LOOKING BACK AT 2013

How good a year was it for the economy?  Statistics tell the tale.

Was 2013 a terrific year for stocks? Absolutely. The good news wasn't limited to Wall Street, however: the employment rate fell, the economy revved up, home prices rose and inflation pressure was minimal.

Bulls triumphed. Christmas Eve brought the Dow's 49th record close of 2013: 16,357.55. The S&P 500 settled at 1,833.32 on December 24 - a new all-time peak - while the NASDAQ ended the day at 4,155.42. The YTD gains on Christmas Eve were stunning: DJIA, 24.83%; S&P, 28.55%; NASDAQ, 37.62%. As you read this, these indices may have climbed even higher since.1,2

GDP improved. Our economy expanded just 0.1% in the fourth quarter of 2012, but things got better in 2013. The Bureau of Economic Analysis measured GDP at 1.1% for Q1, 2.5% for Q2 and 4.1% for Q3.3

The job market began to turn around. In November, the jobless rate hit a 5-year low of 7.0%. From August through November, non-farm payrolls grew by an average of 204,000 jobs per month, compared to average growth of 159,000 new jobs a month from April to July.4

Homes grew more valuable. In late November, the September edition of the S&P/Case-Shiller Home Price Index showed a 13.3% year-over-year gain. Prices hadn't risen so dramatically in a 12-month period since February 2006.5

The Consumer Price Index barely rose. It was flat in November, and that put yearly consumer inflation at only 1.2%; the annualized gain in the core CPI was also minor at 1.7%. As recently as the summer of 2011, consumer inflation was approaching 4%.6

The recovery seemed to acquire more momentum. After years of troubling economic developments, 2013 was refreshingly positive. If the economy hasn't quite healed yet to where it was before the recession, indicators such as these suggest it won't be long until that day.

Citations.
1 - foxbusiness.com/markets/2013/12/24/stock-futures-steady-ahead-durable-goods-data/ [12/24/13]
2 - usatoday.com/money/markets/overview/ [12/24/13]
3 - money.cnn.com/2013/12/20/news/economy/gdp-report/index.html [12/20/13]
4 - cbsnews.com/news/unemployment-rate-dips-to-7-percent/ [12/7/13]
5 - tinyurl.com/jvl25lh [11/26/13]
6 - marketwatch.com/story/consumer-prices-unchanged-in-november-2013-12-17 [12/17/13]

Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO PETER MONTOYA.

MERRY CHRISTMAS 2013

That wonderful time of year is here again: Christmastime.

When you glimpse a great tree all lit up and decorated, or hear Nat King Cole's version of "The Christmas Song" or Bing Crosby singing "White Christmas", you can't help but feel sentimental. Wherever you come from, wherever you have been, the emotion of the season works its wonder and speaks to you.

There is something about Christmas that reminds us to enjoy the simple pleasures of life and the joys of friends and family in a hurried world. We are sentimental at Christmas - and so grateful, too, for the many gifts we have received.

In this beautiful season, may you be happy, healthy, and merry. We wish you a wonderful Christmas, and wonderful memories to go with it.

Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO PETER MONTOYA.

LET THE TAPER BEGIN

The Federal Reserve Board has made its long-awaited announcement that it will begin to scale back ("taper," in WallStreetSpeak) its QE3 stimulus program. The last time the Fed even mentioned starting to taper back, last fall, global stock markets and bond investors panicked and sent the markets reeling. Now, the Fed says that instead of buying $85 billion in Treasuries and mortgage bonds per month, it will only buy $75 billion, and more cuts will come as the economy continues its recovery and the jobless rate continues to fall.

With this announcement, markets went up and investors cheered. Japan's Nikkei index reached a six-year high, European markets soared, and U.S. stocks finished the day at new record prices.

Does any of this make sense to you?

