Stocks, Fuel, and Tax Deductions
The S&P 500 and the Nasdaq have been up for eight of the last nine weeks, though mixed economic data caused a minor decline on Friday. The S&P gained 0.28% and the Nasdaq rose 0.44%, but the Dow lost 0.04% for the week. Stocks have been the strongest positive indicator in a slew of mixed information coming at us during the last few weeks. The five-month stock rally has been built on steadily improving economic news and strong underlying fundamentals, though some strategists are calling for a pullback since indexes are hitting new landmarks and the fourth-quarter reporting period is winding to a close.
Exerting some negative pressure on both stocks and the economy, gas prices continued their march higher this week, reaching a national average of $3.74, according to AAA. Gas prices have risen more than 8% this year, influenced by ongoing Middle East tensions and a stronger U.S. economy. However, on a positive note, crude oil prices dropped Friday for the first time in days, on news that the U.S. won’t preemptively attack Iran and disrupt oil supplies. While sustained high gas prices are not something we want to see, economists continue to stress that $4 gas is not enough to derail the economic recovery. Interestingly, higher gas prices haven’t dampened American enthusiasm for cars. Automakers reported strong sales for February, especially among smaller cars as buyers try to offset increased fuel expenses. Although all makers have not reported February results, analysts expect strong sales of 1.1 million cars and trucks for the month.
Federal Reserve Chair Ben Bernanke had both encouragement and words of warning for the Senate Banking Committee this week. While expressing that the recovery is not over and that the Fed expects continued growth of 2.2% to 2.7% this year, he also urged politicians to act on key issues. Bernanke expressed that the expiration of the Bush tax cuts, payroll tax increases, and massive federal budget cuts – all coming at the same time in January 2013 – is a “fiscal cliff” that could threaten the economic recovery. We agree that these lingering political issues could have significant negative consequences if they are not addressed properly. We sincerely hope that the leaders of this nation will act for the common good, and that they will not allow political bickering to get in the way of our ongoing recovery.
ECONOMIC CALENDAR:
Monday: Factory Orders, ISM Non-Mfg. Index
Wednesday: ADP Employment Report, Productivity and Costs, EIA Petroleum Status Report
Thursday: Jobless Claims
Friday: Employment Situation, International Trade
HEADLINES:
Traders pushed up the price of Treasury debt after economic data from Europe brought back fears of a global economic slowdown. Demand for “safe haven” investments like Treasury bills often goes up on the back of poor economic news.
The Institute for Supply Management's manufacturing index fell in February to 52.4 from 54.1, a decline well below expectations. All four of the component indexes also posted declines; however, ISM’s survey chief believes that the declines are part of a generally positive trend of moderate growth.
New orders for durable goods declined a surprising 4% in January. Orders for long-lasting goods like machinery, airplanes, furniture, and appliances dropped after a special business tax treatment expired. While the news could be a sign of weakening manufacturing activity, the durable goods report is notoriously volatile and it is likely one-time factors had a significant impact.
The Conference Board Consumer Confidence Index rose in February, a significant improvement over January’s performance, and is now close to February 2011 levels. Consumers are more confident about current economic conditions than they were in January, and despite rising gas prices, they are more optimistic about the economic recovery.
5 Overlooked Tax Deductions for 2011
As you start getting your tax information together, don’t forget to look for tax deductions.
1. Charitable Mileage
Many people are aware that their charitable contributions can be deducted if they itemize their taxes. However, you can also deduct the mileage that you travel in the service of your favorite charity.
When you travel to and from the charity location, or if you are running errands on behalf of the charity, you can deduct 14 cents per mile. You also get to deduct what you pay for parking and tolls. And, if you take public transport, you can deduct those costs as well.
Just make sure you keep good records.
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2. Tax Preparation Fees
When someone else prepares your taxes, or even if you prepare them yourself using paid software, you can get a deduction for the cost. Deduct the cost of your accountant, your TurboTax software, and even convenience fees that you might be charged.
It’s worth noting, too, that financial planning fees, and fees paid for financial management, can also be deducted from your income.
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3. Property Losses
If you had a property loss, due to destruction or theft, you can deduct some of what you paid for repairs, and even for the decrease in value to your home.
You do have to follow the rules, though.
No deduction for amounts covered by your insurance company, and you have to have paid more than $100, since the first $100 you pay isn’t tax deductible.
You may have had losses due to Hurricane Irene
4. CD Withdrawal Penalties
When you withdraw money early from a certificate of deposit, it comes with a penalty. This can cut into your earnings from the CD, as well as offer annoyance. You can recoup some of that cost when you deduct the penalty on your taxes.
So, if you ended up with such a fee, make sure to remember to deduct it.
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5. Medicare Premiums
Your Medicare Part B and Medicare Part D premiums might be tax deductible as medical expenses. This can be a great help if your premiums have been on the rise.
On top of that, those who aren’t eligible for Social Security, and enroll in Medicare Part A, can deduct those premiums.
Disclaimer: Ken Mahoney is neither a tax nor legal professional. Material contained within this piece is intended for general informational purposes only and is not intended as professional counsel or investment advice, and is not to be used as such. No statement or expression is an offer or solicitation to buy or sell any products or services mentioned. Information contained herein has been obtained from sources believed to be reliable; its accuracy and completeness cannot be guaranteed. Investors are advised to contact their appropriate professional for all personal, including but not limited to retirement and estate planning, tax planning and/or corporate planning.
QUOTE OF THE WEEK:
“The magnificent Universe provides abundantly when you’re in a state of gratitude’
Dr Wayne Dyer
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