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THE BIG TAX QUESTIONS OF 2013 – How will Congress resolve these issues?

Provided by Kim Gaxiola

 

Decisions must be made.

In the next couple of months, Congress will address several major tax matters. Here are the big questions looming.

 

 

The Bush-era income tax cuts.

Will the current 10%-15%-25%-28%-33%-35% federal tax rate structure give way to 15%-28%-31%-36%-39.6% tax brackets in 2013? After the election, some analysts feel a compromise will be struck to maintain some of the Bush-era cuts for another year. In 2013, you may see the 10%, 15%, 25% and 28% brackets being retained while the wealthy face higher taxes.1

 

Tax rates on capital gains & dividends.

Right now, dividends and most long-term capital gains are taxed at either 0% or 15% (depending on the income tax bracket you fall into). In 2013, dividends are scheduled to be taxed as regular income (cf. 15%-39.6% tax brackets above) and the capital gains tax rates are set to increase to 10% and 20%. So will dividend taxes and capital gains taxes only increase for the rich in 2013? That may very well turn out to be the case.2

 

 

Estate & gift taxes.

President Obama’s proposal has the U.S. returning to a top estate tax rate of 45% with a $3.5 million exemption. In other words, estate taxes would return to 2009 levels as opposed to 2001 levels (55% top rate, $1 million exemption), which is what would happen if the Bush-era cuts simply expired. While Sen. Orrin Hatch (R-UT) and others in Congress have called for an end to estate taxes, many analysts think they will return to 2009 levels as a byproduct of Obama’s re-election. Will we see a unified gift and estate tax in 2013? That is a possibility, though not a given. It could be that the lifetime gift tax exemption becomes $3.5 million in 2013 (it is currently $5.12 million per individual with the unused portion of an individual exemption portable between spouses) with gifts past the exemption taxed at 35%. That would be better than the alternative: a scheduled $1 million exemption, along with a 55% maximum gift tax rate.2,3

 

The payroll tax holiday.

Months ago, the consensus was that this would not survive into 2013. Yet last month, Rep. Christopher Van Hollen, the top Democrat on the House Budget Committee, told C-SPAN that it should be extended. Former Treasury Secretary and Obama administration economic advisor Larry Summers agrees. So it may live on for another year.4

 

The marriage penalty.

Our federal tax code has a longstanding quirk: occasionally, married couples pay more in tax than they would if they were single filers. The Economic Growth and Tax Relief Reconciliation Act of 2001 attempted to lessen the penalty in two ways. It made the standard deduction for married joint-filing couples twice what it was for singles, and it made the bottom two tax brackets for those married and filing jointly twice as broad as for singles. In 2013, the marriage penalty could become more severe: the standard deduction for joint filers will be only about 167% of the standard deduction for singles and those widened joint-filer tax brackets are slated to narrow. As middle-income couples will probably face higher payroll taxes in 2013, retaining the current softer penalty seems likely.2

 

Child & childcare tax credits.

Both of these credits are set to shrink next year. The child tax credit is supposed to be halved to $500, and the maximum childcare credits available to most parents ($600 for one child aged 12 or younger, $1,200 for more than one) are poised to drop to $480 and $960. Extending these credits into 2013 could amount to good PR for a disdained Congress.5

 

The American Opportunity Credit.

In 2009, the up-to-$1,800 Hope tax credit was supercharged into the AOC: an up-to-$2,500 education credit which could be claimed for four tax years that include college education rather than two. In 2013, the AOC is scheduled to disappear with an $1,800 (or possibly $1,900) Hope credit slated to reappear. The AOC may be extended into 2013; again, it would be a popular move at a time when Congress is riding a wave of unpopularity.5,6

 

College expense deduction.

Back in 2011, you could write off as much as $4,000 in tuition on your federal return. Some legislators would like to see this deduction made available again in 2013 and perhaps even made retroactively available for 2012. It would be a popular move and it could prove a nice “sweetener” on any bill addressing tax issues for the coming year.5

 

Charitable IRA gifts.

Universities and retirees found the IRA charitable rollover quite useful, but it faded away at the end of 2011. Many in the education community (and some in Congress) would like to see it return for 2013, and given that tax hikes seem to be imminent next year, a big tax break like this might be offered pursuant to a Congressional compromise.5

 

IDLs & PEPs.

