Winners
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Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
mark@markvitekcpa.com
…until next week.
Leasing vs. Buying a Car……
When Leasing is Better than Buying a Car
Leasing can make sense for certain people in certain situations.
Leasing isn’t for everyone, so here are some cases in my CPA practice where it makes sense:
When negotiating the vehicle, watch out and make sure you don’t let the sales person talk you into these mistakes:
Mistake #1: Not haggling over the cost of the car
The capitalized cost of the car is one of the critical starting points; negotiate the cost of the car before saying whether you want to buy or lease.
Mistake #2: Not paying attention to the residual value used in the lease calculations
The residual value (or buyout value) is the estimated fair market value at which the lessee may buy the vehicle at the end of the lease. It pays to choose a car that retains its value since depreciation is the largest component of the cost of owning a vehicle. So watch that residual value when negotiating car leases.
Mistake #3: Just give me the lowest monthly payment for a lease
Frequently car dealerships get lessees to think only about the monthly payment so that there are bad terms in other parts of the lease like overage charges for driving over the contracted number of miles per year.
Mistake #4: Not noticing the interest rate used in the lease calculations
This interest rate is called the implicit interest rate of the lease and is important to get the best rate, just like if you are going to buy the car.
Mistake #5: Not negotiating the lease acquisition fee
The lease acquisition fee for a lease can run from several hundred to more than a $1,000 depending upon the automaker. Frequently, a lessee is told that there is no way to avoid this fee. This is sometimes true, but the dealer may say it could be reduced.
In these times of low interest rate financing, it pays to see if a properly structured lease with a low implicit interest rate is the best way to go.
Let us know if we can help.
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
mark@markvitekcpa.com
…until next week.
Old School Rule #4
Conventional college-savings advice: The best way for grandparents to contribute to a grandchild’s education is a 529 college savings plan. These state-operated plans are designed to help families set aside funds for future college costs by offering tax breaks.
My unconventional wisdom: Most grandparents should skip 529 plans.
Why it’s smarter: There’s no assurance that your grandkids will need the money. They might win scholarships or not go to college at all. What’s more, their parents might incur problems of their own, such as divorce or job loss, causing them to raid the account that you helped fund. Another drawback is that 529 plans limit options for investing money. Most important, you may need that money yourself for healthcare or other expenses. Better: Talk to your estate-planning attorney about setting up a tax-free trust for your young grandchild, and stipulate that it remain untouched until the child reaches retirement age. Over the long run, that will serve the child much better than your contributions to a college fund.
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
mark@markvitekcpa.com
…until next week.
Today we are returning to our series, “Throwing Out the Old Rules of Money” with Tip #3 Regarding Long Term Care Insurance (LTC).
Conventional long term care insurance advice: Buy long term care insurance with lifetime benefits, which pays for at home health care or nursing home or assisted living care as long as you live. This way of purchase is very expensive, but you won’t need to rely on family members or spending down your assets. Your children then inherit more.
My unconventional wisdom: Consider choosing 5 years of LTC benefits instead of lifetime benefits.
Why? The average nursing home stay is less than three years; fewer than 12% of people who enter a nursing home stay more than five years. Premiums on a five year benefit basis, often (but not always) are sufficient and can be 50% less!
Instead consider adding on a shared-care rider. This lets you use the benefits offered by your spouse’s policy if you exhaust your benefits.
This piece is not intended to be considered specific insurance advice, and one should consult his or her own situation with a qualified insurance agent or financial professional.
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
mark@markvitekcpa.com
…until next week.
“Hummer Rules” Have Changed
New SUVs, with a gross weight of over 6,000 pounds, placed in service in 2011, can now be a 100% write-off if used 100% for business.
This is due to the new bonus depreciation rules. Previously, SUVs were limited to a maximum first year deduction of $25,000. Several years ago this limitation was put into the tax code to prevent large deductions for such vehicles—many called it the “Hummer Rule”.
New pickup trucks with loaded weights over 6,000 can also use this rule. Depreciation rules for work related automobiles remain unchanged for 2011.
