February 23, 2019

Wealth Matters: Parking an Investment in Your Garage

Whether cars are a great investment in a strong economy isn’t apparent. Their value rose more than 300 percent from 2008 to 2015, according to the Historic Automobile Group International. By comparison, the SP 500 rose 40 percent in that same period. But over the past four years, they have risen a comparatively modest 85 percent, with Ferrari leading that growth, while the SP 500 rose 22 percent.

“When housing and everything crashed in 2008, there were still wealthy people, so they bought alternative assets and they bought cars,” said Stu Carpenter, founder of Copley Motorcars and a leading expert on Ferraris and Land Rovers. “More collectors came into the market and drove up prices, and then more cars came into the market. Supply and demand fed off each other until 2015, when most things peaked.”

The response in the last recession surprised even the experts, said David Gooding, president of Gooding Company, a leading auto auction house.

“We didn’t see it coming, but in retrospect, it does make sense,” he said. “While there was so much uncertainty in traditional markets, there was a flight toward tangible things people could wrap their minds around.”

He cautions against thinking it will happen again: “Does it mean it will always be the case? No. The car market will continue to have some peaks and valleys.”

After recent auctions in Pebble Beach, Calif., and Scottsdale, Ariz., experts said cars were fairly valued, even though that meant some cars, even Ferraris, sold for less than they would have a few years ago. But both Mr. Gooding and Mr. Carpenter said that sellers were going to have to be realistic about a car’s price and quality.

Keeping a car in top shape is not an inexpensive proposition.

Vinnie Pacifico, who made his money in food service, said he cherished his 1963 Corvette with a split window and enjoyed driving it. But to satiate his appetite for speed, he prefers driving a 2017 Porsche 911 Turbo Carrera.

Article source: https://www.nytimes.com/2019/02/22/your-money/collectible-cars-investment.html?partner=rss&emc=rss

Your Money: A Teacher’s Student Loans Were Forgiven. Then FedLoan Wrecked His Credit.

That same day, Mr. Shafer got a note from Stephanie Galloway, a FedLoan vice president. “We wish to express our sincerest apologies and regret any inconvenience this may have caused you,” it said.

Just to be certain, we checked his credit again a few hours after I heard from Mr. New, with Mr. Shafer and his wife paying the fee themselves to do so. Indeed, the problem was fixed and his FICO credit scores — which are what most lenders look at when checking up on individuals — were very good once more.

Mr. Shafer, who often hears from other struggling public servants who manage to track down his email address, is glad he did not have to resort to the mail. “There is a level of anxiety that I know people feel when they have to start sending stuff,” he said. “That post office box in Harrisburg has to be one of the most feared and dreaded P.O. boxes in the history of humankind.”

So how exactly did this error happen, and will it happen to others? The origin is not clear, but Mr. New said it would not happen again. “We’ve confirmed that this was indeed an isolated instance and have addressed the root cause within the process so no other borrower should experience any negative issues,” he said in an email.

Seth Frotman, executive director of the Student Borrower Protection Center and the former student loan ombudsman at the Consumer Financial Protection Bureau, said he was not that surprised, given P.H.E.A.A.’s history of problems with credit reporting. He reminded me that P.H.E.A.A. had once asked the Supreme Court to spare it from having to abide by the rules that lenders in the banking industry must follow.

“These companies are huge furnishers of credit reporting info, which means that the financial future and credit history and the cost of credit for millions of borrowers are tied up in these companies getting it right,” he said. “This is just one example of the numerous ways in which they are failing at this miserably.”

If you, too, have run the public service loan forgiveness gantlet and think you have succeeded, check your credit reports before you throw a party and use your loan correspondence as confetti. If there’s a problem, email me so I can help you get it fixed. That way, your wrecked credit won’t delay a car or home purchase any longer than necessary, and you can avoid waiting around for weeks while someone at a FedLoan post office box deals with your situation.

But before we go, let us lament, once again, the fact that this sort of warning and intervention is necessary at all. Public service loan forgiveness was a program with bipartisan backing. Surely, we can all agree that our teachers and nurses and firefighters should not have to put up with so much to get what they earned.

