February 2021

The Texas snow storm of 2021 was a harsh reminder of just how unpredictable and unforgiving Mother Nature can be. We can do everything possible to protect our families and our homesteads against perils, yet the truth of the matter is that some things are just out of our control.

Fortunately, the list of perils covered in most home insurance policies is actually pretty broad. Standard home insurance policies normally cover roof damage and damages caused by burst or ruptured pipes. Most policies even cover damages or losses incurred due to power failures, which means your freezer full of spoiled food is probably covered up to a certain amount. You likely even have coverage to help pay for living expenses while your house is uninhabitable. Those expenses can include rent, hotel stays, restaurant meals, storage fees and more. However, as a homeowner you have the responsibility to take reasonable steps to avoid perils. If your 40 year old roof collapsed, yet there are visible signs of structural decay and wind damage from years prior, your claim for the winter storm may be denied since you should have replaced your roof years ago.

So, what can you do now?

First, contact your insurance agent if you haven’t already. If the cost to repair damages exceeds your deductible, then your agent can get you started in filing a claim. He or she may also request specific photos and documents before you begin making repairs.

Second, if you need to hire a professional for repairs, don’t hire just anyone. Be wary of imposters by requesting a certificate of insurance. Contact the insurance company on the certificate to verify the contractor’s coverage is active. It is not out of the ordinary for fake or unlicensed contractors to provide outdated documents. Your insurance agent may even require a copy of your contractor’s certificate of insurance. Document all of your expenses by keeping receipts and make a file of any major home repairs. Maintaining records supporting your responsibility as a homeowner will be an asset in helping you get future claims approved.

Lastly, review your insurance policies. Make sure you understand all the coverages on your policies and have a good grasp of the exclusions. Is your deductible way too high? Or are you under-insured or over-insured? A CERTIFIED FINANCIAL PLANNER™ professional is a great ally to help you in reviewing your insurance policies. A CFP® professional regularly works alongside other professionals, like accountants, attorneys, and insurance agents, to help you make financial decisions that are in your best interest. Though not insurance agents, CFP® professionals are highly educated in insurance and can help you determine if a specific policy is consistent with your financial plan. If you don’t have a financial plan, you can go to https://www.letsmakeaplan.org/ to find a CFP® professional near you.

Published in the Victoria Advocate

Hannah Gohmert is a CERTIFIED FINANCIAL PLANNER™ professional and the Chief Compliance Officer of KMH Wealth Management, LLC.

For many years I have attended advanced tax planning conferences in Las Vegas. Last summer I did not physically go, everything went virtual, as it will this year as well. That’s just not the same. A great friend, CPA, and classmate of mine at Texas A&M and I would meet there annually and when we were together all conversation revolved around tax. Our spouses would make fun of our continuous “tax talk.”

Well, we have plenty of tax to talk about in 2021! How do you plan when you don’t know what is going to happen? At this point, all we really have to go by is the Biden administration tax proposals. With Biden in the White House and a Democratic-controlled Congress a lot can change, but can he really get all he proposes? It will be interesting to watch the negotiations.

Biden’s proposals purport to generally raise taxes for those with incomes above $400,000. The last major tax legislation was in 2017 and the top ordinary income tax bracket dropped from 39.6% to 37%. However, Biden’s proposals would reinstate the 39.6% rate. The tax benefit of itemized deductions would be limited to 28% if you are in a higher bracket along with a reduction of itemized deductions of 3% of income above certain thresholds. The proposals eliminate the $10,000 limitation for state and local taxes.

In addition, for those with incomes over $400,000, there will be a punishing Social Security Tax increase. Currently, the 12.4% Social Security Tax stops at $142,800. Under the proposals, the 12.4% Social Security Tax will start again at $400,000 with no limitation.

For those with incomes over $1,000,000 net long-term capital gains would be taxed at 39.6% which combined with the Net Investment Income Tax (NIIT) of 2.8%, adds up to 43.4%. This is double the current maximum effective rate!

There is a proposal to eliminate the step-up in basis for inherited assets. This is not just for high-income taxpayers. Think about the home or farm that Mom and Dad have owned for 40-50 years, or the equipment, or the livestock. What is the tax basis? You might become a high-income taxpayer in the year you sell your inherited assets.

There is a proposal to eliminate real estate tax breaks-not just for high-income taxpayers. So long to the $25,000 exemption from passive loss rules for rental real estate for middle income taxpayers. Also, elimination of 1031 Like-Kind Exchanges that allowed deferral of capital gains taxed on swaps of real property.

There is a proposal to eliminate deductions for oil and gas drilling expenses and deductions for depletion. This is starting to make my stomach hurt. C-corporations, your tax rate will increase from 21% to 28%.

There’s more folks. I have not even touched on the Estate & Gift Tax Proposals. Do not delay the preparation of your 2020 tax returns and doing some serious planning with your CPA and financial advisor!

Published in the Victoria Advocate

Lane Keller CPA/CFP® is a managing member of Keller & Associates CPAs, PLLC and KMH Wealth Management, LLC with over 30 years of experience in tax preparation and planning.

Time to Review Your Home Insurance Policy

Tax Talk 2021

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