It’s harvest season for your portfolio, at least if you are hoping to save on taxes.
December is the time when many people think about harvesting tax losses to cut their tax bills (though it’s possible any time of year). Selling stocks or other assets that have lost value generates a reduction in your tax liability that you can use to offset capital gains.
The market’s recent ups and downs have been unsettling, but the silver lining is that any losses in your portfolio may make April 15 considerably less unpleasant if you decide these are assets you no longer want to hold.
Read More6 ways to lower your 2014 tax bite
“Do I have some security that I just don’t fundamentally believe in any more and I want to reduce my allocation or get out? Do I have an asset allocation that is out of balance?” said John Sweeney, executive vice president of retirement and investing strategies at Fidelity. If so, he said, “you can sell both your winner and the security that is underwater.”
Selling short-term assets is especially helpful at tax time. Losses on those assets can be used to offset any short-term capital gains, and short-term capital gains are taxed at ordinary income rates, not at the lower long-term capital gains rates.
The higher your tax bracket, the greater the potential for tax-loss harvesting to save you money. Top earners in the 39.6 percent income tax bracket wind up paying a rate of 43.4 percent on short-term capital gains, since taxpayers in that bracket also pay the Medicare surcharge of 3.8 percent.
“Technically, everybody can and should be looking to do this,” said Paul Giliberto, senior wealth planner at SunTrust Bank. “[But] higher income taxpayers are the ones that stand to gain the most.”
Read MoreHow traders are playing year-end selling
In fact, in the lowest tax brackets, your long-term capital gains rate goes to zero. In that case, harvesting gains makes more sense than harvesting losses. It won’t affect what you owe in taxes now, but you will be able to lock in a higher cost basis if you repurchase that asset at the current higher price, reducing your potential future tax liability.
“People at the zero capital gains rate can sell winners and get them back at a higher basis at no cost,” said Michael Kitces, partner and director of research at Pinnacle Advisory Group. But for those people, “tax-loss harvesting is a disaster. You step your cost basis down and get no savings.”
Long-term tax planning can also help you decide whether to harvest tax losses. If you expect your income to be lower in future years — if you are heading into retirement, or have just coming into a sudden one-time windfall, or you are selling your home and downsizing — it may make sense to harvest losses now when the tax savings are greater.
If you believe overall tax rates are on track to fall, harvesting losses now also makes sense.
“Take the loss at the higher rate if you think the next president will have a policy of lower tax rates,” said Bob Meighan, a vice president at TurboTax. “People are all about saving today.”
NEW YORK (CNNMoney)
‘Tis the season for gifting (and tipping), and there’s a whole list of people who may be expecting a few dollars.
Early December is prime tipping time, and this year Americans are expected to give more holiday tips than last year. The surge is good news for house cleaners, hair stylists and elevator operators, but for the tipper, parting with those extra dollars can be as painful as it is charitable, according to a recent report by Care.com (CRCM), a site connecting consumers and caregivers.
Take delivery people. According to the study, 1 in 3 people wish they didn’t have to tip them a little extra this holiday season. A similar sentiment goes for child care providers — 14% of respondents wish they didn’t have to include them either.
But they do. For nannies, the recommended holiday tip is one to two week’s pay. For day care workers, it’s $25-$50, plus a small gift from your child.
Also on the list are building superintendents, baristas, dog walkers, dry cleaning delivery people, personal trainers and school bus drivers.
How much should you tip housekeeping? A travel tipping guide
The survey showed that 17% of people tip because of expectation, compared to 73% who do it to say thank you. About 6% tip out of fear they won’t get good service next year if they’re stingy.
Fear should never be a factor in gifting, said Diane Gottsman, an etiquette expert. “You should not feel blackmailed that they’re not going to give quality service,” she said. “A gift is not an obligation.”
Still, deciding who receives that gift can become contentious. About 15% of people said they argue with their partner about tipping, which is no surprise, given that 1 in 4 people plan to spend more than $250 in total — a large chunk of some household budgets.
Sticking to a holiday tipping budget, and allocating cash or gifts starting with those closest to you, is the best way to handle a longer list, said Katie Bugbee of Care.com.
For those who skip the tip, there may be some savings, but it comes with a healthy side of guilt — especially if you’re a woman. Over half of the women surveyed reported feeling guilty about not tipping, compared to 39% of men.
