Janell A. Israel & Associates

1585 Kapiolani Blvd., Suite 1604, Honolulu, Hawaii 96814 Phone: 808-942-8817

June 2012 Tax Newsletter


What's New in Taxes:


Consider Better Ways To Use Your Tax Refund



Tax refunds for 2011 returns are averaging nearly $3,000. What are you going to do with your federal income tax refund this year? Instead of spending the money on things you don't really need -- like a bigger flat screen TV or the latest smart phone -- you might put a sizeable refund to better use. Here are a few suggestions.


* Pay down debt. Improve your overall financial situation by reducing the amount of any outstanding debts beginning with high-interest rate credit card balances.


* Contribute to an IRA. For 2012, you can contribute up to $5,000 ($6,000 if you're age 50 or over) to any combination of traditional and Roth IRAs. Contributions to a traditional IRA may be wholly or partially tax-deductible, while Roth IRAs can provide tax-free payouts in the future. (*To qualify for the tax free penalty free withdrawal of earnings, a ROTH IRA must be in place for at least five tax years, and the distribution must take place after age 59 or due to death, disability, or a first time home purchase (up to $10,000 lifetime maximum). Before taking any specific action, be sure to consult with your tax professional.)



* Save for your children's education. Investigate the options, such as Section 529 plans*.


* Build an emergency fund. Set aside some money that will be available in case of emergencies.



Vacation Homes: What Are The Tax Rules?



If you own a home that is available for both personal and rental use, you have what is commonly known as a vacation home. Vacation homes are a hybrid: they are not purely rental properties, nor are they purely personal use properties. Since they are special, they have their own very specialized tax issues.


A vacation "home" could be a house, condo, motor home, boat, or similar property. In order to qualify, it must have a sleeping place, toilet, and cooking facilities.


If the home is rented for less than 15 days, you are not required to report the income. However, if you rent the home for 15 days or more, and you or family members use the home for personal use, you may have to allocate rental expenses.


The amount of personal use determines the classification of your home for tax purposes. If you rent your vacation home for more than 14 days, all your rental income is reportable. Whether you treat the income and expenses as a second residence or as rental property depends on the personal use of your vacation home relative to the time the home is rented out.


If you limit your personal use to not more than 14 days or 10% of the time the home is rented, all rental expenses are deductible.


If you use the property for more than 14 days or 10% of the number of days it's rented, the rules change. Your rental deductions (except for taxes and mortgage interest) are limited to the amount of your rental income.


The rules are complex, but a basic understanding of the rules and good recordkeeping will help you get the best tax breaks from your vacation home. Give us a call if you would like more information.




What's New in Finances:


Report Foreign Investments by June 30



If you have foreign bank, savings, or investment accounts, you are required to file "Treasury Department Form 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR)," by June 30, 2012. The report is required if you have an interest in accounts in foreign countries and the aggregate value of those accounts exceeded $10,000 at any time last year.


This is not a form that you file with your income tax return. Rather it is a separate form filed with the Treasury Department in Detroit. The report must be received by the Treasury Department, not postmarked, by the June 30 due date. Penalties for failing to meet the FBAR requirements are severe and can include jail time. Contact our office for details or filing assistance.



Be Cautious With E-mails If You Don't Want Your Identity Stolen


The e-mail from your bank gets your attention right away. It says you need to log into your account in the next 48 hours to continue your online privileges. Something about a system upgrade. You wonder, is it legitimate? How can you know for sure?


Bogus e-mails designed to steal your identity, also known as phishing, are becoming a bigger problem these days. While they can take many different forms, most scams are designed to trick you into revealing personal information such as your social security number or online account password. Through clever use of logos and familiar-looking web addresses, these e-mails often appear to be an urgent message from your bank, mortgage lender, or e-mail provider.


You may not realize it, but thieves are especially eager to gain access to your web e-mail account. Why? Once a scammer has access to your e-mails, he or she can often figure out where you bank and detect clues to passwords you might use.


So what can you do to protect yourself? Take a moment and think before you click. Never respond to an e-mail asking for your social security number or birth date. You can almost bet that it is a scam. If an e-mail contains a website link that you are not familiar with, do not click on it. Instead, either go directly to the company's trusted website, or contact them by phone.


Also remember that e-mail scams become more prevalent following a significant public event, such as a natural disaster or sudden stock market drop. Thieves will prey on your sympathies or fears during these times, so be extra careful when responding to appeals for charity or notices to update your financial records. Be further leery of e-mails with demanding language or incorrect grammar -- both are potential signs of a counterfeit e-mail.


For preventive measures, try to use a different password for every online account, and change your passwords regularly. Make your passwords stronger by using combinations of letters, symbols, and numbers. Also, keep your computer anti-virus software up to date.


Finally, do your part to thwart these crimes by reporting any suspected scam e-mails to reportphishing@antiphishing.org. If you receive a bogus tax-related e-mail, forward it to the IRS at phishing@irs.gov. And of course, feel free to contact our firm if you need a second set of eyes on any suspicious-looking e-mail.




Take a Break


Some Marriage Numbers...


June is the traditional month for weddings. Here are some marriage statistics revealed by a recent government report:


* Based on interviews conducted from 2006 to 2010, 38% of women have never married.


* Nearly 50% of marriages break up within 20 years.


* Education affects the likelihood of divorce. 78% of women with at least a bachelor's degree were still married after 20 years, compared with 41% for those with a high school diploma. 65% of men with at least a bachelor's degree were still married after 20 years, compared with 47% for those with a high school diploma.




All information is believed to be from reliable sources, however we make no representation as to its completeness or accuracy. The information contained in this newsletter is provided by Mostad & Christensen, Inc. The information is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance. For more information on anything in this newsletter, or for assistance with any of your tax, business, or financial strategy concerns, contact our office.

Securities and advisory services offered through National Planning Corporation (NPC), Member FINRA/SIPC, a Registered Investment Adviser. Mosted & Christensen, Janell Israel & Associates and NPC are separate and unrelated companies.

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