Tuesday, March 6, 2018

What Were The Actual 2018 Tax Changes?

Question: There was so much talk about the proposed changes to the tax code. Now that the changes have finally been signed into law, I’m wondering which planned modifications actually became a reality. What were the exact changes made to the U.S. tax code this year?

Many of the changes signed into law with the official Tax Cuts and Jobs Acts were quite different from those planned. Remember, though, that none of these changes will take effect until April 2018 at the earliest.

Let’s take a look at exactly how the tax code will be different for 2018.

1.) Changes for the seven income brackets

The current administration initially planned on condensing the income bracket system into just three brackets. However, when the law was finally passed, the seven-bracket system remained in place, though income levels for each bracket were tweaked.

The old income levels for the seven brackets were as follows: 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. The new rates are now 10%, 12%, 22%, 24%, 32%, 35% and 37%.

2.) Removal of Obamacare penalties
While the administration was not successful in repealing the Affordable Healthcare Act, there will be no penalties for those who choose not to have adequate health coverage starting in the year 2019. For your 2017 and 2018 taxes, though, you will still need to provide proof of health coverage or be held liable for the penalty.

3.) Changes in standard deductions and personal exemptions
The personal exemption has been eliminated, while standard deductions have increased.In 2017, the standard deduction for the single taxpayer was $6,350, in addition to one personal exemption of $4,050. For 2018, those deductions will be combined into one larger standard deduction of $12,000 for those filing separately, and $24,000 for joint filers.

4.) Child tax credit

Deductions and credits for children under age 16 have doubled from $1,000 to $2,000. There is also a new tax credit for non-child dependents.
The Child and Dependent Care Credit, offering parents deductions for specific child care expenses, remains as-is.

5.) Estate tax exemption
Before the current changes, the 40% estate tax applied to the portion of an estate was valued at $5.6 million for the individual, and $11.2 million for a married couple. The new law will double these exemptions. Taxpayers filing as individuals will be granted an exemption of $11.2 million, while married couples will have a $22.4 million exemption.

6.) Education tax breaks

Original versions of the tax bill included plans for reducing or eliminating several education tax breaks, but none of these changes actually made it into the Tax Cuts and Jobs Acts.
The Lifetime Learning Credit and Student Loan Interest Deduction remain unchanged, and the exclusion for graduate school tuition waivers is also still in place.
However, the new tax bill has expanded the available use of funds in a 529 college savings plan to include other levels of education. You can now use money in those funds to pay for private school tuition or tutoring services for children in grades K-12.

7.) Deduction changes

There have been slight changes in the mortgage interest, charitable contributions, medical expense and State and Local Taxes (SALT) deductions.
The mortgage interest deduction was previously in place for any mortgage debt totaling up to $1 million. Under the new tax code, all mortgages taken after Dec. 15, 2017 and totaling up to $750,000, are qualified for this deduction. Also, the interest on a home equity loan can no longer be deducted.
The charitable contribution deduction has seen two minor changes. Taxpayers can now deduct as much as 60% of their income for charitable donations, up from the previous 50% limit. Also, donations made to universities in exchange for the privilege of purchasing tickets to athletic events can no longer be deducted as charitable expenses.
The cap for the medical expenses deduction has been cut from 10% of adjusted gross income (AGI) to 7.5% of AGI. Unlike nearly all other provisions in the bill, this change is retroactive to the 2017 tax year. Also, it will only apply through 2018.
The SALT deduction, which includes property and income tax, was originally slated for elimination, but was preserved with some changes. The total SALT deduction now cannot exceed $10,000.

8.) Corporate tax rate changes
The modified tax code lowers the corporate tax rate to a flat 21% on all profits. This simplifies taxes for most businesses while providing them with a significant cut as well.