“Women are just feeling guilty all the time,” Bugbee said. “Even when they are handing out a lot of cash, they can’t win.”
Gottsman advised that when wondering where to draw the line, it’s simple: If you wouldn’t gift that person, don’t tip them. Lists that offer guidelines for tipping should be regarded as suggestions and not rules.
5 people you might not tip (but should)
Some may not tip because they just don’t have the money, which is true of 28% of respondents. Still, Bugbee said to be mindful of the message that could send.
Even if a cash tip isn’t possible, send on a hand-written note or a homemade food item — especially if it’s people who work in your home. “If you’re having a very economical Christmas they’ll know that and they’ll see that,” she said.
Gottsman agreed, saying that while gifting is a choice, not giving anything may leave an impression that says, “I’m not as appreciative of you.”
But it is the holiday season, after all. “You give with good cheer, you give with good will,” she said.
Wondering how much to tip everyone, from the animal trainer to the Zumba instructor? Check out this handy list, courtesy of Care.com.
First Published: December 12, 2014: 10:10 AM ET
NEW YORK (CNNMoney)
Now, even rents are reaching new heights — to the tune of $500,000 a month.
Or at least that’s what one tenant is paying for a six-bedroom suite that occupies the entire 39th floor of Manhattan’s posh Pierre Hotel.
The renter is not only renting the suite for the entire month of December, but also the separate one-bedroom Getty Suite for $150,000 a month, according to Therese Bateman and Andres Perea-Gurzon, the Town Residential agents who represented the listing.
The agents wouldn’t disclose the tenant’s name, but one thing is clear: The half-million-dollar a month rent is not only a record for Manhattan. “It blows everything else out of the water,” said Jonathan Miller, head of the appraisal firm Miller Samuel. “It’s the highest rent I’ve ever seen. Nothing comes close.”
The bedrooms are large and luxurious.
The 4,786 square-foot main dwelling of the rental includes the hotel’s lavish presidential suite.
Many international visitors traveling with large families or entourages rent the Pierre Residences. But some locals are also in the mix, including some Upper East Siders doing extensive renovations on their own luxury homes.
The living room offers plush seating, soft carpets and beautiful views.
Elizabeth Taylor, Yves Saint-Laurent, Dashiell Hammett, Mohamed Al-Fayed and Francis Ford Coppola are just some of the famous residents who have lived at the Pierre.
Related: Brooklyn is now the least affordable place in America
Opened in 1930,the Pierre went through a $100 million renovation a few years ago in which public spaces, such as the lobby and grand ballroom, were redecorated and the guest rooms updated with new technology.
The master bath is bigger than some NYC apartments.
Its views are panoramic, with Central Park, the Upper East Side and Midtown Manhattan within easy sight. The George Washington Bridge, five miles north, is even visible on a clear day.
The guest suite comes with a deep terrace with park views.
The location is a big part of the property’s attraction, said Bateman, who, with Perea-Gurzon, also represents nine other luxury suites at The Pierre that start at $75,000 a month.
“Living at the Pierre rental suites gives residents great flexibility,” she said.
Related: For sale, the world’s most expensive apartment
Tiffany, Cartier and Harry Winston Jewelers, FAO Schwartz, and Madison Avenue boutiques are all nearby, as are the Theater District, Lincoln Center and Carnegie Hall.
The elegant Pierre Hotel lobby and its attentive staff.
Beyond the apartment’s comfort, location and views, what really makes the Pierre special is the numerous services and benefits that are included. There’s a private elevator, butler and maid service, 24/7 concierge, and a chauffeur driven Jaguar.
First Published: December 10, 2014: 5:20 PM ET
Astronauts still have to file their taxes on April 15 every year — even if they’re floating in outer space.
HONG KONG (CNNMoney)
Yes, that’s right. Astronauts are on the hook to file taxes by April 15, even if they’re orbiting hundreds of miles above Earth on a long-term mission.
The IRS — the much-feared enforcer of the U.S. tax code — makes no exceptions. Experts say astronauts don’t get special treatment, no matter how far away they are from the planet.
NASA astronaut Leroy Chiao — commander of the tenth expedition to the International Space Station — was in orbit when tax day rolled around in 2005. Chiao had no choice but to manage his taxes from space.