In 2010, itemized deduction limits and personal exemption phase-outs were repealed. In 2013, they may return as the federal government seeks much-needed tax revenues.2

Kim Gaxiola may be reached at (800) 584.3652 or kim@gaxiolafinancialgroup.com or www.techgirlfinancial.com.

 

 

TechGirl Financial is a part of Gaxiola Financial Group. Registered representative, securities offered through Cambridge Investment Research, Inc., broker-dealer, member FINRA/SIPC. Investment advisor representative, Cambridge Investment Research Advisors, Inc., a registered investment advisor. Cambridge and Gaxiola Financial Group are not affiliated.
Gaxiola Financial Group | 305 Vineyard Town Center #369 | Morgan Hill, CA 95037
This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 – money.usnews.com/money/blogs/the-best-life/2012/08/29/get-ready-for-5-key-money-changes-in-2013 [8/29/12]
2 – www.smartmoney.com/taxes/tax-policy/key-tax-issues-to-watch-postelection-1351019063876 [10/23/12]
3 – www.deseretnews.com/article/765589424/Sen-Orrin-Hatch-calls-for-end-of-estate-tax-as-Jan-2013-taxmageddon-looms.html [7/12/12]
4 – online.wsj.com/article/SB10000872396390444734804578066991225311524.html [10/18/12]
5 – www.marketwatch.com/story/14-tax-issues-to-watch-after-the-election-2012-11-01 [11/1/12]
6 – www.finaid.org/otheraid/hopescholarship.phtml [11/8/12]

 

 

BIG SPENDERS vs. BIG SAVERS – Who would you rather emulate?

You stand at your window and look across the street. Nice house, you think. Nice landscaping. Nice sports car. Nice driveway. New bikes for the kids. Wow, your neighbors are really well off. If only you had that kind of money.

That plain home down the street with the older model sedan parked out front pales in comparison. A couple in their seventies lives there, and the front yard hasn’t been spruced up in a decade. Who knows, maybe they struggle just to get by.

If you could somehow look into the financial lives of those two households, you might be surprised. The couple with all the toys might not be as wealthy as the neighborhood perceives, while the vanilla exterior on that humble rancher might hide a multimillionaire next door.

 

Remember that affluence does not = net worth.

When you look across the street at the house of that well-to-do family, you are not necessarily gazing at a portrait of wealth. You are seeing a portrait of their spending habits.

What are they spending their money on? Perhaps, quite literally, a façade; their house may be the best house in the neighborhood, but what of kind of mortgage payment are they grappling with? Are they making payments on that sports car? That vehicle is a depreciating asset (unless they keep it garaged for a few decades). The flat-screen, the pool, the home audio system … they have put their dollars into things that their neighbors can see. They may be engaging in all-too-common financial behavior: thinking of wealth in terms of material items, spending money on toys instead of their lives.

 

 

Real wealth may not be advertised.

Perhaps the older couple down the street isn’t interested in the hottest new luxuries. Decades ago, they put extra money toward their mortgage; even with housing values currently depressed, their residence is still worth much more than they paid for it. Most importantly, it is paid off.

Maybe they are good savers, always have been. When they were the age of the flashy couple up the street, they directed money into things that their neighbors couldn’t see – their investments, their retirement accounts, their bank accounts.

Years ago, they could have lived ostentatiously like that high-earning couple up the street – but instead of living on margin, they chose to live within their means. They saw some of their friends “rent” a luxury lifestyle for a few years, only to lose homes and cars they couldn’t really afford. Sometimes the economy or fate had a hand in it, but too often their friends simply made poor decisions.

It could be that it was just more important for them to think about the future rather than the moment. Parenting reinforced that philosophy. Their good financial habits kept their family away from a bunch of bad debts, and helped them build wealth slowly. Indirectly, it also helped their kids, who grew up in a household with less financial stress and with an appreciation and understanding of key financial principles. Now, they are applying those principles to build wealth in their own lives.

 

 

Roughly every fortieth American is a millionaire.

There are nearly 8 million people with a net worth of $1 million or more in the U.S., and their financial characteristics may differ slightly from what you expect.1

Fidelity’s 2012 Millionaire Outlook survey (which polled 1,000 households with $1 million or more in investable assets) notes that 86% of millionaires are self-made. Not so amazing, perhaps, but here is a striking detail. Among the self-made millionaires, the top sources of assets were 1) investments and/or capital appreciation, 2) compensation and 3) employee stock options or profit sharing. Millionaires born into wealth were the most likely to cite entrepreneurship and real estate investing as key factors behind their fortunes.2

According to the survey, the average U.S. millionaire is 61 years old with $3.05 million in investable assets. Fidelity also found that with regard to the financial future, more than (30%) of these millionaires were focused on preserving wealth, rather than growing it (20%).2

 

 

What will you spend your money on, tomorrow or today?

