Thursday, August 18, 2022


By Charles Sims Jr., Special to The New Tri-State Defender

With a stable housing market, low interest rates, and a more positive employment picture, more Americans may be in a position to buy or sell properties in 2017. Moreover, the U.S. tax code favors real estate ownership, allowing for tax savings that might help families enhance their everyday lives and build wealth over the long term. Incentives for homeowners The ability to write off mortgage interest and other home-related expenses can help subsidize a home purchase. Homeowners must itemize deductions on Schedule A of their federal tax returns instead of claiming the standard deduction. The deduction for mortgage interest applies on up to $1 million for first mortgages — plus up to $100,000 on home-equity loans — for a primary residence and a second home such as a vacation condo, mobile home, boat, house trailer, or any structure with sleeping, cooking, and toilet facilities (if it is not rented for income). The property owner can also deduct real estate taxes in the year they are paid, as well as mortgage points (origination fees) — even if the seller pays them for the buyer. Protected profits When a principal residence is sold, losses are not tax deductible, but a profit of up to $250,000 ($500,000 for married joint filers) may be excluded from the federal capital gains tax. To qualify for the exclusion, the home must have been owned and occupied as a principal residence for two out of the five years before the sale. Owners who cannot pass this test may be eligible for a reduced exclusion, but only if the home sale resulted from an employment relocation, health reasons, or certain other unforeseen circumstances. Different rules for rentals Because rental property is considered business property, mortgage interest, property taxes, insurance, maintenance, depreciation, and other expenses are tax deductible and can be used to offset some or all of the rental income. Depreciation is calculated on a straight-line basis over 27.5 years, which means about 3.63% of the entire purchase price may be deducted each year, even if the property is largely financed. Under IRS Section 1031, when a qualified (non-owner occupied) investment property such as a rental home is exchanged instead of sold, the capital gains tax may be postponed indefinitely as long as the transaction is documented and conducted properly. The seller must purchase ‘like-kind’ property (i.e., real estate must be exchanged for real estate, but it need not be the same grade, quality, type, or class) of equal or greater value within 180 days. IRS rules mandate that the proceeds from the sale of the original property must be held by a third party (such as a qualified intermediary), and the exchange process must meet a number of other specific conditions. (Charles Sims Jr., CMFC, LUTCF, is President/CEO of The Sims Financial Group. Contact him at 901-682-2410 or visit
By Charles Sims Jr., Special to The New Tri-State Defender According to a 2015 survey by the National Small Business Association, one in three small businesses devote more than 80 hours each year — two full work-weeks — to handling...
By Charles Sims Jr., Special to The New Tri-State Defender

In 2013, the S&P 500 index, generally considered representative of the U.S. stock market as a whole, produced total returns of 32.39 percent — the highest return for the index since 1997. But the S&P 600, which represents the stocks of smaller companies, returned 41.31 percent. Consider a hypothetical investor named Jim, who looked at those returns at the end of 2013 and decided to sell his shares in an S&P 500 index fund and reinvest them in an S&P 600 fund, hoping to ride the hot stocks of smaller companies. Index mutual funds and exchange-traded funds (ETFs) attempt to track the performance of a benchmark index by holding the securities that comprise the index; individuals cannot invest directly in an unmanaged index. The trade would have been a disappointment for Jim. Small-cap stocks slumped in 2014, with the S&P 600 returning just 5.76 percent. By contrast, the S&P 500 returned 13.69 percent. Jim would have missed out on the higher return because he tried to chase prior-year performance. If he continued to chase performance and switched his investments back to an S&P 500 index fund, he would have been slightly ahead in 2015, a down year for the market in general, and then lost out again in 2016 when small caps again outpaced large-cap stocks (see chart). Spreading the risk This example clearly illustrates the danger of chasing performance, but it also demonstrates why owning stocks in companies of different sizes can be a helpful diversification strategy. Diversification is a method used to help manage investment risk; it does not guarantee a profit or protect against investment loss. Companies are typically classified based on market capitalization, which is calculated by multiplying the number of outstanding shares by the price per share. There is no standard classification system, but Standard & Poor’s indexes offer a helpful comparison and are used as benchmarks for many funds.3 S&P 500 (market capitalization exceeding $5.3 billion). Stocks of larger companies, or large caps, are generally considered more stable than those of smaller companies. Large caps may provide solid long-term returns and possibly higher short-term returns in some years, as they did in 2013. But large caps typically have lower growth potential because they have already experienced substantial growth to reach their current size. S&P MidCap 400 (market capitalization of $1.4 billion to $5.9 billion). Mid caps may have greater growth potential than large caps, and mid-sized companies can sometimes react more nimbly to changes in the business environment. Mid caps are associated with greater risk and volatility than large caps, but are considered less volatile and risky than small caps. Although they may not be the best performer in any given year, mid caps have produced the highest returns over the last 10-, 20-, and 30-year periods.4 S&P SmallCap 600 (market capitalization of $400 million to $1.8 billion). Small-cap stocks might offer the highest growth potential of the three classifications, because they have the furthest to grow and are more likely to react quickly to market opportunities. However, they are typically the most risky and volatile class of stocks, as illustrated by the performance swings of the last four years. The performance of an unmanaged index is not indicative of the performance of any specific security. Past performance is not a guarantee of future results, and actual results will vary. The investment return and principal value of stocks, mutual funds, and ETFs fluctuate with market conditions. Shares, when sold, may be worth more or less than their original cost. Supply and demand for ETF shares may cause them to trade at a premium or a discount relative to the value of the underlying shares. (Charles Sims Jr., CMFC, LUTCF, is President/CEO of The Sims Financial Group. Contact him at 901-682-2410 or visit
© REUTERS/Mike Blake A Wells Fargo bank sign is pictured in downtown Los Angeles A homeowner has filed a proposed class action lawsuit accusing Wells Fargo & Co (WFC.N) of improperly charging thousands of customers nationwide to lock in interest rates...
By Stacy M. Brown (NNPA Newswire Contributor) African-American physicians earn 15 percent less than White physicians—an average of $262,000 compared to $303,000—according to Medscape’s 2017 Physicians Compensation Report. Approximately 19,200 physicians across 26 areas of medicine were asked questions about annual compensation, race, gender, geography and job satisfaction. The report, detailed by CBS News, revealed […]