Navigating the Phase-Out of Bonus Depreciation

ST. CROIX INSIGHTS

Navigating the Phase-Out of Bonus Depreciation

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC
US dollar banknotes over digital screen with exchange chart, depreciation and volatility concept

The first-year bonus depreciation deduction is being gradually phased out. Here’s a strategy to consider: Focus on the Section 179 deduction instead. If you place in-service property that qualifies under Section 179, you can aim for immediate write-offs up to a generous limit. Claiming bonus depreciation may not be necessary.

Understanding Bonus Depreciation

First-year bonus depreciation is available for assets like computers, vehicles (within limits), off-the-shelf software, machinery and equipment, office furniture, and other property depreciable under the Modified Accelerated Cost Recovery System (MACRS), with a recovery period of 20 years or less. You can also claim bonus depreciation for “qualified improvement property” (QIP) in a nonresidential building. For a particular asset, the first-year bonus depreciation deduction is claimed after the taxpayer claims any first-year Section 179 depreciation deduction.

Historical Context

Before the Tax Cuts and Jobs Act (TCJA), the first-year bonus depreciation deduction was equal to 50% of the cost of new (but not used) qualified property placed in service during the year. The TCJA doubled the first-year bonus depreciation percentage to 100% for qualified property placed in service after September 27, 2017, and before January 1, 2023. It also expanded the bonus depreciation deduction to cover used as well as new property.

However, the TCJA phases out first-year bonus depreciation from 2023 through 2026. The allowable percentage for property placed in service in calendar year 2024 is 60%, meaning you’re getting less tax bang for your buck this year than in the past.

Read more: 10 Key TCJA Changes Set to Expire

Leveraging Section 179 Deduction

Fortunately, the phase-out can be a moot point if the property placed in service qualifies for the first-year Section 179 depreciation deduction, which can cover 100% of the depreciable property’s cost.

Section 179 Benefits

A business can write off the full cost of qualified Section 179 property (both new and used) placed in service during the year, up to the lesser of its business income calculated before any Section 179 deductions or an annual maximum that can be subject to a phase-out rule. For tax years beginning in 2024, the maximum Section 179 deduction is $1.22 million, subject to a phase-out at $3.05 million of qualified property placed in service during the year. In many cases, a small or medium-sized business can instantly write off the entire cost of property placed in service in 2024—with no bonus depreciation needed. And if there’s some cost left over, bonus depreciation and regular depreciation can pick up part of the slack.

Decision-Making Considerations

The decision to claim first-year Section 179 deductions or first-year bonus depreciation is not a simple one. Also, most states allow Section 179 and many states did not adopt bonus depreciation

Impact on Pass-Through Entities

For example, if your business is organized as a pass-through entity—such as an S corporation, partnership. Section 179 deductions and bonus depreciation write-offs reduce your qualified business income (QBI). This lowers your QBI deduction. Therefore, if you’re entitled to a QBI deduction, consider the potential tax impact from first-year depreciation deductions.

Net Operating Losses and Future Tax Rates

You can create a NOL with bonus depreciation but not 179. Furthermore, it may be advantageous for your business to forego first-year Section 179 deductions and first-year bonus depreciation if you have a net operating loss (NOL) for the year, an NOL carryover into the year, or expiring tax credit carryovers that could not be used if taxable income is reduced by big first-year depreciation deductions. Also, if you believe tax rates will be higher in future years, depreciating assets over those future years when tax rates are higher could yield greater overall tax savings than claiming first-year depreciation deductions for the current year.

Timing of Deductions

Finally, remember that Section 179 deductions and bonus depreciation can only be claimed in the year in which the qualified property is placed in service—not the year the property is acquired. This is important if you need extra time at year-end to customize and/or install equipment.

Tip: Keep these tax rules in mind when your business purchases depreciable property.

This can be a very complicated tax area. Talk to a qualified CPA about this that specializes in business planning. Shaun Simma, CPA is someone I turn to for advice in the area. His e-mail address is shaun.simma@creativeplanning.com.

 

The first-year bonus depreciation deduction is being gradually phased out. Here’s a strategy to consider: Focus on the Section 179 deduction instead. If you place in-service property that qualifies under Section 179, you can aim for immediate write-offs up to a generous limit. Claiming bonus depreciation may not be necessary.

Understanding Bonus Depreciation

First-year bonus depreciation is available for assets like computers, vehicles (within limits), off-the-shelf software, machinery and equipment, office furniture, and other property depreciable under the Modified Accelerated Cost Recovery System (MACRS), with a recovery period of 20 years or less. You can also claim bonus depreciation for “qualified improvement property” (QIP) in a nonresidential building. For a particular asset, the first-year bonus depreciation deduction is claimed after the taxpayer claims any first-year Section 179 depreciation deduction.

Historical Context

Before the Tax Cuts and Jobs Act (TCJA), the first-year bonus depreciation deduction was equal to 50% of the cost of new (but not used) qualified property placed in service during the year. The TCJA doubled the first-year bonus depreciation percentage to 100% for qualified property placed in service after September 27, 2017, and before January 1, 2023. It also expanded the bonus depreciation deduction to cover used as well as new property.

