Why SWA?

Put the SWA advantage to work for you.

Learn More


Concerned about market volatility?

Watch Now

Contact Us

Send us an email or call us today.

Email Us

C.H. Robinson

We specialize in working with C.H. Robinson employees across the U.S.

Learn More


Medicare Tax – Opportunity for Concentrated Stock Positions

Written by Summit Wealth on .

Additional Medicare Tax Coming in 2013 

Beginning in 2013 a new 3.8% tax will apply to the “unearned” income of “high income taxpayers”.  An additional 0.90% tax will apply to the “earned” income of many of these same individuals.  Both taxes are referred to as “Medicare” taxes.

For purposes of this new “Medicare” tax,  high income taxpayers are defined as:

  • Single taxpayers with Adjusted Gross Income (AGI) in excess of $200,000
  • Married couples filing a joint tax return with AGI in excess of $250,000

NOTE: These AGI amounts are not indexed for inflation

Unearned income is defined as the income that an individual derives from investing his / her capital.  It includes capital gains, rents, dividends and interest income.  It also comes from some investments in active businesses if the investor is not an active participant in the business.

  • The new 3.8% Medicare tax is assessed only when AGI is more than $200,000 single / $250,000 married filing joint. 

For example, if a single individual has AGI of $275,000, then the excess over $200,000 would be $75,000.  Assume that this individuals net investment income is $60,000.  The new 3.8% tax applies to the smaller amount.  In this example, $60,000 of net investment income is less than the $75,000 excess over the threshold.  Therefore, in this example, the 3.8% tax is levied against the $60,000.

KEY PLANNING POINT:  For those that are looking to diversify out of a concentrated, significantly appreciated stock position, it makes sense to consider doing so in 2011 or 2012, given that upcoming increase in the Medicare tax (due in 2013) along with that anticipated increase in the long-term capital gains tax rate (also anticipated to take effect in 2013).


Videos – Insurance

Written by Summit Wealth on .

My wife and I sat down last night and took a look at our wedding video (VHS!) that a good friend took at our wedding.  I have to admit, it has been years since we last viewed it.  It was fun to relive that special day.  I highly recommend digging out your wedding video, picture album or high school yearbook and reliving the good old days. 

But then, the financial planner that I am, I got thinking about our house inventory video, and how long it had been since we took the videotape (VHS too!).  Reviewing that tape was fun too (well maybe I do need to get out more), seeing some of the old appliances and furniture we had – emphasis, had.  I realize, we need to get our inventory tape up-to-date.  As much as we recommend clients videotape the contents of their house (documentation for the insurance claim in case of fire, or some other disaster), we assume they know to occasionally update the video.   It isn’t much good if we are asking for replacment of an old black and white TV that long ago went to the recycling.

The message for you, is if you haven’t taken a video of your household, do so.  And if you have, make sure it is up-to-date.   This is a great tool should you need to document your belongings, especially for insurance purposes.  Another side use is documentation of items you give to charity for which you want a tax deduction.   A video is much easier to prepare than listing with each and every one of your belonings, but that is an alternative.  Stop and think about it, could you sit down now, and list all of your household belongings, including what you have hiding in the attic?  The insurance company will ask you for an itemized list of belongings, should you need to make a claim of loss.  Take it from someone who has gone through that process without a reference, it is a pain.

As for that wedding video?  I think I better get that converted to DVD, since we are going to recycle the VHS recorder soon.  Come to think of it, the home inventory better be preserved on DVD as well.


End of Year Reminders – IRA Distributions

Written by Summit Wealth on .

As we near the year-end, there are a number of financial planning and tax related items that you should consider.   One such item, for those age 70 1/2 and older, is IRA (SEP, SIMPLE IRA, qualified plans and 403b) account Required Minimum Distributions (RMD).  At age 70 1/2 IRA owners must begin taking minimum distributions from their IRA, according to IRS guidelines, and pay tax on those distributions.  If you are over age 70 1/2, you should verify with your financial advisor that you hve satisfied distribution requirements.  There is an excise tax for not taking a required distribution, and it can be severe, 50% of the amount of shortfall from what you should have taken.    

