Steven A. Branson, Esq. - Financial Strategies

Mortgage rates have come down recently. If your mortgage rate is 6% or above, you can probably reduce your mortgage rate by .5%, which is worth over $200 per month on a 30 year mortgage of $500,000. If the closing costs total $2,200, then you break even in less than 11 months. Let us know if you want to explore this in greater detail.

The sub-prime mess is not over. The companies that insure municipal bonds are in trouble themselves. If they cannot cover the bonds that they insure, the ratings on the bonds drop from AAA to B or lower, changing the value of these bonds. That could shake the financial markets yet again. If you hold insured municipal bonds, you will want to review your holdings to see if any of the companies insuring those bonds are at risk. Let us know if you need our input on the review.

Congress is expected to restore expired tax breaks, dating them back to January 1, 2008. They include the R&D tax credit, tax-free IRA distributions to a charity and the deductions for sales tax, college tuition and teachers’ class supplies. Also, Congress will need to act on the AMT because the higher AMT exemptions of 2007 are not in place for 2008.
RETIREMENT CONTRIBUTIONS
The IRA and Roth limit rises to $5,000, up by $1,000; taxpayers born in 1958 or earlier can add an extra $1,000. (The 401(k) or 403(b) contribution caps stay at $15,500, or $20,500 for individuals born before 1959.)
The ceiling on SIMPLEs remains $10,500, adding $2,500 if you are age 50 or older in 2008. The ceiling for defined-contribution plans is $46,000 in 2008, a $1,000 increase for Keoghs and profit sharing plans.
DEDUCTION PHASE-OUT
The phase-out of itemized deductions for 2008 is changed: if your AGI exceeds $159,950, itemizations are trimmed by 1% of the excess, not 2% as in prior years (you still never lose more than 80% of your itemized deductions).
ADOPTION
The adoption tax credit goes up to $11,650, but the break phases out for filers with AGIs between $174,730 and $214,730.
ESTATE AND GIFT TAX
The estate tax exemption remains $2 million in 2008 then goes to $3.5 million after 2008. The top tax rate remains at 45%. The lifetime gift tax exemption is still $1 million and the annual gift tax exclusion remains at $12,000.

Do not close old credit card accounts. Your credit score is based in part on utilization of available credit; closing old accounts reduces what is available, thereby raising your ratio.

We welcome Christina R. Schaper, Esq., a graduate of Boston College Law School, with legal experience from Boston firms, who has just joined our firm (see more under Our Training and Experience).