However, the TCJA phases out first-year bonus depreciation from 2023 through 2026. The allowable percentage for property placed in service in calendar year 2024 is 60%, meaning you’re getting less tax bang for your buck this year than in the past.

Read more: 10 Key TCJA Changes Set to Expire

Leveraging Section 179 Deduction

Fortunately, the phase-out can be a moot point if the property placed in service qualifies for the first-year Section 179 depreciation deduction, which can cover 100% of the depreciable property’s cost.

Section 179 Benefits

A business can write off the full cost of qualified Section 179 property (both new and used) placed in service during the year, up to the lesser of its business income calculated before any Section 179 deductions or an annual maximum that can be subject to a phase-out rule. For tax years beginning in 2024, the maximum Section 179 deduction is $1.22 million, subject to a phase-out at $3.05 million of qualified property placed in service during the year. In many cases, a small or medium-sized business can instantly write off the entire cost of property placed in service in 2024—with no bonus depreciation needed. And if there’s some cost left over, bonus depreciation and regular depreciation can pick up part of the slack.

Decision-Making Considerations

The decision to claim first-year Section 179 deductions or first-year bonus depreciation is not a simple one. Also, most states allow Section 179 and many states did not adopt bonus depreciation

Impact on Pass-Through Entities

For example, if your business is organized as a pass-through entity—such as an S corporation, partnership. Section 179 deductions and bonus depreciation write-offs reduce your qualified business income (QBI). This lowers your QBI deduction. Therefore, if you’re entitled to a QBI deduction, consider the potential tax impact from first-year depreciation deductions.

Net Operating Losses and Future Tax Rates

You can create a NOL with bonus depreciation but not 179. Furthermore, it may be advantageous for your business to forego first-year Section 179 deductions and first-year bonus depreciation if you have a net operating loss (NOL) for the year, an NOL carryover into the year, or expiring tax credit carryovers that could not be used if taxable income is reduced by big first-year depreciation deductions. Also, if you believe tax rates will be higher in future years, depreciating assets over those future years when tax rates are higher could yield greater overall tax savings than claiming first-year depreciation deductions for the current year.

Timing of Deductions

Finally, remember that Section 179 deductions and bonus depreciation can only be claimed in the year in which the qualified property is placed in service—not the year the property is acquired. This is important if you need extra time at year-end to customize and/or install equipment.

Tip: Keep these tax rules in mind when your business purchases depreciable property.

This can be a very complicated tax area. Talk to a qualified CPA about this that specializes in business planning. Shaun Simma, CPA is someone I turn to for advice in the area. His e-mail address is shaun.simma@creativeplanning.com.

10 Key TCJA Changes Set to Expire

ST. CROIX INSIGHTS

10 Key TCJA Changes Set to Expire

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC
Close up of a Tax return form with calculator

The Tax Cuts and Jobs Act (TCJA) was implemented at the end of 2017. It marked the most significant federal tax overhaul in over three decades. Many provisions affecting individuals under the TCJA are slated to expire after 2025.

Here’s a look at the 10 key changes set to expire:

  • Individual Tax Rates: The TCJA introduced new tax rates for individuals, including a reduced top rate of 37%, down from the previous 39.6%, along with lower rates for other brackets. These rates are expected to return to their pre-TCJA levels in 2026.
  • Standard Deduction: The TCJA substantially increased standard deduction amounts and indexed them for annual inflation. For the tax year 2024, the standard deduction is $14,600 for single filers and $29,200 for joint filers. However, these amounts are set to decrease significantly after 2025.
  • Personal Exemptions: Before the TCJA, individuals could claim personal exemptions for themselves, their spouse (if married), and each qualified dependent. However, the TCJA suspended these exemptions for the tax years 2018-2025.
  • Alternative Minimum Tax (AMT): The TCJA included enhancements to the individual AMT, such as increased exemption amounts, resulting in fewer taxpayers being affected by it. However, these benefits are set to expire after 2025.
  • Child Tax Credit (CTC): The TCJA raised the CTC from $1,000 to $2,000 and added a $500 credit for non-dependents. These changes will revert to prior law after 2025.
  • State and Local Tax (SALT) Deductions: Previously, SALT payments were fully deductible for itemizers, but the TCJA capped this deduction at $10,000 for the tax years 2018 through 2025. The cap will be eliminated in 2026.
  • Moving Expenses: The TCJA suspended deductions for job-related moving expenses for most taxpayers for the tax years 2018-2025, except for military personnel on active duty.
  • Mortgage Interest: The TCJA lowered the ceiling for mortgage interest deductions and suspended the deduction for home equity debt. These changes will revert after 2025.
  • Casualty Losses: Under the TCJA, deductions for personal casualty and theft losses were restricted to those incurred in federal disaster areas for the tax years 2018-2025. The previous rules will be reinstated in 2026.
  • Miscellaneous Expenses: Itemizers could previously deduct various miscellaneous expenses, but this deduction was suspended for the tax years 2018-2025.

