Taxation of Investment Income

Bank Deposit Interest earned from an Irish Bank will be subject to DIRT tax deducted at source, now at a rate of 41%. The recipient will also be liable to PRSI, which will normally increase the liability to 45% of interest earned. Foreign banks usually pay the interest without any deduction but then fully liable to Irish taxes.

Interest paid on Government Stock will be without any tax deducted but fully liable to taxes. The profit on sale or redemption of Government Stock is exempt from Income Tax.

Rental income from property outside the State is treated as Investment Income. Any rental loss arising from Irish property cannot be offset against foreign rents. All of the foreign rents can be grouped together so that a loss on one property can be offset against a profit in another country.

Many people who are resident in Ireland have a foreign employment, typically if might be as a Director of a UK-based company. The foreign source income is liable to Irish Income Tax as the person is resident with credit given for foreign tax paid on the same income.

If the person pays PRSI in Ireland then it is usually possible to arrange that no social security charge (in UK its NIC) will be deducted. This avoids paying social security twice on the same income.

While the Revenue has become very sophisticated in detecting undeclared Investment income, there are still many people who, for example, have not declared their Spanish Holiday Apartment. If it does come to Revenue attention then Revenue will want to know how it was financed. If someone does nothing about it then, when that person dies, it will show up on their Probate Schedule of Assets and that will trigger a Revenue enquiry.

Foreign Bank Interest is harder for Revenue to detect but if funds have been transferred abroad or later back to Ireland then it may be detected passing through the Clearing House handling payments into or out of the State via the Banking system.

If a person is on PAYE and has investment income not declared to Revenue then what is the position? If the gross income before expenses is over EUR50,000 per annum or the net income after expense is more than EUR3,174 per annum then the self-assessment provision applies and a person should submit an Annual Tax Return regardless of whether a Return was received by post or not.

If not subject to Self-Assessment and no Return is received then it would still be wise to regularise the situation as a person is likely only to build up liabilities which the Revenue will ultimately want paid in one go. If in doubt go to your tax advisor and take their advice. With Investment Income peace of mind can be very important.

Wicklow People

Buying a home is still a good financial option

For as long as I can remember, owning your very own property has been the Australian dream.Having your own plot of land with a number of bedrooms, a backyard for the kids and a sense of security for the future is what Australians have always aspired to.

But according to the Reserve Bank of Australia, Australians may as well abandon this long-held dream. The RBA recently released a research discussion paper, provocatively titled Is Housing Overvalued?, which has been making the rounds in the real estate industry. Essentially, the authors argue that Australians may be financially better off renting rather than buying a home.

They base this on the projected future capital gains on Australian properties. The current average rate that real house prices have been increasing by since 1955 is just under 2.5 per cent. The authors say that if future house prices grow slower than this rate – and we take into account prices, interest rates and rents – it might pay off more for Australians to be tenants rather than homeowners.

While this argument might sound reasonable at first, the problem is that it ignores the many benefits that purchasing a house can bring.

Why do people buy houses?

Australians want to own their own home for a variety of different reasons. Of course, even apart from the financial side of things, theres the personal and emotional aspect. A home isnt just another purchase, but a milestone in your life. Theres something special about having a place you can call your own and making a life for yourself.

Other people buy for lifestyle reasons. A property might be near a good school, or it might be located in an exciting part of town with plenty of opportunities for entertainment and recreation.

But even in terms of finances, buying a home is a more secure option than simply renting for eternity.

The financial benefits of home ownership

Its all very well to say youre better off to rent rather than to buy. But the issue is, what are you doing to build a saleable asset? When youre actually living in a house and paying the mortgage, youre essentially saving money. Each time you make a repayment, slowly chipping away at your debt, youre building up equity in your home that you can use down the line if you choose.

By contrast, when youre renting, you need to be disciplined enough to actually be investing money somewhere, somehow. Unfortunately, human nature being what it is, a majority of people are unlikely to do that. So when thinking about the long-term savings of the population, its almost misleading to say renting is the way to go for financial security.

Property ownership is about building an asset for your future. Thanks to the right advice, I used my super fund to buy a piece of real estate not too long ago. I paid around $330,000 for the property, spent another $100,000 putting a granny flat on it and now I get $750 a week in rent – which is nothing to sneeze at!

Its this kind of financial benefit that Australians miss out on if they just stick with renting. With the right advice, they can also make home ownership work for their bank account.

Leanne Pilkington, general manager, Laing+Simmons
Leanne Pilkington is General Manager of leading New South Wales residential real estate group Laing+Simmons.