Article source: https://www.nytimes.com/2019/02/22/your-money/student-loan-forgiveness-credit-score.html?partner=rss&emc=rss

Your Money Adviser: Those Credit Card Bonuses May Be Taxable

Here are some questions and answers about credit card bonuses:

Do I have to report card bonuses as income if I don’t receive a Form 1099?

You should. While the card company must send out the form for payments to an individual that total $600 or more, a bonus is considered income even if it’s below that threshold, Mr. Zidik said. “Any type of income, no matter how small, has to be reported,” he said.

How much you actually pay in taxes on the amount, however, depends on your overall income and tax bracket, Ms. Hawes said.

What if I receive a corrected 1099 form after filing my tax return?

In general, if people get a corrected 1099-MISC, they should contact their tax professional because they may need to file an amended return, Mr. Zidik said.

Does this make referring friends to get a bonus more hassle than it’s worth?

“It’s definitely a disincentive,” Mr. Riley at Mercator said. Although the amounts involved may be relatively small, he said, you still have to pay attention to forms that are filed with the I.R.S., to avoid potential penalties or interest for underreporting income.

Scott Mayerowitz, executive editorial director at The Points Guy, a website that covers card rewards topics, said having to pay taxes does take away some of the positive feelings from earning bonuses. But it’s likely that in most cases, he said, “You’re still coming out ahead.”

Ms. Rogers, of Chase, said, “Our customers love the rewards that come with our cards, and we really don’t hear concerns about tax implications.”

Article source: https://www.nytimes.com/2019/02/22/your-money/credit-card-bonuses-taxes.html?partner=rss&emc=rss

A Man in Florida Mistakenly Received a $980,000 Tax Refund, and Officials Say He Tried to Keep It

Taxpayer refunds are sent out in batches via an expedited electronic system, Mr. Pine explained. If a refund is red flagged, it ought to prompt a closer examination by an I.R.S. employee who “should have immediately and proactively stopped the refund from being issued based on the obvious discrepancy between the income reported of $18,497 and the refund generated of $980,000.”

Mr. Blanchett has not been charged in federal court, Amy H. Filjones, a spokeswoman for the United States attorney’s office in Tampa, Fla., said on Friday. A date for the next hearing has not been set, said a spokesman at the United States attorney’s office.

According to court records, Mr. Blanchett pleaded guilty in 2016 to possession of drug paraphernalia and resisting an officer without violence, both misdemeanors of the first degree. In 2014, he was charged with possession of marijuana, also a first-degree misdemeanor, but the judge withheld adjudication, so he was not convicted of a crime.

SunTrust Bank, where Mr. Blanchett initially deposited the funds, suspected fraud and initially froze the funds, the court documents said, but later returned them to Mr. Blanchett via cashier’s check. He then put the money into an account at Grow Financial, telling the bank that the money came from the estate of his deceased father, the documents said.

Mr. Blanchett shifted the money around, transferring it among different bank accounts within Grow Financial, the complaint said, eventually using some of it to purchase a silver Lexus last August. On Friday, a spokeswoman for SunTrust and a spokesman for Grow Financial declined to comment.

The complaint didn’t specify when the I.R.S. first learned about the inaccurate refund check. But in August, Grow Financial sent the I.R.S. the funds in Mr. Blanchett’s account in accordance with a federal seizure warrant, the complaint said. The I.R.S. also seized the Lexus, and the government is seeking a car insurance premium of about $809 that was refunded to Mr. Blanchett when he no longer had possession of the Lexus.

During 2011 to 2013, when Mr. Pine served as the director of field operations for the eastern half of the United States, and in the years before, refund fraud was “out of control” in Tampa, he said, primarily because of identity theft.

Article source: https://www.nytimes.com/2019/02/16/us/tax-refund-check.html?partner=rss&emc=rss

your taxes 2019: ‘Opportunity Zones’ Offer Tax Breaks and, Maybe, Help for Communities

But the rules are complex, and the Treasury and the Internal Revenue Service didn’t clarify many details until October; more guidance is still expected. The recent government shutdown didn’t help.

That said, opportunity funds are beginning to gain steam. The main questions for investors — such as what kind of investment gains are eligible for investment in an opportunity fund — generally have been answered, Mr. Miller said.

“The benefits are pretty significant,” Mr. Miller said.

