How to Pay Your Taxes Like a Billionaire
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What quick market headlines and mortgage rate updates should you know at the start of the episode?
With your money briefing, I'm J.R. Whalen at The Wall Street Journal in New York. You can be a billionaire just like the fat cats in those mansions with the fancy cars. It all starts with smart tax planning. We'll tackle that issue in a moment. First, these money and market stories you should know. A bit of a glimmer of hope for the housing market. Rates for home loans hovered near two-month lows in the most recent week. The 30-year fixed-rate mortgage averaged 4.81%. In the November 29th week, that's unchanged from the week before. Meantime, the 15-year fixed-rate mortgage averaged 4.25%. That's up one basis point during the week. And the five-year Treasury-indexed hybrid adjustable rate mortgage averaged 4.12 percent.
How did hosts introduce the topic of paying taxes like a billionaire?
That's up from 4.09 percent. Higher rates have no doubt affected homebuyers, but also the mortgage lending industry. The Mortgage Bankers Association says that last week refinances were at the lowest level since 2000. The Wall Street Journal Heard on the Street team takes issue with some of Wall Street analysts predicting long-term earnings growth in corporate America. A group of analysts recently polled believe that earnings for stocks in the S&P 500 will grow 13.3% a year for the next three to five years. Heard on the Street's Justin Lehart writes, "...by any realistic calculation, it is nearly impossible for that prediction to come true." Predicting anything is tough, and going out three to five years relies heavily on guesswork.
Perhaps the best use of these forecasts are as an indicator of Wall Street optimism. And Wall Street Journal intelligent investor columnist Jason Zweig writes that the holiday season isn't going to be very rosy for mutual fund investors. That's because mutual funds must distribute all their realized capital gains or profits on securities they have sold during the year. And more than 500 funds have announced they'll pay out at least 10% of net assets as taxable gains. See his full column at WSJ.com or the WSJ app.
Who among us hasn't ever dreamed of being a billionaire? Well, now's your chance to at least act like a billionaire, at least when it comes to paying your taxes. Wall Street Journal tax reporter Laura Saunders is here with some details. So, Laura, one way that billionaires become or stay billionaires is through smart tax planning. And non-billionaires like us could benefit from multi-year tax planning and the new standard deduction can jumpstart those efforts.
What's different now is that when we had the tax overhaul last year, they put in a bunch of new income thresholds. Now, people who are very high earners have always had advisors who do planning not over for one year to the next, but over several years, you know, with things like net operating loss carry forwards and stuff like that. But now this technique is becoming newly useful to a really broad swath of taxpayers. And so we talk in this story about two things that people could take advantage of as they do their year-end planning. One of them is that this is a massive, massive change. The switch from the standard to the standard deduction from itemized deductions. Nearly 30 million people next year will no longer be breaking out
Their deductions on Schedule A, that's deductions for charitable, for mortgage interest, for state taxes, things like that. It's going to pay you more not to do that. That's because the standard deduction, which is what you get if you don't do that, has doubled. For couples, it's $24,000, and for singles, it's $12,000.
And 30 million people are brought into this new fold.
Yes, that's exactly right. Taxes are going to get less complicated for them and also for the IRS to enforce. That's going to be interesting. They're going to have far fewer charitable contributions and things like that.
And then planning out those charitable donations and making annual tax-free gifts, those are smart moves as well.
Well, yes, particularly the charitable donations. Now, let's talk about how this works. This is where you have to do multi-year planning.
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