If you use a vehicle for business, be sure to closely document your mileage even if deducting actual expenses. A 100% business use argument is sometimes hard to substantiate in an audit. If you can’t prove 100% business use, you can still use the limited deduction as long as the business-use exceeds 50% of the total yearly mileage.
Also, the SUV must be new—used vehicles do not qualify.
Give us a call if you want more details.
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
mark@markvitekcpa.com
…until next week.
Reminder – New Firm Hours: Closing Fridays for Summer 2011
Starting June 1, 2011, our firm will be closed on Fridays through September 15, 2011 since we work Saturdays January to April 15th of each year. The new hours will begin this Friday, June 3rd.
Our hours of operation will be from 9:00 am to 5:30 pm, Monday through Thursday of each week.
Any items may be dropped through our mail slot in the front door or voicemails may be left for return calls each Monday.
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
mark@markvitekcpa.com
…until next week.
New Firm Hours: Closing Fridays for Summer 2011
Starting June 1, 2011, our firm will be closed on Fridays through September 15, 2011 since we work Saturdays January to April 15th of each year.
Our hours of operation will be from 9:00 am to 5:30 pm, Monday through Thursday of each week.
Any items may be dropped through our mail slot in the front door or voicemails may be left for return calls each Monday.
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
mark@markvitekcpa.com
…until next week.
Congratulations to our clients, Carter Worthy and Chuck Anderson
This week we are going to take a break from our Tax and Money Tip of the Week to congratulate two of our clients, Carter Worthy and Charles Anderson. They have both recently won 2011 Champion Awards given by the Triangle Commercial Real Estate Women (CREW).
The Impact Award was given to Carter Worthy. This award is given to an individual who has made a significant positive influence on the Triangle’s commercial real estate industry. Ms. Worthy owns and operates Carter Worthy Commercial Realty, Inc. here in Raleigh.
Charles Anderson received the award for Professional Commercial Real Estate Service. This award is given to an individual who provides the best professional commercial real estate service, with consideration for industry knowledge, leadership skills, work ethic and creativity. Mr. Anderson is an attorney and principal with Ellis & Winters, Attorneys at Law.
Congratulations Carter and Chuck on your recent achievement awards!
Mark Vitek, CPA, P.A. …serving long term, relationship-based CPA services to successful businesses and individuals.
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
mark@markvitekcpa.com
…until next week.
Old School Rule #2
Retirement Planning Old School Wisdom: Convert your traditional IRA to a Roth IRA. New unconventional advice: Forget about doing this; Roth IRAs are designed to get you to pay taxes EARLIER ….
Why It’s Smarter
Converting to a Roth IRA does nothing to increase your wealth.
For example, lets say a client in the 25% federal income tax bracket has a Regular IRA of $100,000. If he decides to convert to a Roth he would have to pay tax of $25,000 immediately and would be left with only $75,000. Lets say the client doubles in 10 years this Roth IRA shrewdly via investing to $150,000. Instead, assume the client keeps his regular IRA of $100,000 and doubles it in 10 years to $200,000. After paying taxes, he would wind up with $150,000, the same amount but without the hassles of paying taxes, etc.
Key point: Congress may decide to tax Roth IRA withdrawals, subject them to 28% AMT tax or reduce the marginal tax rates (via eliminating certain deductions). For most situations, paying taxes sooner is NOT better than keeping wealth tax sheltered and using the power of tax compounding to your advantage.
If you should have any questions, please don’t hesitate to give us a call.
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
mark@markvitekcpa.com
…until next week.
This week we will start a series regarding throwing out the old rules of money.
Old School Rule #1
Conventional mortgage wisdom is to pay your home mortgage as soon as possible using extra payments. Here’s what you should do instead: Keep a long-term mortgage typically 30 years, regardless of your age or income, even if you can pay it off sooner.
Why It’s Smarter
Owning your home outright saddles you with some pretty significant disadvantages now days, such as lack of liquidity. Every dollar you give to the bank is one you will never get back until you sell your home. You may need that money if you lose your job unexpectedly or have a large medical expense. Instead, put that money to work in a diversified investment portfolio possibly one composed of a mix of passively managed index funds to keep expenses low.
If you should have any questions, please don’t hesitate to give us a call.
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
mark@markvitekcpa.com
…until next week.
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