Regarding business provisions, while most were made permanent under the TCJA, some are set to expire:

  • The deduction for qualified business income (QBI) for pass-through entities and self-employed individuals will end after 2025.
  • The first-year bonus depreciation, initially doubled from 50% to 100%, is subject to a phase-out through 2026.
  • The credit for family and medical leave paid to employees was extended through 2025.
  • Current deductions for excess business losses for taxpayers other than C corporations are disallowed through 2028.

Additionally, the federal estate tax exemption was doubled under the TCJA but is scheduled to revert to previous levels after 2025. For 2024, the exemption is $13.61 million per individual, meaning that in 2026 the exemptions might be around $7 million for individuals and $14 million for married couples.

It’s important to note that with the fall 2024 election, Congress may extend or modify some of these provisions.

 

The Tax Cuts and Jobs Act (TCJA) was implemented at the end of 2017. It marked the most significant federal tax overhaul in over three decades. Many provisions affecting individuals under the TCJA are slated to expire after 2025.

Here’s a look at the 10 key changes set to expire:

  • Individual Tax Rates: The TCJA introduced new tax rates for individuals, including a reduced top rate of 37%, down from the previous 39.6%, along with lower rates for other brackets. These rates are expected to return to their pre-TCJA levels in 2026.
  • Standard Deduction: The TCJA substantially increased standard deduction amounts and indexed them for annual inflation. For the tax year 2024, the standard deduction is $14,600 for single filers and $29,200 for joint filers. However, these amounts are set to decrease significantly after 2025.
  • Personal Exemptions: Before the TCJA, individuals could claim personal exemptions for themselves, their spouse (if married), and each qualified dependent. However, the TCJA suspended these exemptions for the tax years 2018-2025.
  • Alternative Minimum Tax (AMT): The TCJA included enhancements to the individual AMT, such as increased exemption amounts, resulting in fewer taxpayers being affected by it. However, these benefits are set to expire after 2025.
  • Child Tax Credit (CTC): The TCJA raised the CTC from $1,000 to $2,000 and added a $500 credit for non-dependents. These changes will revert to prior law after 2025.
  • State and Local Tax (SALT) Deductions: Previously, SALT payments were fully deductible for itemizers, but the TCJA capped this deduction at $10,000 for the tax years 2018 through 2025. The cap will be eliminated in 2026.
  • Moving Expenses: The TCJA suspended deductions for job-related moving expenses for most taxpayers for the tax years 2018-2025, except for military personnel on active duty.
  • Mortgage Interest: The TCJA lowered the ceiling for mortgage interest deductions and suspended the deduction for home equity debt. These changes will revert after 2025.
  • Casualty Losses: Under the TCJA, deductions for personal casualty and theft losses were restricted to those incurred in federal disaster areas for the tax years 2018-2025. The previous rules will be reinstated in 2026.
  • Miscellaneous Expenses: Itemizers could previously deduct various miscellaneous expenses, but this deduction was suspended for the tax years 2018-2025.

Regarding business provisions, while most were made permanent under the TCJA, some are set to expire:

  • The deduction for qualified business income (QBI) for pass-through entities and self-employed individuals will end after 2025.
  • The first-year bonus depreciation, initially doubled from 50% to 100%, is subject to a phase-out through 2026.
  • The credit for family and medical leave paid to employees was extended through 2025.
  • Current deductions for excess business losses for taxpayers other than C corporations are disallowed through 2028.

Additionally, the federal estate tax exemption was doubled under the TCJA but is scheduled to revert to previous levels after 2025. For 2024, the exemption is $13.61 million per individual, meaning that in 2026 the exemptions might be around $7 million for individuals and $14 million for married couples.

It’s important to note that with the fall 2024 election, Congress may extend or modify some of these provisions.

A Tax-Smart Way to Support Grandkids’ Education

ST. CROIX INSIGHTS

A Tax-Smart Way to Support Grandkids’ Education

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC
grandchildren fishing with their grandfather

While the Section 529 plan is commonly known as a tax-favored method for parents to save for their children’s college education, older family members can also utilize this strategy to support their grandchildren’s educational endeavors. Setting up an account for your grandkids can offer similar tax benefits to those funded by parents.

Understanding the 529 Plan Options

A 529 plan can be established as either a prepaid tuition plan or a college savings plan.

529 Prepaid Tuition Plan:

  • Locks in Tuition Rates: Allows you to prepay tuition at participating colleges or universities at today’s rates, protecting against future tuition inflation.
  • State-Sponsored: Typically sponsored by state governments, and the benefits may be limited to in-state public colleges.
  • Limited Flexibility: Usually limited to covering tuition and mandatory fees, with less flexibility in using funds for other qualified expenses.
  • Risk Mitigation: Provides a hedge against rising tuition costs, as you’ve already paid for tuition at the locked-in rate.

529 College Savings Plan:

  • Investment Option: Allows you to invest contributions in various investment options, such as mutual funds, stocks, or bonds, chosen by the account owner.
  • Flexibility: Funds can be used for a broader range of qualified higher education expenses, including tuition, room and board, books, and even certain technology expenses.
  • No Guarantees: No guarantees on investment returns or tuition rates, as the account’s value is subject to market fluctuations.
  • Nationwide Participation: Available in all states, and beneficiaries can use the funds at any eligible educational institution, not limited to specific states.

