Mapped: The Growth in House Prices by Country

Preface: Our rewards in life will always be in direct proportion to our contribution. — Earl Nightingale

Mapped: The Growth in House Prices by Country

Mapped: The Growth in House Prices by Country

Global housing prices rose an average of 6% annually, between Q4 2021 and Q4 2022.

In real terms that take inflation into account, prices actually fell 2% for the first decline in 12 years. Despite a surge in interest rates and mortgage costs, housing markets were noticeably stable. Real prices remain 7% above pre-pandemic levels.

In this graphic, we show the change in residential property prices with data from the Bank for International Settlements …see global visual on above link.

How to Survive a Recession and Thrive Afterward

Preface: All who have accomplished great things have had a great aim, have fixed their gaze on a goal which was high, one which seemed sometimes impossible. — Orison Swett Marden

How to Survive a Recession and Thrive Afterward

…………..In their 2010 HBR article “Roaring Out of Recession,” Ranjay Gulati, Nitin Nohria, and Franz Wohlgezogen found that during the recessions of 1980, 1990, and 2000, 17% of the 4,700 public companies they studied fared particularly badly: They went bankrupt, went private, or were acquired. But just as striking, 9% of the companies didn’t simply recover in the three years after a recession—they flourished, outperforming competitors by at least 10% in sales and profits growth. A more recent analysis by Bain using data from the Great Recession reinforced that finding. The top 10% of companies in Bain’s analysis saw their earnings climb steadily throughout the period and continue to rise afterward. A third study, by McKinsey, found similar results………….

…….Companies with high levels of debt are especially vulnerable during a recession, studies show. ……. Overall, the more housing prices declined, the more consumer demand fell, driving increased business closures and higher unemployment. But the researchers found that this effect was most pronounced among companies with the highest levels of debt. They divided up companies on the basis of whether they became more or less leveraged in the run-up to the recession, as measured by the change in their debt-to-assets ratio. The vast majority of businesses that shuttered because of falling demand were highly leveraged……


  • HBR’s 10 Must Reads on Managing in a Downturn
    “The more debt you have, the more cash you need to make your interest and principal payment,” Mueller explains. When a recession hits and less cash is coming in the door, “it puts you at risk of defaulting.” To keep up with payments, companies with more debt are forced to cut costs more aggressively, often through layoffs. These deep cuts can impair their productivity and ability to fund new investments. Leverage effectively limits companies’ options, forcing their hand and leaving them little room to act opportunistically.

Equipping Employees with a Company Car

Preface: Every street is paved with gold. – Kim Wo-Choong

Equipping Employees with a Company Car

Buying or leasing an auto for the use of your employees ought to be an uncomplicated transaction from the tax viewpoint, but it’s not. The plain fact is that the company auto creates more tax complications than almost any other type of business asset.

That’s why it’s imperative for you to formulate an overall strategy with tax advisor, one that yields the maximum in tax savings, while keeping your paperwork and administrative burden at a minimum. This strategy will take into account the special rules that apply to your deductions for the company auto, the tax consequences of an employee’s personal use of a company auto, and the payroll implications of such personal usage.

As a general rule, your company can claim depreciation deductions for the full cost of a purchased company auto, usually based on a five-year “life” but also limited each year by so-called “luxury auto caps.” Alternatively, if your company leases instead of buys, it can fully deduct its lease cost (again, up to certain “luxury vehicle limits”). In either case, the value of the employee’s personal use of the car is generally treated as fringe benefit compensation income.

The employee’s personal use of the company auto creates a separate category of tax complications. That’s because the value of the employee’s personal mileage must be treated as noncash fringe benefit income that is taxable to the employee, but not deductible by the company (its deductions consist of depreciation or lease deductions and operating costs).

There are four separate ways to value employee personal mileage, and each of them carries its own rules and conditions. Three of the four methods require detailed record keeping of business and personal usage.

The fringe benefit value of personal use of the company auto generally is subject to federal income tax withholding and FICA tax. However, your company can elect not to withhold federal income tax if it properly notifies affected employees of this choice.

Furthermore, the value of an employer-provided vehicle may be excludable as a working condition fringe to the extent the employee would be allowed a deduction for depreciation or as a trade or business expense if the employee paid for the use of the vehicle. In addition, a company can choose to treat the company car as having been used entirely for personal travel. This option will greatly simplify the company’s record keeping burden, but usually will create extra taxable income for your employees.

Although the rules for company autos are complex, we can show you how to minimize their impact on your bottom line, on your payroll department, and on your employees.

2023 Tax Planning: Educational Savings Plans

Preface: Don’t wish it were easier; wish you were better. Don’t wish for fewer problems; wish for more skills. Don’t wish for less challenges; wish for more wisdom. — Jim Rohn

2023 Tax Planning: Educational Savings Plans

If you are a parent with young children, you are faced with many rewards and challenges. One of which may be saving for the high cost of a college education for them. However, there are two tax-favored options that might be beneficial: a qualified tuition program and a Coverdell education savings account.