The so-called "taper," and the QE3 stimulus program itself, are somewhat unique in the history of investment markets. To understand QE3, imagine that at the auctions where investors buy government bonds and packages of home loans, a bidder nine times the size of Gargantua shoulders everybody else aside and insists on paying higher prices (and, therefore, receiving lower interest) than any of the other bidders. The Feds' stated goal was to stimulate the economy by driving interest rates lower, making it less expensive for large and small businesses to borrow money, so they can build factories, expand their capacity and hire more people.

The problem with this stimulus effort all along was that American corporations are already sitting on tons of cash, and have little need to borrow if they really want to go on a building and hiring spree. The companies in the S&P 500 index reportedly have a record $1.5 trillion in their coffers, up 14% this year alone. Add in the money stuffed under the mattresses of smaller companies, and the total may exceed $5 trillion.

The Feds' mortgage purchases probably did make mortgage rates a bit cheaper for home buyers, but it's hard to tell how much. The day after the announcement, 30-year Fannie Mae mortgage rates were up 0.01 percentage points, at 4.42%. That's higher than the low of 3.31% in November of 2012, but still very low by historical standards.

Savers and long-term investors should breathe a sigh of relief that the Fed is finally easing out of the investment business. Why? For one thing, it means that economists at the Federal Reserve Board believe the economy is finally in a self-sustaining recovery mode.

For another, it means the end of uncertainty. When investors are unsure what to expect, they tend to expect the worst, which is why you will read articles saying that the taper will cause interest rates to skyrocket out of control, leading to all sorts of bad things in the economy, possibly including an alien invasion. By the (admittedly early) indications, no such thing is happening, and you can bet that Fed economists are monitoring the situation and plan to nip any catastrophe in the bud.

But at the same time, we can expect interest rates to go up over the next year or two at least, which is great news for older Americans who have been living on a fixed income with CD rates barely higher than what they would get if they stashed their retirement money in a cookie jar.

For the economy as a whole, there is still plenty of cash to lend to any company that wants it, housing is still more affordable than it was before the 2008 meltdown, and inflation is actually (and stubbornly) lower than the government's preferred target rate. Investors were wrong to panic last fall, and they are right to cheer now as the biggest, clumsiest bond buyer in history starts cautiously easing away from the auction table.

Sources:
http://www.cnbc.com/id/49519419
http://www.cnbc.com/id/101279385
http://www.foxbusiness.com/personal-finance/2013/12/18/how-fed-taper-announcement-could-impact-your-finances/
http://www.bloomberg.com/news/2013-12-18/mortgage-bond-yields-little-changed-after-fed-taper-announcement.html
http://money.cnn.com/2013/12/18/investing/world-markets-thursday/
http://money.cnn.com/2013/12/18/news/economy/federal-reserve-taper/

Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO BOB VERES.

TAX PERKS OF YEAR-END CHARITABLE GIVING

Help the causes you care about & help your finances in the process.

An opportunity for you to give & save. As 2013 ends, you may be considering making one or more charitable gifts. In most instances, they are tax-deductible with benefits for the donor as well as the recipient.

As you make any charitable gift, keep three things in mind. One, the organization must be a qualified charity. An Internal Revenue Service letter certifies this status. Some charities post such letters on their websites; others don't, but will produce one for you if there is any question in your mind. You can check up on a charity yourself at irs.gov, using the IRS Exempt Organizations Select Check. (For the record, the IRS considers churches, mosques, temples and others houses of worship de facto charities; they may not be on the Select Check list, but they are eligible to receive charitable gifts. If there is any question at all, simply ask.) 1,2

Two, remember that charitable contributions are only deductible if itemized on Form 1040, Schedule A (lines 16-19). They are deductible in the tax year that they are made.1,2

Three, you will want a receipt or some form of bank record - a credit card receipt, a canceled check - plainly denoting the name of the charity and the date and amount of the donation. You don't have to file these receipts with your 1040, but you should have them in case of an audit. The IRS now requires written evidence of cash donations to charities, regardless of amount.1,2

How should you contribute? There are a few popular options.