Getting Started and Maximizing Benefits

Upon setting up a 529 plan, you designate your grandchild as the beneficiary and make contributions within generous limits imposed by the state. These contributions are then invested based on the offerings available for the specific plan. Starting early allows for potential tax-free growth of earnings within the account, providing substantial assistance towards your grandchild’s educational expenses.

Tax Benefits and Flexibility

Qualified distributions from a 529 account are exempt from federal income tax and often from state income tax as well. If the grandchild doesn’t utilize the entire balance for education, you have the option to roll over the remaining funds tax-free to another beneficiary’s account, such as another grandchild. Setting up multiple 529 accounts for multiple grandchildren can be beneficial, especially if they are close in age.

Enhancements to Financial Aid Eligibility

Previously, distributions from a grandparent’s 529 plan were factored into the expected family contribution (EFC) for federal financial aid, potentially reducing aid eligibility. However, under the FAFSA Simplification Act, students no longer need to report contributions from a grandparent’s 529 plan on the FAFSA form, enhancing the likelihood of qualifying for financial aid.

Maximizing Gift Tax Exclusions

Contributions to 529 accounts count as gifts but can be offset by the annual gift tax exclusion. In 2024, the exclusion is $18,000 per gift recipient. Additionally, a lump-sum contribution to a 529 account allows for claiming five gift tax exclusions, enabling substantial contributions without tax consequences.

Summarizing the benefits of a 529 Plan:

  • Tax Benefits: Contributions are exempt from federal and often state income tax.
  • Flexibility: Unused funds can be rolled over to another beneficiary’s account.
  • Early Start: Starting early allows for potential tax-free growth of earnings within the account.

Important Considerations

It’s essential to note that on the new FAFSA form, the student’s income is based on data from federal income tax returns supplied by the IRS.

By leveraging a Section 529 plan, you can play a significant role in supporting your grandchildren’s educational journey while enjoying tax benefits and financial flexibility.

 

While the Section 529 plan is commonly known as a tax-favored method for parents to save for their children’s college education, older family members can also utilize this strategy to support their grandchildren’s educational endeavors. Setting up an account for your grandkids can offer similar tax benefits to those funded by parents.

Understanding the 529 Plan Options

A 529 plan can be established as either a prepaid tuition plan or a college savings plan.

529 Prepaid Tuition Plan:

  • Locks in Tuition Rates: Allows you to prepay tuition at participating colleges or universities at today’s rates, protecting against future tuition inflation.
  • State-Sponsored: Typically sponsored by state governments, and the benefits may be limited to in-state public colleges.
  • Limited Flexibility: Usually limited to covering tuition and mandatory fees, with less flexibility in using funds for other qualified expenses.
  • Risk Mitigation: Provides a hedge against rising tuition costs, as you’ve already paid for tuition at the locked-in rate.

529 College Savings Plan:

  • Investment Option: Allows you to invest contributions in various investment options, such as mutual funds, stocks, or bonds, chosen by the account owner.
  • Flexibility: Funds can be used for a broader range of qualified higher education expenses, including tuition, room and board, books, and even certain technology expenses.
  • No Guarantees: No guarantees on investment returns or tuition rates, as the account’s value is subject to market fluctuations.
  • Nationwide Participation: Available in all states, and beneficiaries can use the funds at any eligible educational institution, not limited to specific states.

Getting Started and Maximizing Benefits

Upon setting up a 529 plan, you designate your grandchild as the beneficiary and make contributions within generous limits imposed by the state. These contributions are then invested based on the offerings available for the specific plan. Starting early allows for potential tax-free growth of earnings within the account, providing substantial assistance towards your grandchild’s educational expenses.

Tax Benefits and Flexibility

Qualified distributions from a 529 account are exempt from federal income tax and often from state income tax as well. If the grandchild doesn’t utilize the entire balance for education, you have the option to roll over the remaining funds tax-free to another beneficiary’s account, such as another grandchild. Setting up multiple 529 accounts for multiple grandchildren can be beneficial, especially if they are close in age.

Enhancements to Financial Aid Eligibility

Previously, distributions from a grandparent’s 529 plan were factored into the expected family contribution (EFC) for federal financial aid, potentially reducing aid eligibility. However, under the FAFSA Simplification Act, students no longer need to report contributions from a grandparent’s 529 plan on the FAFSA form, enhancing the likelihood of qualifying for financial aid.

Maximizing Gift Tax Exclusions

Contributions to 529 accounts count as gifts but can be offset by the annual gift tax exclusion. In 2024, the exclusion is $18,000 per gift recipient. Additionally, a lump-sum contribution to a 529 account allows for claiming five gift tax exclusions, enabling substantial contributions without tax consequences.

Summarizing the benefits of a 529 Plan:

  • Tax Benefits: Contributions are exempt from federal and often state income tax.
  • Flexibility: Unused funds can be rolled over to another beneficiary’s account.
  • Early Start: Starting early allows for potential tax-free growth of earnings within the account.