9.) Disappearing deductions
Not every deduction survived the new tax law. Here are some that won’t be in effect for 2018 taxes:

  • Casualty and theft losses that were not caused by a federally declared disaster
  • Unreimbursed employee expenses
  • Tax preparation expenses
  • Miscellaneous deductions previously subject to the 2% AGI cap
  • Moving expenses
  • Reimbursement for employer-subsidized parking and transportation

10.) Repatriation of foreign assets
In an effort to bring some of the country’s largest companies’ profits back to American shores, the new tax law features a one-time repatriation rate of 15.5% on all cash and similar foreign-held assets, and 8% on non-liquid assets held overseas.

11.) Changes to the AMT exemption amount
The alternative minimum tax (AMT) exemption was permanently adjusted to account for inflation. These changes will be most dramatic in 2018 and are as follows:

  • For a single taxpayer or one filing as head of household, the AMT rate will increase from $54,300 to $70,300.
  • For a married couple filing jointly, the AMT rate will increase from $84,500 to $109,400.
  • For married couples filing separately, the AMT rate will increase from $42,250 to $54,700.

Tuesday, February 6, 2018

Mistakes First-Time Homeowners Make

Q: My husband and I have been renting an apartment since we got married.  We recently decided  to buy our first home.  Some friends of ours had lots of trouble with the process, and wound up  buying a house they can’t really afford.  We don’t want to go through what they did.  What can we do to buy our dream home without all that grief?

A: Buying a house is one of the biggest decisions you will ever make.  It’s great that you and your husband are planning ahead for this important milestone. These are common mistakes that first-time homeowners make--and how to avoid them.   

    1.) Not Knowing Your Housing Budget

The term “house poor” is an apt one for the many people who buy a house that is costing them more than their income allows. It’s uncomfortable to be in this situation, so you’ll want to avoid  buying out of your financial comfort zone.  You sound like planners, so you probably already have a budget and some idea of your expenses  for running your current household.  Now is the time to review that budget.  Some of your expenses are going to increase in a new home — utilities, for instance.  If you’re moving from an apartment to a larger home, that can cost much more.  Some of the other budget items may change, too.  Renter’s insurance and laundromat costs may drop off the list.  Add up all your expenses, but leave out rent or mortgage payments. 

When you subtract the total of this list from your take-home pay, you will have a pretty good idea of how much you have left for mortgage payments.  Find a mortgage calculator online and use it to calculate mortgage payments based on various interest rates.  Generally, housing costs should be 30 percent or less than your before-tax income.

    2.) Looking Outside Your Housing Budget

There is nothing worse than finding your dream home only to realize that it’s way out of your reach. It’s a common mistake to look at properties that are too expensive for your budget. This tends to set you up for disappointment.  Even if you manage to purchase the home, you may find yourself in the same situation as the friends you mentioned in your question: too much house and too little money.    After doing your research, you’ll know how much you can afford to spend on a new home. You  can then pinpoint properties in your price range.   

Most home purchases require compromise. Maybe you’ll decide on a smaller house in a  neighborhood with the best schools in the city. If space is your highest priority, you might decide on a large house in a less-exclusive neighborhood.  Every house has some advantages and disadvantages, but keep your search within your financial comfort zone.

    3.) Purchasing Based on Future Changes 

If you are having trouble finding a house in your price range, consider ways to reduce your current expenses.  This will mean having more money available to make a larger monthly mortgage payment.  The mistake some people make is assuming they can make these changes once they own a house.  However, these budget changes should be in place before you buy a  house, even if it means delaying the purchase.  Give yourself at least six months to see if you can stick to your new budget.

    4.) Treating Your Home as an Investment

First-time buyers often expect that they will be able to sell their house in five or 10 years for a large profit.  The last decade has brought major changes to every housing market.  While a house in certain areas was almost guaranteed to appreciate in value, this is no longer a sure thing.  Economics professor Art Carden, from the Brock School of Business, has this advice, “Buy a house to live in and be prepared for lots of unseen upkeep costs that range from mowing the lawn to emergency repairs.”

Tuesday, January 2, 2018

What Will The New Tax Code Do?

Based on similar historical situations, slashing taxes always translates into budget cuts across government programs.  This is due to the PAYGO Act that Congress passed in 2010 to keep the national deficit in check, so the program that’s expected to take the biggest hit is Medicare.