At this time of year, we receive telephone calls from folks that are not working with a financial advisor (and some that are), wondering if they are required to take a distribution; and occasionally, if a distribution is required, how can they satisfy the distribution requirement if they don’t have cash in their account.  These calls can be a bit frantic, especially as we near year-end, with no cash in their account, and the caller realizes they may have a rather substantial excise tax if they do not take a distribution.  

What many people do not realize is the distribution can be taken either as cash or in-kind (e.g. as stock or mutual fund).  The in-kind distribution is still taxable, as a distribution, even though the in-kind asset has not been sold.  In-kind distributions are handy, especially if liquidation of the holding means a waiting period (known as settlement) before distribution of cash.  Another advantage to an in-kind distribution is there is no change to your asset allocation. 

Contact a Summit Wealth Advocates advisor if you have any questions regarding distributions from your IRA.


State of the Union – Tax Impact of Obama’s Plan

Written by Summit Wealth on .

I have taken some time to digest the President’s State of the Union address and wanted to share a few thoughts / comments about what I heard concerning taxes.

The President appears obsessed with the notion that the wealthy are not paying enough in taxes and that those in the top tier of income should pay “their fair share”.  So, to solve this problem, the President has implemented a “surtax” of 3.80%, applicable to all married couples that have income in excess of $250,000 of Adjusted Gross Income.  This “surtax” will take effect in 2013 and will likely generate a considerable amount of tax revenue for the country.  It’s as if he believes that more tax revenues will solve the problem.

I my humble opinion as a “Fee-Only” financial advisor, more tax revenues offer a very small, temporary band aid for the very large problem.  That problem is that our country spends too much money.  This issue, in my opinion, should be at the top of everyone’s list of problems to solve.

I mean really, lets take a look at a list of just some of the taxes the typical middle-class family is faced with every day:

  • Federal income tax
  • State income tax
  • Social Security tax
  • Medicare tax
  • State sales tax
  • Property tax
  • Fuel tax
  • Liquor tax

By no means is this list meant to be inclusive of all taxes; it merely serves as an example of the laundry list of taxes each of us pays every day.

And the argument continuously being presented is that the taxes we are currently paying just aren’t enough to cover the expenditures we are making.  I feel it is well beyond the time to take a hard look at the entitlement programs this country is paying for each year (both inside and outside the US) and make some hard decisions on how we can adjust or eliminate some of them.  Hard choices need to be made and its time they stop asking for a larger “allowance” when all they’re doing is blowing it in an inefficient manner.  Every dollar we can keep in our own pockets means we are that much closer to a comfortable retirement we have worked so hard for.


Is the US Economy Getting Better?

Written by Summit Wealth on .

Well, the recent news that the Federal Reserve reduced the estimated US Gross Domestic Product (GDP) estimates for 2012 caused some pull back in the US stock market. That said, there has been some good news that has caused the markets to rebound somewhat. That news included:

• Sales of newly built single-family homes rose to their highest levels in more than two years in May. Sales of new single-family homes rose 7.6% compared with April 2012 and 19.8% from May 2011.

• In speaking with some real estate professionals we know, they have indicated that inventory of previously owned homes is low, they are receiving multiple offers on homes and many are selling for more than asking price.

• Many have said that the US economy simply cannot rebound without participation by the housing market. Real estate helped to stoke the US economy out of previous recessions as interest rates declined, home sales increased and construction jobs rebounded.

As fee-only financial advisors, we look at this news as a positive long-term indicator that the US economy may finally begin to benefit from some assistance from the housing market.

Unfortunately, we are still in the midst of an election year and, given the uncertainty in health care and taxes for 2013 (and beyond), we may still not see much movement, up or down, from here until we get past the November elections.

Stay tuned!!


North Metro: 763.355.5873
227 East River Parkway
Champlin, MN 55316-5873

South Metro: 612.987.9112
5871 Crossandra Street SE
Prior Lake, MN 55372-3337

West Metro: 763.639.3425
322 Greenhill Lane
Long Lake, MN 55356

This email address is being protected from spambots. You need JavaScript enabled to view it.