Important Considerations

It’s essential to note that on the new FAFSA form, the student’s income is based on data from federal income tax returns supplied by the IRS.

By leveraging a Section 529 plan, you can play a significant role in supporting your grandchildren’s educational journey while enjoying tax benefits and financial flexibility.

Planning for Major Life Events: Including Stuff We Don’t Want to Talk or Think About

ST. CROIX INSIGHTS

Planning for Major Life Events: Including Stuff We Don’t Want to Talk or Think About

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC
last will and testament and a watch and pen

Life isn’t always gumdrops and lollipops. At times, we can experience different seasons in our life that are extremely difficult. A premature death of a spouse or child, divorce, or a serious illness can all put your life and financial well-being on a completely different track. Yet at other times, we are flying high where nothing can stop us.

Truly, the best time to plan in our lives is when life is going well. You are feeling invincible. It’s making sure your values and finances are in line with the life you want to live.

Why Consider a Financial Advisor?

During our lifespan, we have a host of major life transitions we will face. Having an impactful conversation with a Certified Financial Planner (CFP®) can be an invaluable partnership when you least expect it to be. Here’s why:

  • Expert Guidance: Financial advisors bring expertise and experience that can help you navigate complex financial decisions during challenging times.
  • Personalized Plans: They create tailored financial plans that align with your goals and circumstances.
  • Emotional Support: An advisor can provide objective advice and support when emotions run high, and you doubt you’ll never die or could ever become sick.
  • Time-Saving: They handle the intricate details of financial management, saving you time and stress.

Major Life Events That Benefit from Planning with a Financial Advisor

Here are some major life events where a financial advisor’s guidance can make a significant difference:

  • Marriage: Determining if combining finances makes the most sense, setting joint financial goals, and planning for future expenses.
  • Birth of a Child: Planning for educational costs, adjusting budgets, and securing life insurance if necessary.
  • Buying a Home: Navigating mortgages, budgeting for homeownership, and understanding the financial implications.
  • Career Changes: Managing income fluctuations, planning for retirement, and optimizing benefits.
  • Divorce: Dividing assets, planning for financial independence, and understanding tax implications.
  • Serious Illness: Managing medical expenses, planning for long-term care, and protecting your family’s financial future.
  • Retirement: Ensuring a steady income stream, managing investments, and planning for healthcare costs.
  • Death of a Loved One: Handling estate planning, managing inheritance, and providing for dependents.

Financial Products for Major Life Event Planning

When planning for major life events, various financial products can be instrumental in ensuring stability and achieving your goals. Here’s a closer look at some of the key financial tools that can aid in this process:

Insurance Products

  • Life Insurance: Provides financial security for your loved ones in the event of your premature death. It can cover final expenses, pay off debts, and replace lost income.
  • Health Insurance: Covers medical expenses and helps protect against high healthcare costs, especially important during serious illness.
  • Disability Insurance: Replaces a portion of your income if you become unable to work due to illness or injury.
  • Long-Term Care Insurance: Helps cover the costs of long-term care services, such as nursing homes or in-home care, which can be essential during aging or illness.
  • Property and Casualty, Umbrella, Liability Insurance: Offers protection for your physical assets and provides coverage for liability claims.

Investment Products

  • 401(k) and IRA Accounts: Retirement savings accounts that offer tax advantages, helping you save and grow your money for retirement.
  • Brokerage Accounts: Allow you to invest in stocks, bonds, mutual funds, and other securities to grow your wealth over time.
  • 529 Plans: Tax-advantaged savings plans designed to help pay for education expenses; beneficial when planning for a child’s future.

Savings and Budgeting Tools

  • Emergency Fund: A savings account specifically set aside for unexpected expenses, providing a financial cushion during emergencies.
  • High-Yield Savings Accounts: Offer higher interest rates than regular savings accounts, helping your savings grow more efficiently.
  • Budgeting Apps and Software: Tools like YNAB (You Need A Budget), set financial goals, and manage your finances effectively.

Debt Management Tools

  • Debt Consolidation Loans: Combine multiple debts into a single loan with a lower interest rate, making it easier to manage repayments.
  • Credit Counseling Services: Provide advice and assistance in managing debt and improving your credit score.

Estate Planning Tools

  • Wills and Trusts: Legal documents that outline how your assets should be distributed after your death, helping to protect your family’s financial future.
  • Power of Attorney: Grants someone the authority to make financial decisions on your behalf if you become incapacitated.
  • Healthcare Directive: A legal document that specifies your preferences for medical treatment and end-of-life care.

Tax-Advantaged Accounts

  • Health Savings Accounts (HSAs): Allow you to save for medical expenses with pre-tax dollars, providing tax benefits and potential investment growth.
  • Flexible Spending Accounts (FSAs): Let you set aside pre-tax dollars for eligible healthcare or dependent care expenses, reducing your taxable income.

Annuities

  • Fixed Annuities: Provide guaranteed income for a specified period or for life, which can be a reliable source of income during retirement.
  • Variable Annuities: Allow investment in various portfolios, offering the potential for higher returns along with a death benefit.

