years of relentless progression forward.
Most people don’t become millionaires overnight—that only happens to lottery winners—and trust me, none of us are going to win the lottery. (I will gladly stand corrected if the hand of fate touches your Powerball ticket.) The rest of us mortals achieve financial success by moving the ball forward each and every day. (FYI, being a millionaire is not the definition of financial success—but it’s close.)
Evaluate where you are in the Spring of 2018 and target a better place for the Spring of 2019. Then in 2019, scratch and claw your way to a better Spring of 2020. And if you get to a point where you are feeling satisfied and content—ask yourself if your goals were big enough. Take a fresh look at what you have achieved and, with an open mind, look for places where you can improve. We have all of eternity to rest and relax—but only a few years to make a difference.
Tennessee Williams said that “luxury is the wolf at the door . . .” I think we beat that wolf away by striving—always striving, for continuous and incremental improvement. What better time to start that mindset than in the Spring.
Regardless of your circumstances and your age—there are always things you can improve on. For a good example, if you have 13 minutes and 55 seconds watch this video about Dag Aabye from Vernon BC (Near Vancouver.) The video is not about financial issues, but it is worth every second. https://www.theatlantic.com/video/index/555527/dag-aabye-death-race/ If nothing else you’ll see some amazing scenery.
Speaking of cleaning out our slothful ways, this year’s Shred Event is May 16th. Bring anything paper to shred between 9:30 and 11:30 am. We can fill the whole truck—we pay by the hour, not the pound.