Medicare funds health insurance coverage for senior citizens and much of the disabled population. According to the law, only 4% of the Medicare budget can be trimmed. However, financial experts predict the new tax code could clean out Medicare funds completely by 2029.

The actual cuts: The new tax bill will increase the federal deficit by approximately $1.5 trillion over the next decade.  To reduce the deficit, many programs will have budget cuts. It is anticipated that Medicare will be subjected to automatic cuts to the tune of $25 billion as early as next year.

Which other programs will be affected? Many social insurance programs will be affected by the new tax code, including food stamps and WIC. The two programs expected to be hardest hit are Social Security and Medicare, both of which are already running at deficits.  Generally, these programs need the most funding. Medical costs tend to rise with time. In addition, aging Baby Boomers far outnumber preceding generations and are likely to drain any available funds more quickly.

The Social Security Trust Fund reports that if no further action is taken, its reserves will be depleted by 2034.

Will those who are losing benefits receive a tax cut? Most middle-class Americans who stand to lose their benefits will also be paying more in taxes under the new code. The AARP has also estimated that 1.2 million taxpayers age 65 and older will be paying higher taxes by 2019.

What can you do about the change? The tax code itself must be changed by Congress to avoid these possible consequences.  What you can do, though, is double down on all your retirement investments and try to put away a little more for your golden years.

Protect yourself now! For tips on setting up or improving a retirement fund, call, click, or stop by First City to ask how we can help.

Wednesday, November 22, 2017

What are Bitcoins and how can you get some?

Here’s an introductory guide to bitcoins to help answer these questions and more!

Bitcoin is a form of money that is entirely digital.  In other words, if the U.S. has dollars, and
Europe has Euros, the internet has bitcoins.   

But the fact that bitcoin is digital isn’t the most interesting thing about this type of currency.  In
fact, economists estimate that 92% of all money is digital, no matter what currency we’re talking
about.  So what makes Bitcoin so interesting is that it’s decentralized.

No single nation, bank or institution controls bitcoin.  While it was first invented by developer
Satoshi Nakamoto, the bitcoin currency is administered and propagated by Bitcoin users.

How Does Bitcoin Work?

Bitcoin works a lot like a regular currency.  You can buy and sell digitally, of course, but you can
also use bitcoin to make “real life” purchases if the vendor accepts bitcoins.  The first such “real
life” purchase using bitcoin was in 2010, when a man bought two pizzas for a whopping 10,000
BTC (Bitcoins).

You can invest with bitcoin, exchange your bitcoins for other forms of currency, transfer bitcoins,
etc.  But people can also create new bitcoins through a process called mining.

This is where bitcoin’s decentralized system becomes super interesting.  Rather than a large bank
or financial institution printing more money, anyone can mine new bitcoins.   

Mining involves using computational power to solve complex mathematical problems in order to
validate other bitcoin transactions that have occurred within the network of Bitcoin users.  This
system of peer-validation is the bedrock of the revolutionary blockchain technology that makes
bitcoin so secure and allows for direct peer-to-peer value transferring.  It is also the linchpin of the
bitcoin system from the perspective of Bitcoin creation.  For every “block” of transactions
successfully validated in this way, the miner is rewarded with new bitcoins.

Is Bitcoin Legal?


Bitcoin has a bit of an infamous reputation based on its ability to be traded securely and
anonymously without the regulation of a centralized institution.  It has been associated with
money-laundering and illegal purchases on the deep web’s black market, but this doesn’t mean
bitcoin isn’t legal.

That said, as with all currencies, bitcoin is illegal when you purchase illegal things with it.   

How Can I Earn Bitcoins?

There are a few main ways to get into the bitcoin market.  The first of these is mining.

Mining, as mentioned above, is the process of solving complex mathematical problems available
to anyone in the bitcoin network.  This is win-win for both the miner and the network at large. 
The miners provide transaction validation for the network and are, in turn, rewarded with bitcoins.