Each of these financial products serves a specific purpose in helping you navigate major life events. Not all products are necessary for all individuals or families. By working with a financial advisor, we can help you select the right mix of products tailored to your unique needs and circumstances, ensuring that you’re well-prepared for whatever life throws your way.

How We Can Help

We’re here to help you achieve the financial security and peace of mind you deserve.

We offer different financial services that can be tailored to how involved or distant you want to be in this process, but just know that we are here to help. If you are a good fit for us and we are a good fit for you, we will make the details work.

Our services include:

We are always open to having a conversation. You can give us a call at 651-337-1919 or complete this contact form. Let’s see if this would be a good opportunity for both parties.

With the right guidance, you can navigate life’s challenges and still achieve the life you want. Don’t hesitate to reach out and start the conversation today.

 

Life isn’t always gumdrops and lollipops. At times, we can experience different seasons in our life that are extremely difficult. A premature death of a spouse or child, divorce, or a serious illness can all put your life and financial well-being on a completely different track. Yet at other times, we are flying high where nothing can stop us.

Truly, the best time to plan in our lives is when life is going well. You are feeling invincible. It’s making sure your values and finances are in line with the life you want to live.

Why Consider a Financial Advisor?

During our lifespan, we have a host of major life transitions we will face. Having an impactful conversation with a Certified Financial Planner (CFP®) can be an invaluable partnership when you least expect it to be. Here’s why:

  • Expert Guidance: Financial advisors bring expertise and experience that can help you navigate complex financial decisions during challenging times.
  • Personalized Plans: They create tailored financial plans that align with your goals and circumstances.
  • Emotional Support: An advisor can provide objective advice and support when emotions run high, and you doubt you’ll never die or could ever become sick.
  • Time-Saving: They handle the intricate details of financial management, saving you time and stress.

Major Life Events That Benefit from Planning with a Financial Advisor

Here are some major life events where a financial advisor’s guidance can make a significant difference:

  • Marriage: Determining if combining finances makes the most sense, setting joint financial goals, and planning for future expenses.
  • Birth of a Child: Planning for educational costs, adjusting budgets, and securing life insurance if necessary.
  • Buying a Home: Navigating mortgages, budgeting for homeownership, and understanding the financial implications.
  • Career Changes: Managing income fluctuations, planning for retirement, and optimizing benefits.
  • Divorce: Dividing assets, planning for financial independence, and understanding tax implications.
  • Serious Illness: Managing medical expenses, planning for long-term care, and protecting your family’s financial future.
  • Retirement: Ensuring a steady income stream, managing investments, and planning for healthcare costs.
  • Death of a Loved One: Handling estate planning, managing inheritance, and providing for dependents.

Financial Products for Major Life Event Planning

When planning for major life events, various financial products can be instrumental in ensuring stability and achieving your goals. Here’s a closer look at some of the key financial tools that can aid in this process:

Insurance Products

  • Life Insurance: Provides financial security for your loved ones in the event of your premature death. It can cover final expenses, pay off debts, and replace lost income.
  • Health Insurance: Covers medical expenses and helps protect against high healthcare costs, especially important during serious illness.
  • Disability Insurance: Replaces a portion of your income if you become unable to work due to illness or injury.
  • Long-Term Care Insurance: Helps cover the costs of long-term care services, such as nursing homes or in-home care, which can be essential during aging or illness.
  • Property and Casualty, Umbrella, Liability Insurance: Offers protection for your physical assets and provides coverage for liability claims.

Investment Products

  • 401(k) and IRA Accounts: Retirement savings accounts that offer tax advantages, helping you save and grow your money for retirement.
  • Brokerage Accounts: Allow you to invest in stocks, bonds, mutual funds, and other securities to grow your wealth over time.
  • 529 Plans: Tax-advantaged savings plans designed to help pay for education expenses; beneficial when planning for a child’s future.

Savings and Budgeting Tools

  • Emergency Fund: A savings account specifically set aside for unexpected expenses, providing a financial cushion during emergencies.
  • High-Yield Savings Accounts: Offer higher interest rates than regular savings accounts, helping your savings grow more efficiently.
  • Budgeting Apps and Software: Tools like YNAB (You Need A Budget), set financial goals, and manage your finances effectively.

Debt Management Tools

  • Debt Consolidation Loans: Combine multiple debts into a single loan with a lower interest rate, making it easier to manage repayments.
  • Credit Counseling Services: Provide advice and assistance in managing debt and improving your credit score.

Estate Planning Tools

  • Wills and Trusts: Legal documents that outline how your assets should be distributed after your death, helping to protect your family’s financial future.
  • Power of Attorney: Grants someone the authority to make financial decisions on your behalf if you become incapacitated.
  • Healthcare Directive: A legal document that specifies your preferences for medical treatment and end-of-life care.

Tax-Advantaged Accounts

  • Health Savings Accounts (HSAs): Allow you to save for medical expenses with pre-tax dollars, providing tax benefits and potential investment growth.
  • Flexible Spending Accounts (FSAs): Let you set aside pre-tax dollars for eligible healthcare or dependent care expenses, reducing your taxable income.