But how exactly did that happen?
“Get someone to help you out on the ground,” Chiao said. The mission commander’s sister is an accountant, and she was able to file papers on his behalf to extend his tax return deadline.
“He certainly had a good, valid reason [for the extension],” said his sister, Judy Chiao Smith.
Related: This job has the world’s worst tax return
After eight months living on the International Space Station, Chiao returned to earth on April 24, 2005 — just nine days after tax day — and got busy working on his tax return.
Since astronauts are routinely gone for months, “you do have to anticipate everything,” Chiao said. The astronaut ticked off a laundry list of events to prepare for: voting, birthdays, anniversaries and even Christmas.
Taxes are no exception. Astronauts need to “make sure their mail is getting redirected, so the [tax forms] and other information from the government actually goes somewhere, and isn’t held at the post office,” Chiao Smith said. “If you’re up there in space, you can’t get ahold of the data.”
Another strategy is for astronauts to file taxes early, said NASA spokeswoman Nicole Cloutier. Some astronauts “file an extension pre-flight, or their spouse handles filing the taxes,” she said.
Taxes have long stressed out astronauts — Jack Swigert, a last-minute addition to the Apollo 13 crew, even radioed Houston’s mission control center for tax help while the mission was underway.
“Hey, listen, it ain’t too funny; things kind of happened real fast down there, and I do need an extension,” Swigert said, according to NASA transcripts. “I didn’t get mine filed, and this is serious.”
With laughter in the background, mission control promised to help Swigert.
For accountants that work on astronaut taxes, the physical location of their clients raises some interesting — or perhaps bizarre — questions.
Americans living abroad can claim an exemption on income earned in a foreign country, for example. Could an astronaut also claim the exemption?
Related: For $90, you can bury stuff on the moon
Experts say astronauts working in outer space probably wouldn’t qualify. That’s because government workers aren’t typically eligible, and the IRS doesn’t consider international airspace or waters to be a foreign country, said Vincenzo Villamena, an accountant who specializes in expat taxes.
“Even if the astronaut was stationed on board the International Space Station, it would be considered an offshore shop or offshore installation [subject to U.S. taxation],” he said.
But does the IRS definition of “international airspace” extend to altitudes beyond the Earth’s atmosphere? The tax code is silent on the issue, and the IRS did not respond to request for comment.
“It’d be an interesting argument to make, because technically, you are out of the country,” Chiao Smith said.
Read next: Why NASA is turning to Elon Musk
First Published: December 7, 2014: 9:09 PM ET
The target audience: millennials. That generation, according to Moody’s Analytics, has a savings rate of negative 2 percent. “We’re trying to make it easier for people to start building their savings,” said Sam Das, founder and chief executive of Wherewithal. “Having some kind of financial cushion is a necessity in this day and age.”
Necessary, but not easy. “People are completely paralyzed,” said Cruttenden. He co-founded the company with his father, Walter, after noticing that many of his college classmates wanted to invest but couldn’t accumulate enough to meet minimum balance requirements, let alone navigate commissions or create a balanced portfolio. “The goal is to offer them a product that enables them to invest a little bit every day,” he said.
Read MoreShopping online deals? You can do better
The spare-change angle could be an attractive hook, said Kit Yarrow, a professor of marketing and psychology at Golden Gate University. It’s a small enough amount of money that investing is less intimidating and more like a game, and an easier savings commitment to keep when money is tight. “A lot of time, it’s those low-risk starts that get people fascinated,” she said.
Just don’t rely on them. “Your retirement is not going to be made or broken on the investment growth of your spare change,” said Michael Kitces, a certified financial planner based in Reston, Virginia. At some point, you need to actively make larger contributions toward future goals.
Read MoreWhen it’s smart to pay by phone
That’s something Acorns and Wherewithal do allow for; but, even then, consider whether putting money in the stock market is the right choice. Both sites invest your cash in low-cost exchange-traded funds. “If saving is that much trouble, I’m going to guess that the bigger problem is that you don’t have emergency savings,” said Kitces. Consumers in that situation, he said, should focus first on stashing cash in a savings account where there’s no risk of losing money.
