Market Commentary: Market Recap

U.S. equity markets tumbled for the second day in a row following an expected Federal Funds Rate hike announcement by the Federal Reserve on Wednesday. The Federal Reserve raised the Federal Funds guidance rate up 25 basis points to a range of 0.25% – 0.50%. This rate hike was widely expected by economists and financial markets initially rallied following the announcement as many investors believe this was a signal that the U.S. economy is on firm footing. However, this optimism was quickly quelled by concerns that global growth may continue to slow down in the coming quarters, primarily due to fears of a slowdown in China. Oil also continued to move lower this week and most commodities also dropped. With all of this recent negativity surrounding oil and commodity prices, a “Santa Claus rally” would be more than welcomed by many investors.
Year-End Tax Planning

With less than two weeks remaining in 2015, time is running out to look at ways to reduce your tax bill for the year. A few items that can still help you for 2015 include:
1. Tax loss harvesting – volatility in the market has created opportunities in investment accounts to offset realized capital gains as well as up to $3,000 of ordinary income.
2. 529 Plan contributions – contributions to these college savings plan may be state tax deductible. For Missouri, individuals can reduce state income by $8,000 ($16,000 per couple).
3. Charitable giving to qualified organizations – individuals can make gifts of cash or household items such as clothing, or consider making gifts of long-term appreciated securities from investment accounts.
4. Prepay items – such as state tax estimated payments, the January mortgage payment, etc. to help increase your itemized deductions.

If you have exhausted all your options for 2015, be sure to have plans in place for 2016 such as maxing out available retirement plans as much as possible.

Tax Extenders

Once again we are waiting until the end of the year to learn if popular tax breaks will be approved for the current year. Upon passage, under the Protecting Americans from Takes Hikes (PATH) Act of 2015, many of the tax extenders from 2014 will once again be reinstated retroactively for all of 2015. Fortunately this time some of the provisions are expected to be made permanent and thus will not have to be reinstated each year going forward.

A few of the popular items included in the bill:
1. The deduction for state and local sales taxes will be made permanent.
2. The Qualified Charitable Distribution (QCD) which allows those over the age of 70 ½ to contribute up to $100,000 of their required minimum distributions (RMDs) to a charitable organization without having to recognize the income (since no income is being recognized no deduction is permitted for these particular gifts) is expected to be made permanent.
3. Section 179 expensing for businesses will be made permanent.
4. New language regarding 529 plans is to be added regarding computers and related items being considered qualified expenses.

The hope is that by making many of these tax breaks permanent it will allow Congress to focus on comprehensive tax reform, as well as provide transparency on available tax rules for planning purposes. As of this writing the legislation is still pending so we will continue to monitor the situation and provide any updates.

This publication is provided as a service to our clients and associates of PFA solely for their own use and information. The material is derived from sources believed to be reliable but its accuracy and the opinions based thereon are not guaranteed and have not been verified. The content in this publication is for general information only and not intended to serve as individual investment advice. You should seek independent advice from a professional based on your individual circumstances.