Annuities

  • Fixed Annuities: Provide guaranteed income for a specified period or for life, which can be a reliable source of income during retirement.
  • Variable Annuities: Allow investment in various portfolios, offering the potential for higher returns along with a death benefit.

Each of these financial products serves a specific purpose in helping you navigate major life events. Not all products are necessary for all individuals or families. By working with a financial advisor, we can help you select the right mix of products tailored to your unique needs and circumstances, ensuring that you’re well-prepared for whatever life throws your way.

How We Can Help

We’re here to help you achieve the financial security and peace of mind you deserve.

We offer different financial services that can be tailored to how involved or distant you want to be in this process, but just know that we are here to help. If you are a good fit for us and we are a good fit for you, we will make the details work.

Our services include:

We are always open to having a conversation. You can give us a call at 651-337-1919 or complete this contact form. Let’s see if this would be a good opportunity for both parties.

With the right guidance, you can navigate life’s challenges and still achieve the life you want. Don’t hesitate to reach out and start the conversation today.

How to Make the Most of Your Credit Card Rewards

ST. CROIX INSIGHTS

How to Make the Most of Your Credit Card Rewards

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC
woman on vacation paying with a credit card

Each year, I get four free Marriott nights with my credit cards, and I feel great about my credit card reward points — a common response I hear today and one I’ve even said myself.

It all started about a year and a half ago. I was being productive on Facebook, minding my own business, and stumbled upon some reels about credit cards and “transferable currency.” Intrigued, I started watching these reels intermittently for a few months. I knew there was something valuable there, but I wasn’t ready to delve into it. So, I mentioned it to Mrs. Anderson, suggesting she investigate it. Smart leaders delegate, right?

After a month or two, she started watching the reels and realized we could significantly improve our credit card rewards strategy. We shifted our mindset to view our rewards as transferable currency, enabling us to enjoy substantially reduced travel expenses with our current spending level — making our regular Marriott four-night stays look like child’s play. Less than 1% of people take the time to truly understand how their spending and credit card reward programs work.

To Dave Ramsey’s followers: yes, this strategy only works if you pay off your credit cards each month, which we do. We live within our means and integrate our normal spending with credit cards to maximize rewards. If you can’t stick to a monthly spending budget with cash or a debit card, you won’t be able to with a credit card, regardless of what research says.

There is an entire sublanguage and learning curve around credit card reward programs. With prices for everything skyrocketing, why not dive deep and figure out how to maximize credit card rewards to reduce travel expenses?

For business owners, the concept of transferable currency becomes even more valuable due to your increased monthly spending and the ability to obtain a host of credit cards not available to non-business owners.

How’s it going for us? This past April, we attended a two-day credit card convention in Milwaukee, Wisconsin. I can’t believe I attended such an event, but I did. It’s truly a subculture with its own language. There are so many learning opportunities, and it’s not just about what’s in your wallet. I had no idea there are strategies around which credit cards to have—some are actually better and even preferred.

And it can’t be stressed enough: this strategy only works if you pay off your cards each month.

Travel is a big priority for us. Any way to extend our travel budget and get upgrades for flights and hotels, I’m going to figure it out. It didn’t take long to rack up a million transferable currency points and put them to good use!

I have no financial affiliation with any of the following Facebook groups: Travel on Points, Award Travel 101, and The Points Guy. I follow these groups for ideas and advice.

We follow a budget for savings, spending, and giving. It’s not surprising when I approach this subject and see the deer-in-the-headlights look. Yet, I’m hooked. I see the value, and I believe you can too.

Key Credit Card Terms You Should Know

To better navigate the world of credit card rewards, it’s essential to understand some key terms:

  • Purchase Annual Percentage Rate (APR): The annualized interest rate that you are charged for borrowing money through your credit card.
    • Purchase APR: The interest rate applied to purchases made with the card.
    • Balance Transfer APR: The interest rate applied to balances transferred from another card.
    • Cash Advance APR: The interest rate applied to cash advances taken out using the card.
    • Penalty APR: A higher interest rate that may be applied if you miss payments or violate other terms of your credit card agreement.
    • Introductory APR: A lower interest rate offered for a limited time as an incentive for new cardholders.
  • Credit Limit: The maximum amount of credit that a financial institution extends to a client.
  • Balance Transfer: Moving debt from one credit card to another, usually to take advantage of a lower interest rate.
  • Cash Advance: A service provided by credit card issuers allowing cardholders to withdraw a certain amount of cash, often at a higher interest rate.
  • Minimum Payment: The smallest amount you can pay by the due date to keep your account in good standing. Paying only the minimum payment means your balance accrues interest.
  • Rewards Program: A program offered by credit card issuers where cardholders earn points, miles, or cashback on purchases.
  • Transferable Currency: Rewards points or miles that can be transferred between different loyalty programs or redeemed in various ways.
  • Statement Credit: A credit applied to your account balance, often used as a way to redeem rewards.
  • Foreign Transaction Fee: A fee charged for purchases made outside of your home country, typically a percentage of the transaction amount.
  • Credit Utilization Ratio: The ratio of your credit card balances to your credit limits, which is a key factor in your credit score.
  • Interest-Free Period: The time between the purchase date and when interest begins to be charged, provided the balance is paid in full by the due date.
  • Late Payment Fee: A fee charged when a payment is not received by the due date.
  • Grace Period: The period during which you can pay your credit card balance without incurring interest charges.
  • Variable Interest Rate: An interest rate that can change based on an underlying index or benchmark.
  • Fixed Interest Rate: An interest rate that remains constant throughout the term of the credit card agreement.