Opportunity funds let investors postpone federal taxes on recent capital gains until the end of 2026; they can also reduce the taxable portion of those gains by as much as 15 percent, after seven years. Further, investors can eliminate taxes on additional gains from investing in the fund itself, if they hold the investment for 10 years.

So, if you have investments that have appreciated, you can defer capital gains taxes by selling the investment and reinvesting the money into an opportunity fund within six months. Almost any sort of capital gain qualifies, whether from the sale of stocks or mutual funds, or other investments, including the sale of real estate or a business. (One investor in Fundrise’s opportunity fund, Mr. Miller said, invested a gain from the sale of a dialysis clinic.)

Just the gains on an investment — rather than the entire proceeds of a sale — must be reinvested in the opportunity fund. That’s “highly unusual” and one reason opportunity funds may appear attractive, said Jeffrey Levine, chief executive of BluePrint Wealth Alliance.

Say you sold stock for $500,000, and $300,000 of it was a gain. Just $300,000 must be rolled into the opportunity fund and the remaining $200,000 can be used as the seller wishes, according to an example provided by Tim Steffen, director of advanced planning at Baird Wealth Solutions Group, part of Robert W. Baird Company.

By putting money in the fund, investors not only delay having to pay tax, but are also eligible for a partial exclusion of the tax on the reinvested gains. If you remain in the fund for five years, you will reduce the taxable gain by 10 percent; if you hold it an additional two years, for seven total, you will further reduce the taxable gain by another 5 percent.

Article source: https://www.nytimes.com/2019/02/15/business/opportunity-zone-tax-break-controversy.html?partner=rss&emc=rss

Wealth Matters: You Want to Buy Art. Is It About Love or Money?

Lam, who died in 1982, was Cuban by birth and grouped with other Latin American artists at auctions, which drew a specific collector. But he was later seen as a modern artist, because he was a friend of Jackson Pollock, Willem de Kooning and other midcentury artists. As his artworks moved to more popular auctions, their value has doubled or tripled in a decade, Ms. Bscher said.

A similar shift happened with Picasso about 15 years ago, she said. Collectors did not want to buy his work created after 1965, when the artist was in his 80s and seen as past his prime. At the time, the artworks were inexpensive, but they have since risen in value.

Her advice: “If you buy the period of an artist that is not in fashion, you can make a great investment.”

There are of course plenty of collectors with enough wealth to not really care about the short-term hit in value that the work on their walls may take. Hilary Geary Ross, an art collector and the wife of Commerce Secretary Wilbur Ross, said she had always loved the work of René Magritte, the Belgian surrealist, and began buying his work when she and Mr. Ross married in 2004.

She has 36 pieces by Magritte, worth in excess of $100 million. They include famous works like “La Clairvoyance.” The billionaire couple have rarely sold any of their works, but Mrs. Ross said they did take advantage of the 2008 downturn to buy paintings.

“People come to us with them, because they know we like them,” she said.

In distressed markets, social concerns may keep some people from working with auction houses. They can try private sales — as happened with the Ross’s acquisitions in 2008 — to sell something quietly.

Article source: https://www.nytimes.com/2019/02/15/your-money/art-investing.html?partner=rss&emc=rss

Your Money Adviser: Tempted by Holiday Car Sales? Be Ready for Higher Prices

“Do your research in advance, have a short list and test-drive all of them,” he said. Tell the dealer that you’re not buying yet, to help reduce pressure.

For a three-day weekend, Mr. Jones suggested narrowing your list to two or three models by Saturday. Test-drive the cars on Sunday, then buy — if you’re ready — on Monday.

Also, be flexible. Overall car quality has improved immensely, Mr. Jones said, so you may be able to find an affordable option by looking beyond your first choice. “Take off your blinders, if you’re loyal to one brand,” he said.

Do I have to use the dealer’s financing offer?

No. Consider getting preapproved for a loan at your own bank or credit union before visiting a dealership, Ms. Adams said. That way, you’ll know how much money you qualify for and you’ll have a base rate to compare with the dealership’s offer.

While buying is generally less expensive than leasing over all, shoppers may want to consider leasing in certain situations — if, say, a teenager is going to be driving the car. Leasing may make a car with the latest safety features more affordable, which is an acceptable trade-off if an inexperienced driver is behind the wheel, Mr. Bartlett said.

How can I judge if a car is affordable for me?