As Thomas J. Stanley and William D. Danko noted in their classic study The Millionaire Next Door, the typical millionaire lives on 7% of his or her wealth. That was in 1997; the percentage could be lower today. Call it frugal, call it boring, but such financial conservation may help promote lifetime wealth. Today, with so many enticements to spend your money as soon as you earn it, this mindset may have a lot of financial merit.1

 

 

 Kim Gaxiola may be reached at (800) 584.3652 or kim@gaxiolafinancialgroup.com or www.techgirlfinancial.com.
TechGirl Financial is a part of Gaxiola Financial Group. Registered representative, securities offered through Cambridge Investment Research, Inc., broker-dealer, member FINRA/SIPC. Investment advisor representative, Cambridge Investment Research Advisors, Inc., a registered investment advisor. Cambridge and Gaxiola Financial Group are not affiliated.
Gaxiola Financial Group | 305 Vineyard Town Center #369 | Morgan Hill, CA 95037

As material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 – www.investopedia.com/financial-edge/0411/why-many-millionaires-dont-feel-rich.aspx#axzz2AM2TWb3m [4/13/11]
2 – www.reuters.com/article/2012/07/19/idUS126070+19-Jul-2012+BW20120719 [7/19/12]

The Aftermath of Sandy

Gauging the economic and market impact of the storm.

Presented by Kim Gaxiola

Hurricane Sandy’s fury has exacted a considerable and tragic toll. Even with the relief efforts now underway, it will be some time before things return to normal in many communities. How has Sandy impacted Main Street, Wall Street and the broader economy?

 

 

Repairing Main Street

How do you begin to total the damage from a storm affecting 20% of the U.S. population?1

EQECAT, a risk-modeling firm, thinks it could run as much as $10-$20 billion, with $5-$10 billion reflecting insured losses. This is an important distinction, as many analysts feel a tally of $10 billion or less in covered losses could have a comparably diminished effect on the insurance industry beyond the fourth quarter. However, respected University of Maryland economist Peter Morici told MarketWatch that total losses could reach $35-45 billion if the superstorm ultimately proves more powerful than Hurricane Irene… exactly how Sandy was being described the morning after. That would fall well short of the economic hit from Hurricane Katrina, from which the damage totaled about $108 billion; 1992’s Hurricane Andrew was responsible for roughly $60.5 billion of destruction. Federal government officials say they have about $3.6 billion ready to pay for relief efforts.1,2,7

If there is any good side to this, it is that the collective response to Sandy’s destruction may amount to an economic stimulus. MarketWatch notes that as much as $20 billion could be spent over the next 12 to 24 months on new construction, remodeling and renovation, which could further invigorate the construction industry, indirectly aid the job market, and bring about increased consumer spending.1,2

 

 

 

Resuming trading on Wall Street.

Will the New York Stock Exchange’s goal of reopening Wednesday morning turn out to be realistic? Just in case, NYSE Euronext will test a backup plan Tuesday morning, a plan B that could permit trading in case things aren’t up to speed by Halloween. In this scenario, NYSE Arca would become the primary market for New York-listed stocks – we’re talking about the NYSE’s electronic market that could operate even if its trading floor or headquarters were closed for the day.3

As for Tuesday, all NYSE and NASDAQ exchanges will close across all asset classes. While the CME Group’s Nymex floor will be closed today, its products are still available electronically. CME Group opened trading of equity-index futures and options Monday night, but that trading ended early today; however, trading of interest-rate futures and options will resume with normal trading hours. The CBOE and CBOE Futures Exchange are shuttered today; CBOE Holdings will update traders if the closure is forced to stretch into Wednesday.3

With the end of the month coming, there is extra impetus to get the market open – fund managers need to adjust holdings before November starts.

 

 

 

What about earnings and the October jobs report?

