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Love and money

Three ways you and your honey can keep the peace about money.

When you hear about celebrities’ extravagant gifts, like the $2 million Bugatti Beyoncé gave to Jay-Z, do you wish you could do the same or do you roll your eyes? Does your partner have the same reaction? Opposites may attract but differing views on money can result in conflict for couples.

Here are three ways you and your honey can align your financial goals.

  1. Work as a team

If one of you always handles daily spending and the other focuses on long-term saving and investing, you’ve got a setup for conflict.

The American Psychological Association says couples can avoid disharmony two ways. You can swap roles reach month so each of you understands your household short- and long-term finances. Or, share the roles equally. This way you both have a clear view of your micro and macro financial picture.

  1. Understand your partner’s money mindset

Many couples think they’re arguing about money, but it’s often really about a difference in temperaments. Some folks are savers, some are spenders. Some like budgets; others can’t stand them. You can better understand each other’s views by having a conversation.

Try these questions to start:

  • How did your parents handle money? Were they frugal or spendthrifts?
  • Did your family talk about money or was it taboo?
  • What’s your biggest fear about money?

If it’s hard to even broach the subject of money with your sweetie, take a lighthearted first step. Go to the Moneyharmony Quiz, where each of you can find out your money personality type (Amasser, Hoarder, Avoider, Spender or Money Monk). Coming at the conversation from this direction may make it easier for both of you to talk freely about what can be a tense topic.

  1. Eyes on the (shared) prize

Life happens. Priorities change. Take time once a year for a heart-to-heart financial reality check.

Make sure your shared goals are still in synch. Are you saving for a vacation home? Have job or health changes affected your financial goals? Do you want to prioritize paying down debt or saving for retirement?

Whether you want that Bugatti or burgers out once a week, put it all out on the table and make sure your financial goals are aligned.

When you and your partner want help to meet your financial goals, we’re here to help– no matter how big or small! Call us at 800-991-2221 to get your questions answered.

Federally insured by NCUA

What the new tax bill means for you

When Congress passed the Tax Cuts and Jobs Act (TCJA) in December, it made significant changes that affect virtually all taxpayers. Here’s how the new Federal tax code impacts deductions for individuals and small businesses.

Deduction capped for state and local income and property tax

Under the old tax code, if you itemized deductions, you could deduct state and local income and property taxes from your federal income tax return. Under the new code, the deduction for these taxes combined is capped at $10,000.

The cap takes effect for 2018 and remains in place until 2026. It has also prompted a move in Lansing to restore and gradually increase Michigan’s personal exemption. Otherwise residents’ state income taxes would rise. Lawmakers expect that the state exemption will be $4,000 for 2018 when new legislation is passed.

Mortgage interest deduction on first mortgages preserved – mostly

Homeowners with mortgages taken out before December 15, 2017, can still deduct mortgage interest for loans up to $1 million. For those with mortgages purchased after December 15, 2017, the deduction cap is lowered to $750,000.

This means if you have a $1.5 million mortgage that originated in 2015, you can deduct interest on up to $1 million. Since the loan was taken out before December 15, 2017, it qualifies for the higher cap.

If you borrowed $800,000 on January 15, 2018, the TCJA limits your mortgage deduction to interest on up to $750,000.

Home equity loan deduction on hiatus until 2025

Unfortunately, the TCJA eliminates the deduction for interest paid on home equity and HELOC (home equity line of credit) loans for 2018 through 2025.

Interest deductions for home improvements still available – if you refinance and the changes are “substantial”

First things first – you need to know the definition of “acquisition indebtedness.”

According to the IRS, acquisition indebtedness is debt incurred in acquiring, constructing or substantially improving a qualified residence of the taxpayer and which secures the residence. The term also includes indebtedness from refinancing, subject to some constraints.

For example, you could incur $400,000 of acquisition indebtedness by purchasing a new principal residence. If you pay the debt down to $150,000, your acquisition indebtedness becomes $150,000.

The only way to increase your acquisition indebtedness would be by refinancing the $150,000 and adding on the cost of a substantial improvement. This could be $20,000 for a new kitchen. The new mortgage loan would be $170,000 and all the interest would be deductible because the additional indebtedness was incurred to substantially improve your home.

What about mortgage interest deductions on second or vacation homes?

Interest for second homes or vacation homes is still deductible, however, it is capped on new acquisition debt.

Again, we need to look at an IRS definition. Home acquisition debt is a mortgage taken out after October 13, 1987, to buy, build or substantially improve your main or second home. It must also be secured by that home. Only the debt that is not more than the cost of the home plus improvements qualifies. (The additional debt may qualify as home equity debt.)

The new deduction of $750,000 is a combined limit. This means interest payments on up to $750,000 of new acquisition debt are deductible and is applicable to a principal dwelling and one other residence such as a vacation or second home.

Interest deductions on rental properties remain

If a homeowner owns their primary residence and a rental/income property, the interest would be deductible on the primary residence and the income property.

If a homeowner owns multiple income properties, under the TCJA and the previous tax code, interest on additional properties would not be deductible.

Interest can still be deducted on small business loans
Businesses with an average annual gross revenue less than $25 million may still deduct interest paid or accrued on their small business loan.

Get tax advice

The TCJA applies to 2018 taxes, and we recommend that your talk to a qualified tax advisor when making tax decisions.

The tax code might be complex, but your banking doesn’t have to be! Consumers makes mortgages and business banking easy. Call us at 800-991-2221 to get your questions answered.

Federally insured by NCUA