A good rule of thumb is “20-4-10”: Put at least 20 percent down in cash, stick to a four-year loan, and aim for a monthly payment that is no more than 10 percent of your gross income.

Mr. Bartlett’s general advice is to pay cash for a car, if you can. If financing is a must, a loan term of 48 months at the most, at a rate as near zero as possible, is the next best option. “Going beyond that is a bad investment on a depreciating asset,” he said.

Article source: https://www.nytimes.com/2019/02/15/your-money/holiday-car-sales.html?partner=rss&emc=rss

Your Money: The Power of Raw, Honest Stories About Money

REYNOLDS: I could be their mother, daughter, sister or co-worker. I could be them.

LIEBER: Hence the book. And its profane subtitle, which echoes the name of your website. In the book, you call out the “tighty whitey sanitized language” that gets in the way of raw honesty in this realm. But why excrement?

REYNOLDS: I was standing by the foot of my husband’s bed in the intensive care unit, and I turned to my friend when I still couldn’t get into my husband’s phone, and remembered that the will was drafted but not signed and I didn’t know if the life insurance had been on autopay and I hoped nothing bounced and didn’t know if he had disability insurance or not. And I just said, “Oh, my God, I don’t have my shit together at all.”

And if that was happening to me, what was going on with everyone else in the I.C.U.? It was like the camera zoomed in and pulled out at the same time: We were all so screwed, and none of us had any idea.

LIEBER: Gaby, you write about what you call the three buzzkill musketeers of getting better at money: shame, embarrassment and anxiety. Does talking bluntly about our money stories and failures dispense with those feelings, or put us at a bigger risk of experiencing them more acutely?

DUNN: I’m still very bad with money. It’s about relatability. I was just going over my taxes with my accountant, and I was crying. But at least I’ve made crying about taxes my brand.

I record my accountant so I can listen back. I Google words, and I’m thinking really hard, and it’s just not coming, and I’m crying because I guess the conclusion is just that I’m an idiot.

REYNOLDS: You know that systems of oppression are set up against you in all these other ways, but this is the one you buy into in many ways. This is the one you listen to.

Article source: https://www.nytimes.com/2019/02/15/your-money/gaby-dunn-chanel-reynolds-vicki-robin-interview.html?partner=rss&emc=rss

your taxes 2019: All Talk, Little Action: What to Expect on Tax Policy This Year

“This is a lot like a duck swimming in a pond,” said Ryan Ellis, a tax lobbyist in Washington and a former tax policy director at Americans for Tax Reform, who is helping to lead the push for the capital gains change. “All the real action is happening underneath the surface.”

If the administration took that step, however, it would inflame Democrats’ critique of Republican tax policies, because adjusting capital gains for inflation would mainly benefit the wealthiest Americans. Economists from the Penn Wharton Budget Model project that the move would amount to an $88 billion tax cut over a decade for the top 1 percent of income earners in the United States — and a $14 billion cut for the other 99 percent.

Soak-the-rich talk seems likely to escalate as Democratic candidates jockey for advantage in the 2020 presidential primaries. Increased taxation of high-income, high-wealth people can be a means of funding new social spending programs like universal prekindergarten education. It can also be a direct way of reducing inequality and wealth in the United States.

At the very least, in the months ahead, you’re likely to hear a lot about millionaires and billionaires paying their “fair share.” And you will probably hear about reducing taxes on middle-class workers — who, thanks in part to the Trump tax cuts, pay a lower marginal tax rate than they have in 30 years, according to the Congressional Budget Office.

The campaign language may suggest what you can expect if Democrats win in 2020: If you’re a millionaire or a billionaire, expect efforts to tax you more. If your income is lower, you might be in line for a break from the feds.

“Taxes on the rich are going to go up, and they will likely go up a lot,” said Michael Linden, a fellow at the liberal Roosevelt Institute who has been a fervent opponent of Mr. Trump’s tax policies. “The fundamental, underlying dynamic is that with near-record inequality, an aging population and an overall economic system that favors the haves over the have-nots, it’s just untenable to have an overall tax code with as little progressivity as ours has, and generates as little revenue as ours does.”

On the other hand, if Mr. Trump wins and Republicans sweep Congress again, you can expect a different vision to prevail — one that embraces the new tax law. Its provisions for individuals are generally set to expire at the end of 2025, but with a strong Republican mandate, those cuts are likely to be made permanent.