Users should also assess fees. When contributions are small, fees eat up a bigger percentage of your balance, said Kitces. Wherewithal users start with a free cash-back account; upgrading to the investment option entails a monthly fee of $10 and an annual fee of 0.25 percent of the balance. (Das said that price could change. “That’s part of the beta, just to see what the right price is and get people’s feedback,” he said.) Acorns charges $1 per month, as well as an annual fee of 0.25 to 0.5 percent of your portfolio.
This time last year I made my final five (of ten) predictions for 2014. Hereâ??s my report card on those predictions, followed by my final five predictions for 2014 (plus a bonus prediction).
What I expected to happen in 2014
The yield curve would steepen, with short-term rates remaining very low and the 30 Year Treasury rising above 4 Â½%.
In spite of rising mortgage rates, home prices would continue to rise.
Commodities would continue to underperform, with gold remaining below $1,500/oz.
The â??bitcoinâ? craze would blow up.
Miraculously, Congress would actually manage to pass meaningful legislation, including a longer term budget and debt deal.
Iâ??d say I got 3 out of 5 for my second set of 2014 predictions, compared to the 4 out of 5 after auditing the first five.
I swung and missed on the 30-Year Treasury. As of this writing itâ??s 3.05%. Its high for the year was 3.93% in early January. Although I was right that short-term rates would remain low, the yield curve flattened out more than a full percent.
I was hardly alone in my home price prediction and we all got it right. At the time Redfin (RFNN) and Zillow Zillow were predicting that home prices would rise between 3% and 5% in 2014. As of this writing, although housing prices can certainly be termed uneven, they are technically up in aggregate. Asking prices were up 6.4% in year-over-year October, according to the Trulia Price Monitor. Although price gains have slowed in 60 of the 100 largest metro areas, only nine metros show actual falling year-over-year prices. Of course, while home prices are up, it is fair to point out that the pace of gains is decelerating as the year winds down.
Commodities most certainly underperformed. Gold not only remained below $1,500, but fell to a four-year low (during intraday pricing) of $1,160.50. Overall in 2014, the metal has dropped 2.9%.
Bitcoinsâ??digital money sent through the Internetâ??have not â??blown upâ? in terms of total annihilation but they certainly have suffered significant damage. Iâ??m giving myself credit for not buying into the hype and predicting its decline. Even some of the virtual currencyâ??s most ardent advocates are admitting the market is â??sputteringâ? if not taking a dive. Bitcoins have taken a strange trip. The oddest twist Iâ??d say are the raft of thefts at exchanges (like Mt. Gox) prompting entrepreneurs (Xapo, for one) to raise money to create actual armed, guarded steel vaults to store what is essentially code on a computer drive. Do I still think the whole thing will eventually go bankrupt? Yes, the significantâ??and to my mind irreparableâ??cracks will shatter this phenomenon.
With the President constantly bypassing Congress with Executive Action, itâ??s easy to forget that the year opened shortly after the Bipartisan Budget Act passed that reinforced the budget and deficit reduction. Of course, two months later an act was passed to temporarily suspend debt limits and, as of this writing, lame-duck action is expected to add $1.5 trillion to long-term debt. Other than that about face, Congress busied itself with such things as agreeing that adoptee records should be accurate, renaming the Dryden Flight Research Center as the Neil A. Armstrong Flight Research Center, reauthorizing a nationwide toll-free number for the poison center, approving a local commemorative for the Peace Corps, appointing leaders of the Smithsonian Institution as well as a nod to the importance of drought relief and agricultural reform.
My second five predictions for 2015Â (see What Investors Can Expect In 2015 for my first five predictions)
6. Hedge funds will make a comeback, beating most traditional U.S. equity mutual funds.
7. Russia officially invades the Ukraine.
8. China announces a new â??Five Year Planâ? laying the roadmap for investing in one of the worldâ??s largest and fastest growing economies.
9. The U.S. dollar rally fizzles, which helps U.S. multinationals (which are also, for the most part, high quality dividend paying companies) do well.
10. Republicans attempt to impeach President Obama but fail miserably.
My de facto 11thÂ prediction is something completely unexpected will happen in 2015. I wish I knew what.Â Itâ??s a very volatile world, and in an environment where anything can happen, something that no one thought of coming surely will. In short, at least one black swan, if not a flock, will take flight in 2015.