Many corporations are delaying the release of third-quarter earnings reports. Hertz, Spirit, and Waste Management will now report quarterly results on Wednesday; Pfizer, Pitney-Bowes, Ralph Lauren, Sirius XM, and TripAdvisor will follow suit Thursday; McGraw-Hill and Thomson Reuters will now report Q3 earnings on Friday. Time Warner Cable will announce Q3 results on November 5, and Office Depot is delaying issuing its Q3 results until November 6.4

“Our intention is that Friday will be business as usual,” Labor Department public affairs specialist Jennifer Kaplan told CBS News regarding the release of October’s employment report. While noting that the severity of the storm might hinder some of the report’s final calculations, Labor Department officials are hopeful that the report can be released as scheduled November 2 (at 8:30am EST).5

 

 

 

Fuel prices

U.S. natural gas consumption could be greatly tempered this week, and prices may move significantly. New Jersey, Pennsylvania and Delaware are home to five of the most important gasoline refineries on the east coast, but analysts feel they could rebound decently from any storm-related problems. While RBOB gas futures rose Monday as traders assumed some disruption in supplies, it appeared the bigger blip might be demand, with commuting and trucking patterns potentially thrown out of whack for days.6

As to whether drivers might see a violent spike in gas prices, the Oil Price Information Service’s Tom Kloza dismisses the notion: “My hunch is we’ll get a wobble higher in the next couple of days, and then resume [heading] lower.”6

After the stress of this superstorm, we can only hope that its economic effect will not be as severe as some anticipated.

Kim Gaxiola may be reached at (800) 584.3652 or kim@gaxiolafinancialgroup.com or www.techgirlfinancial.com.
TechGirl Financial is a part of Gaxiola Financial Group. Registered representative, securities offered through Cambridge Investment Research, Inc., broker-dealer, member FINRA/SIPC. Investment advisor representative, Cambridge Investment Research Advisors, Inc., a registered investment advisor. Cambridge and Gaxiola Financial Group are not affiliated.
Gaxiola Financial Group | 305 Vineyard Town Center #369 | Morgan Hill, CA 95037
This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 – online.wsj.com/article/SB10001424052970204840504578086290411855054.html [10/29/12]
2 – marketwatch.com/story/big-storms-rarely-dent-economy-for-long-2012-10-29 [10/29/12]
3 – www.businessweek.com/news/2012-10-29/u-dot-s-dot-stock-trading-canceled-as-new-york-girds-for-storm [10/30/12]
4 – www.cnbc.com/id/49596291 [10/29/12]
5 – www.cbsnews.com/8301-505123_162-57542196/will-hurricane-sandy-delay-the-jobs-report/ [10/29/12]
6 – www.cnbc.com/id/49596291 [10/29/12]
7 – http://www.reuters.com/article/2012/10/30/us-storm-sandy-insurance-idUSBRE89T0WT20121030 [10/30/12]

Three Tips on How to Negotiate Your Salary

Three Tips on How to Negotiate Your Salary

Presented by Kim Gaxiola

 

In all of the women’s conferences I attend, the common theme on the salary discussion is that women don’t ask. I believe one of the big reasons why women’s salary is less then men is because we simply don’t ask for more. Men consistently ask for more money when being hired, promoted, going out for drinks socially with their manager, or at performance review time. I hope this article gives you some more confidence to go out and ASK! You’ll be pleasantly surprised more often then not at the responses.

Three Tips on How to Negotiate Your Salary

Gaxiola Financial Group’s Wardrobe Change: TechGirl Financial

Gaxiola Financial Group’s Wardrobe Change

Presented by Kim Gaxiola

 

Ready or not, here comes fall. I think I’m ready, are you? It takes a while here in California to really see a difference in seasons, but at least there are holidays like Halloween to get us in the mood. Change is happening all across the country as the outdoor moves from summer to fall and then winter. Out goes the summer clothes, here come the heavier winter styles. What’s different this fall from your last fall season?

With the change of seasons, Gaxiola Financial Group is going through a wardrobe change too. We’ve been working on a re-brand and its unveiling has come. Welcome TechGirl Financial. I compare it to a wardrobe change because the planner behind it all, that would be me, at the core hasn’t changed a bit. I’m just a bit wiser each year. The advice is still the same, but the delivery has shifted. Because we are all consuming information in different ways, I am committed to keep up with the technology and bring advice and communications along with it. The name TechGirl Financial has many appropriate meanings, but keeping up with the times, heavily influenced by our surrounding technology, is key in the delivery of financial advice.