Just how much can you earn from mining?  Well, that depends.  In 2009, you could earn 50 BTC
per “block” mined. However, today it’s considerably less ... 12.5 BTC.  Also, these mathematical
problems are more difficult to solve than anything you may have encountered in high school
calculus.  You need specialized computers to tackle these problems, which is a significant
You can also get bitcoins the old-fashioned way: by working for them.  There are lots of job
postings that pay in bitcoins on the Internet, but a good place to start looking would be on Reddit,
which has one of the most popular message boards for jobs paying in BTC.

There are other ways to get bitcoins as well, though some of these can involve high risks, such as
gambling, online gaming and currency trading.  More on these techniques here.

Do I Have to Pay Taxes on Bitcoin Earnings?

The IRS will view your bitcoins as property rather than currency, meaning that every transaction
you make within the Bitcoin network will affect your capital.  In addition to this, if you are paid
in any crypto-currency (virtual currencies, of which bitcoin is just one kind), this income will be

In many ways, bitcoins are subject to the same tax laws as regular currencies.  Business
transactions in bitcoin are not exempt from regulations or rules regarding reporting and sales tax.

If you’re dealing a lot in bitcoin, check with your accountant. But the general rule is to keep
accurate and thorough records because your Bitcoin income will need to be reported as part of
your gross income. It must also be recorded in U.S. dollars at the exchange rate it was valued for
at the time of the transaction.

Wednesday, November 15, 2017

The Affordable Care Act Open Enrollment is Here

Open enrollment is here again, and for many Americans this time period - and the entire health
insurance market - spells confusion.

Is Obamacare still in effect? Are premiums really increasing as much as predicted? Do I need to
take action now if I’m happy with my insurance plan? What’s the difference between all the plans
offered in the marketplace?

So many questions! No worries, though. We’ve got answers. Read on for the complete rundown
on open enrollment, the Affordable Care Act (ACA) and today’s health insurance options.

1.) The ACA - still in effect?

Before you go shopping for a cheaper or better insurance plan, bear in mind that the Affordable
Healthcare Act is still up and running. Many people are under the mistaken impression that the
current administration has overturned the program or will soon do so. While an alternative health
care plan has been proposed, there has been no change in the current system thus far, and it is not
likely that there will be within the next few months.

What does this mean for the average American?

The ACA has made it mandatory for every American to have sufficient health care coverage. The
penalty for failing to comply with this law is the higher of $695 per adult or 2.5% of household

The ACA also oversees the government-run health insurance marketplace in which insurance
plans can only be purchased during open enrollment. In most states, the open enrollment period
for 2017 is about 6 weeks long, running from Nov. 1 to Dec. 15. The following states have
extended their enrollment period: California, Connecticut, the District of Columbia,
Massachusetts, Minnesota, New York, Rhode Island and Washington.   
2.) Rising premiums or cheaper rates? 

If you ask the average Jane or John Doe if insurance costs are rising or falling, you’d probably
get an earful about ever-climbing premium rates and health care costs. On the flip side, though, is
the government, claiming their subsidized plan and the expansion of Medicaid has health care
costs steadily declining.

In fact, both arguments are true. The silver plans on the ACA marketplace rose by an average of
more than 30% this past year - and 2018 is looking a whole lot worse. Premiums are expected to
rise by as much as 34-50% this coming year.   

The current administration has claimed it will stop paying for many of the key payments to
insurers it’s previously shouldered as part of the ACA. This factor, coupled with the
overwhelming uncertainty surrounding the ACA, has led insurers to drastically increase their

The 80% of customers who receive subsidized insurance through Obamacare will be shielded
from these price hikes; it’s the other 20% who will bear the brunt of the unstable marketplace.

The premium increase rates will vary by state and by the individual, but it is quite possible for an
Obamacare customer who was paying $593 a month in premiums in 2017 to be saddled with a
monthly premium of $1,001 in 2018!

All this uncertainty has led to another significant development: Many providers have left the
marketplace plans. This means your doctor may no longer be part of your insurance plan. Be sure
to find out about any possible changes before open enrollment is up, even if you aren’t looking to
change your plan.