You could make a cash gift. The potential tax savings depends on your tax bracket. For example, if you write a check for $10,000 to a qualified charity, you could save $3,500 in taxes if you are in the 35% bracket and $1,500 if you are in the 15% bracket.3

Can you make a "cash" donation with a credit card? Of course - and as long as the charge is captured by the end of 2013, the donation is deductible for 2013. If you write a check dated in 2013 and mail it before January 1, that contribution will be deductible for 2013 even if it isn't cashed until next year.2

You could donate appreciated stock. In this bull market, many investors hold stocks and funds with major unrealized gains in taxable accounts. If you have owned stock (or other appreciated assets) for more than a year, you can donate that stock to charity and take a deduction equal to its fair market value while avoiding the capital gains tax you would incur by selling it.2,4

An example: you are in the 33% federal tax bracket, and instead of writing a $10,000 check to a charity, you gift $10,000 in appreciated stock you purchased years ago. Let's say the fair market value is $10,000 and the cost basis is $2,000. Under this scenario, your gift offers you a route to $3,300 in income tax savings plus an opportunity to avoid $1,200 of capital gains tax and $304 of Medicare surtax on net investment income.3

An important note: if you gift property worth more than $5,000 to a qualified charity, you are required to get a qualified appraisal of that property's fair market value. This applies to myriad forms of non-cash property, not just appreciated securities. You must also fill out Form 8283. (See irs.gov/taxtopics/tc506.html for additional requirements on non-cash charitable gifts.) 1,2

You could make a charitable IRA gift. To some traditional IRA owners, the annual Required Minimum Distribution is an annual financial nuisance - an unwanted chunk of taxable income. If you feel this way, and have put off your RMD until the last minute (more or less), you may have an alternative.

If you turned 70½ this year (or were already older than 70½ when 2013 started), there may still be time for you to arrange a charitable IRA rollover before the year ends. You may donate up to $100,000 of IRA assets to a qualified charity through a trustee-to-trustee transfer arranged by the IRA custodian. (That is, the money cannot pass through the donor's hands.) The gifted assets must be transferred before the end of 2013. There is no resulting federal income tax deduction, but the distribution of IRA assets to charity can count toward the annual IRA withdrawal requirement and isn't included in the donor's adjusted gross income. Your IRA custodian must send you a 1099-R in January reporting the gift.5

Finally, some fine print. There are some limits to annual charitable gifting, especially if your charitable contributions exceed 20% of your adjusted gross income. Should that occur, you may find that you can only deduct cash contributions up to 50% of your AGI. Similarly, you may also only be able to deduct non-cash assets up to 30% of AGI and appreciated capital gains assets up to 20% of AGI. Should you exceed those limits, you can carry the deduction forward for up to five years. In addition, single filers with AGI above $250,000 and married joint filers with AGI above $300,000 face losing a portion of their itemized deductions in 2013.2,3

Citations.
1 - irs.gov/taxtopics/tc506.html [4/15/13]
2 - forbes.com/sites/kellyphillipserb/2013/11/01/making-your-gifts-count10-smart-tips-for-charitable-giving/ [11/1/13]
3 - wellsfargoadvisors.com/market-economy/financial-articles/estate-planning/charitable-giving-stock-cash.htm [12/12/13]
4 - cbsnews.com/news/when-making-charitable-donations-give-stock-not-cash/ [11/25/13]
5 - forbes.com/sites/deborahljacobs/2013/11/01/the-dollars-and-sense-of-giving-ira-assets-to-charity/ [11/1/13]

Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO PETER MONTOYA.

A BUDGET DEAL - -WHEN?

If there's one thing investment markets hate, it's uncertainty, which is why some advisors have circled late January and early February as a time to watch their portfolios very carefully. The worst case scenario is another federal government shutdown where the U.S. Congress will, at roughly the same time, refuse to raise the debt ceiling. If this becomes an annual event, sooner or later, the markets are going to take a hit.