Why Girl? Because I refuse even at the age of 40 to be addressed as a woman! This is pretty typical of many GenX peers of mine. Bringing up another point: while I’m largely focused on the Baby Boomer generation, generation X is accumulating assets and needs help too. I want to be approachable for multiple generations to come.

What does that mean to you? How do you prefer to receive your communications? Phone, email, Facebook, LinkedIn? As I recently flew to Chicago for a conference and met with some clients too, the personal face to face time doesn’t change. We must be in communication in the meantime, and it’s good to know how to reach you. Another great benefit to you will be the information I post online through my new blog www.techgirlfinancial.com. There are common questions I get reflective upon the season. I will address those trends in the blog, and from time to time may point you there to deliver some ideas that may help you in your financial journey.

I invite you to bookmark the new site, register at TechGirl Financial on Facebook, subscribe to RSS feeds, or follow on Twitter. These are the best ways to keep current on the news I continue to deliver in a prompt manner. There will be webinars and videos hosted and you are all welcome to participate and invite a friend along with you. I’m never too busy to help you, a friend, or family member in need of some financial guidance.

Happy Fall to everyone!

 

Welcome to TechGirl Financial

Presented by Kim Gaxiola

We are a resource for women in technology to guide and support career growth in the technology industry. Recently I attended a Women In Technology International (WITI) Tech Summit and one of the panelists there shared that busy women in tech are outsourcing the errand running, cooking, and cleaning in their households so their time at home can be spent better with family. For those of us juggling many tasks between work and personal lives, you know life does get easier when we learn to delegate. As women in technology move up in their careers, they are finding themselves tasked with more responsibilities and complicated financial concerns. You are not alone.

At TechGirl Financial we serve women in technology by managing their investments, IRAs and money goals. We partner with our clients to make financial decisions. We make the process easy, seamless and customized to suit your style.

Why does TechGirl Financial focus on women in technology? We find that many of the characteristics that make women strong candidates for financial independence are those held by many women in the tech sector. Do you possess some of these characteristics: smart, confident, decisive, educated? If so, we’d love to chat!

Wow – that’s a tough criteria!

Let me explain before we get off on the wrong foot.

SMART

When I say smart – I don’t mean IQ. Do you have the capacity to make smart goals? (Specific, Measurable, Achievable, Realistic, Timely)? If you can run through the SMART process, you are on your way towards setting up your own financial independence.

Confidence

You must have the confidence in yourself to make decisions and follow them through. You must also have confidence to hire others to supplement the weaknesses you know you possess. (and yes, we all have weaknesses-shocker!) Our weaknesses are tasks we are better off delegating.

Decisiveness

YES or NO! Black or White! Beatles or Elvis! Maybe kills opportunity. If you can’t make decisions, you’ll have an extremely hard time doing anything with your money. Money under the mattress is not a reliable investment tool, and hope is not a strategy. You don’t have to make the decisions alone, but you do need to make a choice.

Educated

Are you educated or have a willingness to learn? You don’t have to know everything about the financial markets, the economy, or even investments for that matter. (That’s my job!) But you should know, or be ready to learn, that building a solid financial foundation means having a safety net, strong cash flow, and a plan to,manage what you own (assets) and what you owe (liabilities). This is what it takes to begin your journey towards financial independence.

Now that we’ve defined the people we like working with, are you the right fit? Although, we’ve challenged you to be decisive – it’s o.k. if you’re still a little unsure…for a limited time that is! Stick around, read the blog and check back frequently. If you find yourself liking us more and more, let us know. We also encourage you to share our content with friends. We’ll be ready to serve you when you need to make that next important financial decision.

Thanks for being here!

Lean In To Retirement

Check out TechGirl Financial's Article Series on how to "Lean In To Retirement".

About the Founder

Kim will put you at ease with your financial planning and help you to create a clear picture of your financial future!

Check the background of this investment professional on FINRA's BrokerCheck

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Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Advisors Services through Cambridge Investment Research Advisors, a Registered Investment Advisor.

Tech Girl Financial is not affiliated with Cambridge. Check the background of this investment professional on FINRA's BrokerCheck.
This communication is strictly intended for individuals residing in the states of AZ, CA, CO, FL, ID, IL, IN, KY, MI, MT, NH, NJ, NV, OR, SC, VA, WI. No offers may be made or accepted from any resident outside the specific states referenced.

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