Leanne is one of only a handful of female general managers in real estate franchising in Australia.

Leannes real estate nous has been honed for more than 25 years in the industry. Over the course of her career she has developed an extensive knowldege of the full specturm of real estate services, including residential sales, property management, retail management and development.

Overseeing the whole Laing+Simmons group as well as focusing on the growth and development of each franchise, Leanne is instrumental in developing new products, services and training systems to meet the varying needs of each member of the group.

Leanne joined the Laing+Simmons group in 1995 as a franchise and administration manager. In 1997, she was promoted to marketing manager and then became general manager in 2000.

Leanne completed her Masters in Business Administration at the University of Western Sydney in 2005.

Banks catch em’ young with savings accounts

Piggy banks are passe. The traditional coin container that children used to keep their wealth has lost its relevance, with banks opening accounts for children.

Banks are catching them young, literally, say industry officials. In fact, these days, banks are not even sparing new-born. Just-born kids are account holders in many banks.

State Bank of India (SBI), for instance, has many new-borns as account holders. Kotak Mahindra Bank, on the other hand, has a 12-day boy as their youngest account holder. SBI is conducting classes in schools asking children to move their piggy banks from the home to banks. Banks will help the piggy bank balances to grow by paying an interest 4.5%, same as saving bank accounts on them.

Ever since Reserve Bank of India (RBI) permitted children of 10 years and above to sign uniformly to start their own savings bank account banks.

Most banks such as SBI, Kotak Mahindra Bank, HDFC Bank and ICICI Bank have launched their individual children plans.

SBI has begun imparting a few lessons in personal savings. They are conducting classes for on banking for school children, teaching the young students on banking and on the need for savings. A senior SBI official told dna, We are getting a good response both from the urban areas and the response from rural areas is also encouraging.

SBI has two kinds of accounts which has a specialised account for kids who are even just born called the Pehla Kadam which is opened with the guardian when the kid is just born. Pehli Udaan is where 10 years who can sign uniformly are given an account of their own along with a debit card facility. Children have an ATM limit of Rs 5,000 and mobile banking limit of Rs 200.

Banks are also bundling insurance products with these accounts. For example, SBI has a child account with an insurance support, and planing for higher studies with sum assured of Rs 20 lakh. Launched in many schools, students are handed over account kits. Students were also handed over account kits containing their personalised debit cards, passbooks, cheque books, among others.

Kotak Mahindra Bank was one among the early launchers with the bank having special children account over a year back.

Sumit Bali, executive vice-president, Kotak Mahindra Bank, said, We are getting an encouraging response with the bank adding 35,000 accounts a month. These accounts come with recurring deposits and systematic investment plan facility. All our account holders are given a ID card and a debit card. The recurring deposits are for 36 months with an interest rate of 8.5%

HDFC Bank offers advantage account for kids 7 to 18 years of age with ATM offerings but only with permission of parent or guardian. The ATM withdrawal limit is Rs 2,500 and daily shopping limit is Rs 10,000. The account comes with free education insurance cover of Rs 1 lakh in the event of the death of the parent or guardian through vehicular accident by road, rail or air to safeguard the future of the child. Once the balance in the kids advantage account reaches Rs 35,000 the amount in excess of Rs 25,000 will automatically be transferred to a fixed deposit if money maximiser (sweep out) facility has been opted for by the account holder.

ICICI Bank also recently launched an account for children called Smart Star to be operated by minors over 10 years of age. Account holders will get a personalised cheque book and a debit card with a picture of their choice with access to banking channels such as ATM, mobile and internet banking.

Aberdeen Asia-Pacific Income Fund, Inc. Announces Record Date And Payment …

PHILADELPHIA, Oct. 9, 2014 /PRNewswire/ –Aberdeen Asia-Pacific Income Fund, Inc. (NYSE MKT: FAX)(the Fund), a closed-end fund, today announced that it will pay on October 29, 2014, a distribution of US $0.035 per share to all shareholders of record as of October 21, 2014.

Your Funds distribution policy is to provide investors with a stable monthly distribution out of current income, supplemented by realized capital gains and, to the extent necessary, paid-in capital.

Under US tax rules applicable to the Fund, the amount and character of distributable income for each fiscal year can be finally determined only as of the end of the Funds fiscal year. However, under Section 19 of the Investment Company Act of 1940, as amended (the 1940 Act) and related Rules, the Fund may be required to indicate to shareholders the source of certain distributions to shareholders.