3.) Where to apply   
If you do not receive insurance coverage through Medicaid, Medicare or your workplace, you
may want to consider changing your insurance plan this year. To find out what your options are,
visit healthcare.gov. Most states offer insurance coverage through this site, while others will
redirect you to a private state-run site where you can purchase a marketplace plan.   
4.) Available marketplace plans   

Here’s a quick synopsis of each category of plans available in the ACA marketplace: 
*    Bronze: lowest monthly premiums, highest out-of-pocket costs and very high
*    Silver: the most popular plans available, silver offers moderate premiums and out-of-
pocket costs, with lower deductibles than bronze plans.
*    Gold: high monthly premiums but lower out-of-pocket costs and deductibles.
*    Platinum: the most expensive plans in the marketplace, platinum plans have the highest
monthly premiums but the lowest out-of-pocket costs and very low deductibles.
There is also a catastrophic plan available for individuals under age 30 and people who have
received an exemption from the marketplace due to extenuating circumstances. These plans
include free preventive care, low monthly premiums and very high deductibles.   

5.) Choosing your plan   

When shopping for a marketplace plan, it’s important not to base your decision on price alone.
Many of the cheaper plans come with a heavy price. Your primary care provider or your child’s
pediatrician may not be covered under some of the less expensive plans. You may need to pay
out-of-pocket for many or all prescription drugs. Lastly, a higher deductible can mean that you’ll
end up paying for all of your health care needs in 2018 without “cashing in” on your premiums
before the year is over.   

Be sure to shop around for a plan and do lots of research before making your decision.

Be an educated consumer this open enrollment season so that you make the best decision
possible. Your health is too important for anything less!   

Your Turn: The nationwide health insurance challenge has been hotly contested for years. If
you had the power and means, how would you change the current system? Share your thoughts
with us in the comments!



Friday, October 27, 2017

7 Ways To Save On Thanksgiving Costs This Month

Thanksgiving means giving thanks for all the good in our lives. It also means stuffed turkey and gravy, cranberry pie and mashed potatoes. It’s a time-honored tradition of spending time enjoying a delectable holiday meal while in the company of those we love.
It can also mean spending an awful lot of money.
According to the American Farm Bureau Federation, the average host cooking a Thanksgiving dinner for 10 guests will spend approximately $50 on the dinner alone. Of course, if you’re expecting more than 10 guests or you tend to overspend when hosting, your costs can easily top that amount. Between the turkey, ingredients for that luscious holiday meal and décor to set the ambiance, hosting a Thanksgiving dinner is not cheap.
Looking for ways to cut back without compromising on the quality and festivity of your meal? Look no further! You know that here at First City we love to keep your wallet plump. That’s why we’ve compiled a list of seven easy ways for you to save on your Thanksgiving costs this year.
1.) Verify your guests’ attendance
Before you start writing up a spectacular menu or a detailed shopping list, check to make sure you have an accurate head count of the guests and family members who will be joining you for Thanksgiving dinner. You don’t want to end up with a fridge full of leftovers. Verify that all who are invited are indeed planning on showing, and only then begin planning your menu.
2.) Find out what your guests like
While you’re doing your inviting, ask for your guests’ individual tastes. You don’t want to forget that Great Aunt Martha is on a strict gluten-free food plan or that your cousin’s spouse is a vegetarian. Aside from specialized diets, ask about particular foods your guests like to eat and those they won’t touch. If something on your menu isn’t very popular with your guests, skip it – even if you think it’s an “obligatory” Thanksgiving food. This way, you won’t slave over a pumpkin soup that nobody will touch or end your holiday meal with trays full of leftovers and lots of hungry guests.
3.) Make it a potluck
Slash your spending and your stress in one step by answering an enthusiastic “yes!” to every guest who asks if they can bring something. Don’t just say “anything’s fine,” though, or you might have seven desserts. Instead, create a Google Sheet with your planned menu and let your guests input what they’d like to contribute to the meal. This way, they’ll know exactly what you need, you’ll know what they’re bringing, and best of all, you won’t be doing all the cooking yourself.
4.) Serve on smaller plates
Most people will load up their plates to capacity, regardless of the plate’s size. Curb the wasting at your table by using smaller dinnerware. Let your guests load up all the way without leaving half-full plates. They can always refill if they still want to eat more later.
5.) DIY décor
You can set a beautiful holiday tablescape without blowing your budget; all it takes is a little imagination. Shop the local dollar store for discounted décor that still packs a punch, like colored vases, fake flower arrangements, and other centerpieces. Look for easy, inexpensive DIY ideas online. Finally, get creative by using things from around the house – or yard – as your décor. For instance, you can create a whimsical candleholder by affixing cinnamon sticks around a candle or design an autumn-themed centerpiece with leaves and pinecones from your own yard.
6.) Shop the sales
Grocery stores and shopping centers tend to run specials on turkeys and other Thanksgiving staples starting as early as Halloween. Plan your menu several weeks in advance so you can take advantage of these sales. Keep it flexible until you see the circulars and then base your dishes on the ingredients and produce that’s cheapest. Also, be sure to shop around for your turkey! Supermarkets tend to have the best deals on the birds, with some even running free turkey deals when you spend a specific amount on other groceries.
7.) Cook from scratch
Most everything is less expensive – and tastes better – when it’s homemade. Think gravy, mashed potatoes, stuffing and apple pie. Start your cooking well enough in advance so you don’t find yourself relying on too many convenience foods and paying the price both in cash and taste. Your wallet and your guests will thank you!
When you gather ’round the table with family and friends this Thanksgiving, you can be thankful for all the good in your life without feeling guilty over how much you spent on the meal. All it takes is a little planning!