Understanding these terms will help you make informed decisions and maximize the benefits of your credit card rewards program.

 

Each year, I get four free Marriott nights with my credit cards, and I feel great about my credit card reward points — a common response I hear today and one I’ve even said myself.

It all started about a year and a half ago. I was being productive on Facebook, minding my own business, and stumbled upon some reels about credit cards and “transferable currency.” Intrigued, I started watching these reels intermittently for a few months. I knew there was something valuable there, but I wasn’t ready to delve into it. So, I mentioned it to Mrs. Anderson, suggesting she investigate it. Smart leaders delegate, right?

After a month or two, she started watching the reels and realized we could significantly improve our credit card rewards strategy. We shifted our mindset to view our rewards as transferable currency, enabling us to enjoy substantially reduced travel expenses with our current spending level — making our regular Marriott four-night stays look like child’s play. Less than 1% of people take the time to truly understand how their spending and credit card reward programs work.

To Dave Ramsey’s followers: yes, this strategy only works if you pay off your credit cards each month, which we do. We live within our means and integrate our normal spending with credit cards to maximize rewards. If you can’t stick to a monthly spending budget with cash or a debit card, you won’t be able to with a credit card, regardless of what research says.

There is an entire sublanguage and learning curve around credit card reward programs. With prices for everything skyrocketing, why not dive deep and figure out how to maximize credit card rewards to reduce travel expenses?

For business owners, the concept of transferable currency becomes even more valuable due to your increased monthly spending and the ability to obtain a host of credit cards not available to non-business owners.

How’s it going for us? This past April, we attended a two-day credit card convention in Milwaukee, Wisconsin. I can’t believe I attended such an event, but I did. It’s truly a subculture with its own language. There are so many learning opportunities, and it’s not just about what’s in your wallet. I had no idea there are strategies around which credit cards to have—some are actually better and even preferred.

And it can’t be stressed enough: this strategy only works if you pay off your cards each month.

Travel is a big priority for us. Any way to extend our travel budget and get upgrades for flights and hotels, I’m going to figure it out. It didn’t take long to rack up a million transferable currency points and put them to good use!

I have no financial affiliation with any of the following Facebook groups: Travel on Points, Award Travel 101, and The Points Guy. I follow these groups for ideas and advice.

We follow a budget for savings, spending, and giving. It’s not surprising when I approach this subject and see the deer-in-the-headlights look. Yet, I’m hooked. I see the value, and I believe you can too.

Key Credit Card Terms You Should Know

To better navigate the world of credit card rewards, it’s essential to understand some key terms:

  • Purchase Annual Percentage Rate (APR): The annualized interest rate that you are charged for borrowing money through your credit card.
    • Purchase APR: The interest rate applied to purchases made with the card.
    • Balance Transfer APR: The interest rate applied to balances transferred from another card.
    • Cash Advance APR: The interest rate applied to cash advances taken out using the card.
    • Penalty APR: A higher interest rate that may be applied if you miss payments or violate other terms of your credit card agreement.
    • Introductory APR: A lower interest rate offered for a limited time as an incentive for new cardholders.
  • Credit Limit: The maximum amount of credit that a financial institution extends to a client.
  • Balance Transfer: Moving debt from one credit card to another, usually to take advantage of a lower interest rate.
  • Cash Advance: A service provided by credit card issuers allowing cardholders to withdraw a certain amount of cash, often at a higher interest rate.
  • Minimum Payment: The smallest amount you can pay by the due date to keep your account in good standing. Paying only the minimum payment means your balance accrues interest.
  • Rewards Program: A program offered by credit card issuers where cardholders earn points, miles, or cashback on purchases.
  • Transferable Currency: Rewards points or miles that can be transferred between different loyalty programs or redeemed in various ways.
  • Statement Credit: A credit applied to your account balance, often used as a way to redeem rewards.
  • Foreign Transaction Fee: A fee charged for purchases made outside of your home country, typically a percentage of the transaction amount.
  • Credit Utilization Ratio: The ratio of your credit card balances to your credit limits, which is a key factor in your credit score.
  • Interest-Free Period: The time between the purchase date and when interest begins to be charged, provided the balance is paid in full by the due date.
  • Late Payment Fee: A fee charged when a payment is not received by the due date.
  • Grace Period: The period during which you can pay your credit card balance without incurring interest charges.
  • Variable Interest Rate: An interest rate that can change based on an underlying index or benchmark.
  • Fixed Interest Rate: An interest rate that remains constant throughout the term of the credit card agreement.

Understanding these terms will help you make informed decisions and maximize the benefits of your credit card rewards program.