My Wealth Journey

I just received the notice of appraisal value for my Austin property and am glad to see the taxes went down by a little.  I have a property in the Manor ISD that had a 2006 tax rate of 1.768% that looks like it has been cut to 1.535%. A savings of roughly $200-$250 a year which definitely helps cashflow a little. The other estimated tax rate are the same. The proposed appraisal value also went down by a thousand. I was expecting the value to go up while the tax rate go down a little, neglecting any tax decrease.

While at lunch with coworkers, we were discussing how much should you contribute to a 401k plan? The answer is to contribute at least whatever amount the company will match. So if your company will match up to 4% of your annual salary that you put into your 401k, then you are throwing away money by not putting at least 4% into your 401k plan.

Everyone’s answers will be different as far as how much more to contribute. If you have a lot of disposable income and are in the higher tax bracket, sometimes putting the IRS max contribution will help save you on taxes. Even if you aren’t in the higher tax bracket, putting money into the 401k will reduce your taxable income. However, I don’t recommend people who live close to paycheck to paycheck or don’t have at least 6 month’s worth of living expenses, which includes mortgage payments in their bank account, to contribute anymore than what the company will match.

Any money that you put into the 401k is tax deferred, meaning you pay taxes when you withdrawl. Some people believe taxes will be higher than they are now in the future and choose to just the tax now or put the money into their roth 401k account which is not tax deferred. If you think your tax bracket will be lower when you retire/withdrawl, then put as much as you can into your 401k account.

401k 2007 Contribution Limits

• $15500 for those under 50 years of age
• $15500 plus $5000 additional catch up contribution for those over 50 years of age

Sports Authority is having an annual friends and family event which basically means you get 25% off on any single item purchase from now till 4/15. There are some brand exclusions some which are listed below. Check out Sports Authority’s site for more.

Callaway, Easton, Fly Flot, Garmin, K2, Louisville, Louisville Slugger, Magellan, Magnum, Marmot, Miken Sports, Minolta, Mission, Motorola, Muzono Golf, Nike, Nike Golf, Oakley, Pelican, Pro Feet, Rawlings, Razors, Taylor Made, and Under Armour.

On March 29th, I talked about how you can make money off the Iran/UK situation by investing in energy stocks. Well, I was partly right as most energy stocks have gained 3-5% since. However, I was wrong in my prediction of oil dropping $5 when Iran gives in. I did take my own advice and picked up some SU and VLO and will be taking some off the table today. Can’t get too greedy. The ETF (VDE) is a good ETF to get into if you don’t want the risk of investing in just one or two energy related stock. I still believe we are due for a small pull back in the energy sector so if you are buying, don’t go all in at this point.

It is never too early to start planning for the 2007 taxes. The max 401k contribution for 2007 will be increased by $500 to $15,500 while 2008’s limit should be close to $16,000 and 2009’s limit be around $16,500. 2008 and 2009’s limit are not set in stone yet and are determined by the cost of living increase. I doubt the cost of living, according to the IRS will be more than the 3% figure they have been using.

401k contribution is all done pretax so take advantage of reducing your taxable income, especially if you are in the higher bracket and even more so if your employer matches part of your contribution.

The tax implications for transferring a home in California from parent to children while the parent is still alive is something families should consider and consult with a CPA or tax attorney. From my research, you are entitled to a total of $1 million of non-exempt lifetime gift before you pass away. However, as the person giving up ownership of the home, you still need to file a gift tax return with the IRS even if you do not go over the $1 million. The value of the gift is subtracted from the max federal estate tax exemption of $2 million.

A drawback of receiving the home as a gift rather than inheriting the home is that you lose the stepped up basis of the home’s value.  For example, if the home was purchased by the parent at $100,000 and is now worth $400,000. The cost basis of the home would still be $100,000. We will exclude deprecation and other related activities that may affect the cost basis for this example. That means if the children sells the home at a later date for $500,000, taxes will need to be paid on $400,000 ($500,000 minus $100,000). Had the home been inherited, the stepped basis would be the value of the home at the time of death, which in this example is $400,000. So taxes would only have to be paid on $100,000. ($500,000 - $400,000)

Also, you straight out lose control of your home which could be troublesome if you and your children no longer get along. Once you deed the title over, your children or whomever the title was deeded legally owns the home.

Disclaimer: I am not a tax expert or professional. Please do your own research and consult with a professional.

The job report came out this past Friday and the economy added about 180,000 which drops unemployment to 4.4%! That matches the lowest in 5 years! What this means? Well, it means the chances of a decrease in interest rates will be a lot slimmer now with the bond prices rising because of this.

I expect the market to fall 1 to 1.5 points on Monday because of the decrease chances of a lower interest rate.

Residential construction jobs dropped but a lot of those workers/contractors probably went into commercial.

I know that it is definitely a good market for IT jobs in Southern California. It took me 2 days for 2 interviews and 2 job offers.