Friday, September 1, 2017

First City Credit Union Celebrates its 80th Anniversary

First City Credit Union is celebrating its 80th Anniversary with a number of celebration events in September, culminating on the credit union’s “birth date” or date of establishment, Sept. 28.  We want to invite you, our members, to the festivities!

We will have open house events that will take place in each of the credit union’s eight branches in downtown Los Angeles, Lakewood, West Covina, Claremont, Palmdale, Lancaster, and Pasadena.  The open houses will take place on each Friday in September with refreshments, member gifts, and special product offers for our members.

Sponsor and member appreciation celebrations will also take place in September.  Food trucks will be deployed at several of First City’s main sponsor groups, providing free lunch to staff while the branches will have refreshments and gifts on random days as appreciation for our members and to thank our sponsor groups for their support.

First City was officially founded on September 28, 1937 as Los Angeles County Employees Number 11 Federal Credit Union, with 65 members and a grand total of $149 in deposits!  Today, with more than 55,000 members, $630 million in assets, and 11% in capital, First City is one of America’s strongest financial institutions.

First City CEO Jim Miller wants you to know that “Through the years, we’ve helped thousands of members fulfilling their financial needs. Our success is a reflection of our relationship with the members, sponsors, and communities that we serve.  Their support places First City among the nation’s most financially sound credit unions; a credit union that has received a ‘5-star superior’ rating by the Bauer Financial independent rating firm for 17 consecutive years.”

Your credit union’s commitment to its sponsor organizations and the communities it serves is highlighted by our involvement, fundraising, or sponsorship of several events, including the Lakewood Fun Run, Department of Public Social Services Funmania, Los Angeles Sheriff’s Fight for Life, Department of Children and Family Services Family Fun Day, Los Angeles Sheriff’s Chili Cook-off, LAC+USC Medical Center’s American Heart Association Heart Walk, Antelope Valley Salute to Youth, Children’s Hospital Los Angeles Holiday from the Heart, Children’s Miracle Network Credit Unions for Kids, and Claremont’s Shoes That Fit.  In addition, First City conducts Financial Literacy programs for the sponsors and communities it serves.

We invite you to take advantage of the special rates we have to celebrate our 80th anniversary with you, our wonderful members!