In addition, you might also want to invest in U.S. savings bonds that allow you to exclude the interest income in the year you pay the higher education expenses. Each of these options has their benefits and limitations, but the sooner you choose to make the investment in your child’s future, the greater the tax savings.

Qualified Tuition Program (QTP). A qualified tuition program (also known as a 529 plan for the section of the Tax Code that governs them) may be a state plan or a private plan. A state plan is a program established and maintained by a state that allows taxpayers to either prepay or contribute to an account for paying a student’s qualified higher education expenses. Similarly, private plans, provided by colleges and groups of colleges allow taxpayers to prepay a student’s qualified education expenses. These 529 plans have, in recent years, become a popular way for parents and other family members to save for a child’s college education. Though contributions to 529 plans are not deductible, there is also no income limit for contributors. 

529 plan distributions are tax-free as long as they are used to pay qualified education expenses for a designated beneficiary. As much as $10,000 of distributions may be used for enrollment at a public, private, or religious elementary or secondary school. Qualified higher education expenses include tuition, required fees, books and supplies. For someone who is at least a half-time student, room and board also qualifies as higher education expense.

For any distribution made after 2018, qualified education expenses of 529 plan include certain expenses associated with registered apprenticeship programs and qualified student loans. Apprenticeship program expenses includes expenses for fees, books, supplies, and equipment required for the participation of the designated beneficiary in an apprenticeship program registered and certified with the Department of Labor. Qualified education expenses of 529 plans include up to $10,000 of principal or interest on any qualified student loan of the designated beneficiary or a sibling (brother, sister, stepbrother, or stepsister).

Under the SECURE Act 2.0 of 2022, beginning in 2024 the amounts held in a 529 plan of a designated beneficiary at least 15 years may be rolled over to a Roth IRA of the same beneficiary and excluded from gross income. The distribution cannot exceed the aggregate amount contributed to the 529 account (including earnings) made in the previous five years. Also, there is an aggregate lifetime limit of $35,000 on such rollover distributions with respect to the designated beneficiary. The rollover distribution counts toward the annual Roth IRA contribution limit ($6,500 for an individual under age 50 in 2023). 

Coverdell education savings accounts. Coverdell education savings are custodial accounts similar to IRAs. Funds in a Coverdell ESA can be used for K-12 and related expenses, as well as higher education expense. The maximum annual Coverdell ESA contribution is limited to $2,000 per beneficiary, regardless of the number of contributors. Excess contributions are subject to an excise tax.

Entities such as corporations, partnerships, and trusts, as well as individuals can contribute to one or several ESAs. However, contributions by individual taxpayers are subject to phase-out depending on their adjusted gross income. The annual contribution starts to phase out for married couples filing jointly with modified AGI at or above $190,000 and less than $220,000 and at or above $95,000 and less than $110,000 for single individuals. 

Contributions are not deductible by the donor and distributions are not included in the beneficiary’s income as long as they are used to pay for qualified education expenses. Earnings accumulate tax-free. Contributions generally must stop when the beneficiary turns age 18, except for individuals with special needs. Parents can maximize benefits, however, by transferring the older siblings’ account balance to a younger brother, sister or first cousin, thereby extending the tax-free growth period. 

U.S. Savings Bonds. If you redeem qualified U.S. savings bonds and pay higher education expenses during the same tax year, you may be able to exclude some of the interest from income. Qualified bonds are EE savings bonds issued after 1989, and Series I bonds (first available in 1998). The tax advantages are minimized unless the redemption of the bonds is delayed a number of years, therefore some planning is required.

The exclusion is available only for an individual who is at least 24 years of age before the issue date of the bond, and is the sole owner, or joint owner with a spouse. Therefore, bonds purchased by children or bonds purchased by parents and later transferred to their children, are not eligible for the exclusion. However, bonds purchased by a parent and later used by the parent to pay a dependent child’s expenses are eligible. The exclusion is, however, phased out and eventually eliminated for high-income taxpayers.

Educational assistance. Payments made by an employer after March 27, 2020 and before January 1, 2026, to either an employee or a lender to be applied toward an employee’s student loans are excludable. The payments can be of principal or interest on any qualified education loan. An employer may pay up to $5,250 each tax year toward an employee’s student loans, and that amount would be excludable from the employee’s income. The $5,250 cap applies to the new benefit for student loan repayment assistance and other educational assistance already provided, such as for tuition, fees, and books. Any excess of benefits is subject to income and employment taxes.

Of course, in planning for higher-education costs, parents may also choose to use funds from an individual retirement account or a traditional form of savings. In addition, higher education costs may be supplemented with scholarships, loans and grants. However, having a viable plan as early as possible in a child’s life will make maximum use of a family’s financial resources and may provide some tax benefit. If you would like to explore how these opportunities can work for you and have us fully evaluate your situation, please do not hesitate to call.