The following table sets forth the estimated amounts of the sources of the distribution for purposes of Section 19 of the 1940 Act and the Rules adopted thereunder. The table has been computed based on generally accepted accounting principles.The table includes estimated amounts and percentages for the distribution to be paid on October 29, 2014 as well as the estimated cumulative distributions declared fiscal year to date (11/01/2013 – 09/30/2014), from the following sources: net investment income; net realized short-term capital gains; net realized long-term capital gains; and return of capital.The estimated composition of the distributions may vary from month to month because the estimated composition may be impacted by future income, expenses and realized gains and losses on securities.

Brown Signs Bill Granting Illegals Access to Student Loans

College-age illegal immigrants in California now have access to a form of finance that used to be reserved for US citizens: student loans, according to the Sacramento Bee. On Sunday, Gov. Jerry Brown signed Senate Bill 1210, by State Sen. Ricardo Lara, D-Bell Gardens, into law. 

The bill makes $9.2 million accessible for University of California and California State University schools so they can offer the money to illegal aliens.

Sen. Lara attests that because the illegal immigrants are not eligible for federal financial aid and the bulk of private loans, they have $5,000 to $6,000 less for their college funds at UC and $3,000 less at CSU.

Lara, delighted, issued a statement saying, “This bill will grow our college-educated workforce and make good on the promise that a college degree is possible for all hard-working California students, regardless of immigration status.”

SB 1210 follows on the heels of state actions that allowed illegal immigrants to access in-state tuition if they graduate from California high schools, as well as other legislation that allows them to apply for Cal Grant scholarships.

Tax-smart investing: Eight offsets to income for better returns

I’ve been talking about the four pillars of tax-smart investing: (1) control the timing of income, (2) control the type of income, (3) control the location of income, and (4) control the offsets to income.

Today, I want to finish off by focusing on pillar number four: Offsets to income.

THE OFFSETS

What I’m talking about is creating deductions or credits to offset income earned, or tax that might otherwise be owing, on your investment portfolio. The most common types of offsets include capital losses, charitable donation tax credits, interest deductions, foreign tax credits, losses from limited partnerships, business expenses in some cases, and other deductions, such as flow-through share deductions.

THE IDEAS

Try the following ideas to reduce your tax using offsets:

1. Argue that it’s a business
If you’re actively trading in securities, you may be able to argue that your profit should be taxed as business income rather than capital gains. Now, only half of your capital gains are taxable, so don’t be quick to make this argument. Having said this, if you do report your profits as business income, you’ll be entitled to deduct many types of expenses against your income, including many things you may be paying for anyway, such as a portion of mortgage interest, property taxes, and similar expenses. See my article dated April 22, 2010, for more.

2. Donate securities to charity
Since 2006 it has been possible to eliminate the tax on capital gains on specific securities by donating those securities to charity. Normally, the capital gains inclusion rate is 50 per cent (meaning that one-half of your gains are taxable), but the inclusion rate is set to zero if the securities are donated to charity. In addition to zero tax on the capital gains, you’ll be entitled to a donation tax credit for the value of the securities donated.

3. Harvest capital losses wisely
As we near year-end, many Canadians will choose to sell some of the losers in their portfolio to realize the capital losses, which can then be offset against capital gains that might have been realized this year, or in the three prior years (2013, 2012 or 2011). This can make good sense if you have capital gains this year or in the past to offset, or if you simply don’t like the investment any more.

4. Track your cost properly
If you’re investing in mutual funds, be sure to add the amount of any taxable distributions each year to your adjusted cost base (ACB) of the investment. If you fail to do this you’ll end up paying tax twice on the same growth in value.

5. Claim foreign tax credits

Don’t forget to claim a foreign tax credit for foreign taxes paid on income you’re reporting on your Canadian tax return. You may also want to avoid dividend-paying foreign shares in your Tax-Free Savings Account (TFSA), Registered Retirement Savings Plan (RRSP) or other registered account since you won’t be able to claim a foreign tax credit for foreign taxes withheld on income inside those plans.

6. Avoid the superficial loss rules
If you sell an investment at a loss and you, or someone affiliated with you (your spouse or a corporation you control, for example), acquires or reacquires that same security in the period that is 30 days prior to your sale, or 30 days after your sale (a 61-day window), your capital loss will be denied. The loss isn’t gone forever; it will be added to your ACB of the reacquired securities, so that you’ll eventually realize the tax savings from that loss when you ultimately sell those securities.