But suddenly it looks like this messy future political fight might be avoided after all. As you read this, two legislators representing both sides of the aisle and both houses of Congress--Sen. Patty Murray (D-Wash.) and Rep. Paul Ryan (R-Wis.)--are negotiating one-on-one over a federal budget that would be created by human hands rather than by the automatic cuts known as the sequestration. Murray and Ryan have two things in their favor: 1) the support of party leaders as they make compromises, largely because both sides want to avoid the unfavorable publicity of another ugly budget stalemate; and 2) a deadline, since everybody in Congress wants to leave Washington and go home by December 13.

What are they negotiating over? The differences are surprisingly small. The Republicans are uncomfortable with the automatic sequester cuts to military spending, and want to give the Pentagon back the $19 billion that would vanish from its budget next year. The Democrats want to include $25 billion in benefits for 1.3 million long-term unemployed persons, which are set to expire at the end of this year.

The Republicans want to require federal workers to pay an additional 5.5% of their paychecks toward funding their retirement benefits, which would save taxpayers $130 billion over 10 years. The Obama Administration has proposed a 1.2% increase, saving $20 billion.

Both sides want to generate new revenues when the government auctions off parts of the broadcast spectrum to cell phone networks early next year. And there is talk about raising airline user fees to further raise revenues.

A compromise deal might authorize $1.015 trillion in discretionary spending next year, more than the $967 billion that would result from another year of the sequestration, but less than the $1.058 trillion that Democrats have been seeking. To pass any compromise measure, the Senate Democrats would need the support of only five Republicans. In the House, at least 30 Democrats would have to join with Republican supporters. That, of course, assumes that Tea Party Republicans sign off on a deal that raises domestic and defense spending, which is not a given--even if it is negotiated by one of their own.

Sources
http://www.politico.com/story/2013/12/budget-deal-100854.html
http://news.yahoo.com/emerging-budget-deal-small-victory-republicans-071800982.html
http://www.washingtonpost.com/business/economy/budget-deal-expected-this-week-amounts-to-a-cease-fire-as-sides-move-to-avert-a-standoff/2013/12/08/cc270d90-600b-11e3-8beb-3f9a9942850f_story.html?hpid=z1
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/12/09/wonkbook-the-grand-bargain-is-over/?tid=pm_business_pop

Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO BOB VERES.

TEMPORARY TAX PROVISIONS SET TO EXPIRE IN 2014

Some may be renewed, others may not be.

At the end of every year, certain federal tax breaks face a sunset. Some are renewed, some expire. As 2014 will soon start, here is a list of some notable tax provisions that may go away next year - offering some opportunities that you may want to take advantage of this year.

Qualified tuition deduction. For 2013, an individual taxpayer has the chance to claim an above-the-line deduction for tuition and fees. This applies only to qualified higher education expenses. This deduction is set to expire at the end of this year; it may or may not be extended.1,2

Mortgage insurance premiums deductions. Are you paying for private mortgage insurance (PMI)?This year, you can treat qualified PMI premiums as home mortgage interest, but the deduction only applies if your adjusted gross income is no greater than $109,000. This tax break could go away in 2014; it is available only for mortgages entered into during 2007-13.1,3,4

Mortgage debt relief. In 2013, canceled mortgage debt of up to $2 million (or $1 million, in the case of married taxpayers filing separately) can be excluded from taxable income. The debt must be forgiven on a qualified principal residence (i.e., a taxpayer's primary home) due to the borrowers' financial condition or a decline in value of the residence. You can thank the Mortgage Debt Relief Act of 2007 for this. The tax break is set to sunset at the end of 2013, though - and if it does, then any such debt forgiven next year will be taxable income.2,5

State & local general sales tax deduction. 2013 might be the last year individual taxpayers can choose to deduct state and local general sales taxes as opposed to state and local income taxes. This option is set to expire at the end of the year.1

