Time For Tax Planning
All markets went sideways today…
In the news today…..
23% of mortgages – in the US are underwater (owe more than the property is worth). This could sink the housing market by itself if a sufficient number of these mortgages go into foreclosure. What could cause that to happen? Hopelessness in my opinion. If the homeowners see the value of their properties continue to decline, they will give up hope, and walk away from the houses.
Gold – one of the people I follow on Gold has written an interesting article on where Gold will be going. First he says that Gold will have a decline sometime, but if the current buildup is a blowout like occurred in September 2007, and if the price action of gold is the same this time around; if you start with the bottom of the current breakout ($970/ounce), the top would be around $1457/ounce, and this would happen by April 2010. That is an explosion. This is just one person’s opinion, so take it as such, but it is someone who follows gold a lot more closely than I do.
Tonight’s Dinner Conversation…..
Two leading Democrats in Congress are demanding a tax on the wealthy to pay for the increased troops in Afghanistan. This is a great lead in to tonight’s topic. What should you worry about from the IRS? Or Congress?
It’s clear that with the massive deficit being created by this Congress that taxes must go up to pay for it. So, my advice to you in 2009 is to do some tax planning. If you have the choice to pay taxes in 2009 or 2010, I would recommend sooner than later. Normally, I would recommend the opposite. However, the current Congress thinks you are an easy mark, and they can reach into your pocket and take whatever they want.
So, I’m recommend to pay at the rates for 2009, rather than gamble on what taxes may become in 2010. Congress has passed “retroactive” tax increases and could do it again, so 2009 might not even be safe.
One specific recommendation that I am doing myself is to roll over an IRA into a Roth IRA in 2009, and pay the taxes now. You can control how much you roll, and thereby control the amount of taxes you pay. You know your own situation, and this is a pretty straightforward calculation. If you don’t qualify to roll into a Roth in 2009, you WILL qualify in 2010 as everyone has that one time opportunity. And while taxes could be greater in 2010, at least you can protect your IRA growth in a Roth IRA, and not pay taxes when you take them out of the Roth later on. One thing to know is that when you create a Roth IRA, you can’t take any money out of it in the first 5 years without incurring a penalty and tax. Consult your CPA for the details on the law.
Here are the last numbers for today:
Dow Jones 30 Industrial – 10,434 (down 17 points)
10 Year Treasury Bond – 3.32% (down 0.05%)
Euro – $1.4962
Gold – $1166 (up $1)
Oil – $76.02 (down $1.54)
Gasoline – $1.95 (down $0.03)