Article source: https://www.nytimes.com/2019/02/15/business/new-tax-law-changes.html?partner=rss&emc=rss

your taxes 2019: The 8 Most Common 2019 Tax Return Questions, Answered by Experts

But if you were an employee receiving those checks, you may not have noticed the increase. If that was the case, you won’t be seeing the usual April refund: You’ve already gotten it, just parceled out into slightly higher 2018 paychecks.

Want to get a refund next year? If that’s your goal, Julie A. Welch, a Leawood, Kan., accountant, suggests using the I.R.S. withholding calculator to adjust your paycheck. Most people never bother.

Before breaking down what’s changed, let’s back up and explain the basics: Taxpayers are entitled to take a standard tax deduction amount, or they can itemize their deductions individually; they can deduct whichever amount is higher, resulting in a lower tax bill.

Under the new tax law, the standard deduction has doubled (to $12,000 for individuals and $24,000 for joint filers), while several itemized deductions have been eliminated or limited. TurboTax estimates that as a result, nearly 90 percent of taxpayers will now take the standard deduction, up from about 70 percent in previous years. To help you figure out the best choice, the company has posted a three-step interactive tool on its blog.

  • Dependent exemption: Under the previous law, families were able to claim a $4,050 exemption for each qualifying child, but that deduction has been eliminated. Instead, if you have children under the age of 17, you may qualify for the child tax credit, which was raised to $2,000 from $1,000 for each child. More people will qualify now that the credit begins to phase out at $400,000 in income for joint filers ($200,000 for individuals), according to Claudell Bradby, a certified public accountant with TurboTax Live. The law also introduced a $500 credit for other dependents, which could include elderly parents or children over the age of 17.

  • Mortgage interest: If you itemize, you can deduct the interest paid on the first $750,000 in mortgage indebtedness on loans taken out after Dec. 15, 2017 (on first and second homes). Older loans are grandfathered: You can still generally deduct interest on up to $1 million in mortgage debt on loans taken out before Dec. 16, 2017.

  • Interest on home equity loans or lines of credit are now only deductible if the debt is used to “buy, build or substantially improve” the home that secures the loan. You can no longer deduct the interest if you pay off credit card debt, for example.

  • Alternative minimum tax: Far fewer people are expected to be snared by it because so many of the old tax breaks that set off the so-called A.M.T. have been eliminated or reduced. In addition, the minimum exemption level has increased to $109,400 for joint filers, up from $84,500; and to $70,300 for individual filers, up from $54,300. The exemption begins to phase out at $500,000 for single filers and $1 million for joint filers.

  • Unreimbursed employee expenses: A number of employees’ business expenses that weren’t reimbursed by their employers — like classes and seminars — are no longer deductible.

  • Moving expenses: Workers moving for a new job were once able to deduct related expenses. That has been wiped away, except for members of the military.

  • Tax preparation fees: If you itemized, you could typically deduct the amount your tax preparer charged or similar tax-related expenses, like software bought to file electronically. This is no longer possible, unless you are self-employed.

It depends, said Tyler Mickey, a tax senior manager at Moss Adams in Wenatchee, Wash.

Under the previous law, spouses paying alimony could deduct those payments on their returns, while the recipients had to include the income on theirs. That remains the case for divorce agreements finalized on or before Dec. 31, 2018 (unless a couple changes the agreement after then). Therefore it’s true for returns filed this year.

But for divorces completed in 2019 and later, alimony payments will no longer be deductible, and recipients will not have to include them on their returns, added Mr. Mickey, who is also a member of the American Institute of Certified Public Accountants’ personal finance specialist committee.

It’s half true, said Carol McCrae, a certified public accountant in Brooklyn. You can no longer deduct entertainment or amusement, generally defined as taking a client to, say, a basketball game. But you can still deduct 50 percent of what you spend on meals, as long as you are dining with clients, traveling for business or attending a business convention (or something along those lines). The meals cannot be lavish or extravagant — so forget about the tasting menu at Le Bernardin. Providing meals to employees for an office party or a meeting, she added, are still 100 percent deductible.

Article source: https://www.nytimes.com/2019/02/13/business/tax-return-questions.html?partner=rss&emc=rss