Educator out-of-pocket expenses deduction. Classroom teachers/instructors, counselors, principals and aides who work in grades K-12 have enjoyed a special deduction of up to $250 in out-of-pocket costs above the line in 2013. As for 2014, this deduction is still a question mark.1

Qualified charitable distributions from an IRA. If you are over 70½, you have through December 31 to make a tax-free transfer of assets from an IRA directly to a qualified charity. While you can't deduct the amount as a charitable contribution, it does count toward your annual required minimum distribution (RMD). Will this option be extended into 2014, or be made permanent? No one knows just yet.1

Increased expensing & bonus depreciation allowances. This year, the Section 179 deduction is set at $500,000 while the qualifying property limit is $2 million. In 2014, these limits are slated to drop dramatically: a Section 179 deduction of $25,000, a qualifying property limit of $200,000. In 2013 you can expense off-the-shelf software under Section 179; not so in 2014. This year, you can amend or irrevocably revoke a Section 179 election; next year, a Section 179 election will generally be irrevocable with IRS consent. While you can claim the Section 179 deduction on up to $250,000 of qualified real property this year, 2014 may offer you no such chance. For 2013, qualified leasehold and retail improvements and qualified restaurant property were given a 15-year straight-line recovery period; in 2014 the straight-line recovery period becomes 39 years. Congress may act to preserve all these current allowances.1,2

Currently, 50% special depreciation is permitted for qualified property additions placed into service in 2013, only long production-period property and certain kinds of aircraft will are slated to qualify to special depreciation in 2014. Again, Congress may preserve the current allowance.2

Electric vehicle credit. If you bought (or even leased) an electric car this year, you may be eligible for a tax credit of up to $7,500 (variable based on the size of the battery pack used by the vehicle). This tax perk is set to sunset in 2014. If you bought a qualifying 2-wheel or 3-wheel plug-in electric vehicle this year, you are eligible for a federal tax credit of up to $2,500.2,3

Personal energy property credit. Since 2006, there has been a $500 lifetime tax credit available to taxpayers who remodel their homes for energy efficiency. If you haven't remodeled enough to claim the full $500 credit yet, a heads-up: it is set to expire at year's end.1,3

R&D tax credit. This credit is admittedly hard to figure, but it can bring about major savings and can be carried forward or back. Up to 20% of R&D expenses (above a base) may generally be used as a credit against tax owed. Who knows, it may not be around for 2014.6

Transit benefits. In 2013, the exclusion for transit passes and/or vanpooling, provided by an employer, is $245 monthly; this is the same as the exclusion for employer-provided parking. Next year, the benefit for public transportation falls to $100 per month (with adjustment for inflation) while the exclusion for employer-provided parking stays at $245 per month.2,3

One more thing to keep in mind. The IRS will delay the start of the tax-filing season by at least a week, a consequence of October's federal government shutdown. It had planned to accept tax returns on January 21; that date will now be January 28 or later, with the final determination coming in December. The April 15 deadline for filing returns or requesting extensions still applies.7

Citations.
1 - accountingtoday.com/gallery/disappearing-tax-deductions-67830-1.html [10/30/13]
2 - tinyurl.com/k4pgc8f [11/5/13]
3 - dailyfinance.com/2013/11/05/8-tax-breaks-expiring-year-end-2013/ [11/5/13]
4 - inman.com/2013/08/20/dont-count-on-private-mortgage-insurance-deduction-in-2014/ [8/20/13]
5 - efile.com/home-foreclosure-mortgage-forgiveness-tax-relief-exclude-canceled-debt/ [11/14/13]
6 - inc.com/gene-marks/take-advantage-of-tax-breaks-before-december-31.html [10/31/13]
7 - bloomberg.com/news/2013-10-22/irs-delays-start-of-2014-u-s-tax-filing-citing-shutdown.html [10/22/13]

Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO PETER MONTOYA.