7. Choose your funds wisely
If you invest in mutual funds that have unused capital losses, future capital gains in that fund could be partially sheltered using those losses, which can result in higher after-tax returns for you.

8. Deduct interest costs
It can make sense to borrow to invest if you do this prudently. Interest on money borrowed to earn income can generally be deducted, offsetting some of your investment income, and providing tax savings.

Tim Cestnick is president of WaterStreet Family Offices, and author of several tax and personal finance books.

Renting vs. Buying a Home: Comparing the Monthly Costs

Source: Marcin Bialek via Wikimedia Commons.

The debate over renting versus buying a home has heated up since the financial crisis left many Americans in dire financial straits. American households spending on housing is on average 33% of their annual expenses, but until recently we didnt have data to show the differences in costs between monthly mortgage payments versus rent.

Now, the Bureau of Labor Statistics has released a report detailing Americans average annual expenditures on housing and related items and how they differ between renters and homeowners. Theres a lot we can learn from this look at national data. Read on to find out more. 

Renting vs. owning
The following chart shows average annual housing expenditures by homeowners and renters as of 2012, which is the most recent data available.

How Health Savings Accounts Can Help You Save For Retirement

Health care costs in the US have skyrocketed over the past decade, and with it, medical-related debt. A study published in the American Journal of Medicine revealed that medical debt is the primary cause of personal bankruptcy. Among those who file for bankruptcy, three-quarters reported having some type of medical insurance.

75 million people in the US report problems paying their medical bills or are paying off medical debt, according to a study from The Commonwealth Fund. Bankrate found that one-in-four Americans say they owe more in medical debt than they have saved in an emergency fund, and more than 50 percent expressed concern that medical bills may one day overwhelm their finances.

At the same time, health savings accounts (HSAs), which help patients protect themselves from crushing medical bills, are on the rise.

HSA 101

A HSA is a tax-advantaged medical savings account available to people enrolled in high-deductible health plans (HDHP). They are like personal savings accounts, but the money is used to pay for health care expenses. Contributions to HSAs are 100 percent tax-deductible, tax-free, tax-deferred; and unused money isn’t forfeited at the end of the year. The account owner, rather than an employer or health insurance company, retains complete control. Even if your employer contributes to the HSA, that money is still yours if you switch jobs.

As mentioned above, you need an HDHP policy to be eligible, and the deductible must be at least $1,250 for individual coverage or $2,500 for family coverage. HSA owners can make pretax contributions of up to $3,300 a year for individuals, and $6,550 for family coverage. People age 55 and older can save an extra $1,000 a year. The money can be spent on out-of-pocket medical expenses such as deductibles, copayments for medical care and prescriptions drugs, and bills not covered by insurance. Most HSAs offer multiple options for withdrawals.

Eaton Vance Floating-Rate Income Trust

BOSTON, Oct. 15, 2014 /PRNewswire/ — Eaton Vance Floating-Rate Income Trust (NYSE: EFT) (the Fund), a closed-end management investment company, today announced the earnings of the Fund for the three months ended August 31, 2014. The Funds fiscal year ends on May 31, 2015.

For the three months ended August 31, 2014, the Fund had net investment income of $8,601,475 ($0.216 per common share). The net investment income includes a deduction of $336,071 ($0.008 per common share) representing interest expense paid on Variable Rate Term Preferred Shares (VRTP Shares). In comparison, for the three months ended August 31, 2013, the Fund had net investment income of $9,159,523 ($0.230 per common share). The net investment income includes a deduction of $342,215 ($0.009 per common share) representing interest expense paid on VRTP Shares.

Net realized and unrealized losses for the three months ended August 31, 2014 were $3,674,748 ($0.092 per common share). In comparison, net realized and unrealized losses for the three months ended August 31, 2013 were $7,409,567 ($0.186 per common share).

On August 31, 2014, net assets of the Fund applicable to common shares were $637,355,386. The net asset value per common share on August 31, 2014 was $15.99 based on 39,863,690 common shares outstanding. In comparison, on August 31, 2013, net assets of the Fund applicable to common shares were $642,072,823. The net asset value per common share on August 31, 2013 was $16.11 based on 39,856,811 common shares outstanding.

The Fund periodically makes performance data and certain information about portfolio characteristics available on www.eatonvance.com (on the fund information page under Individual Investors Closed-End Funds). Fund portfolio holdings for the most recent month-end are also posted to the website approximately 30 days following month-end.

The Fund is managed by Eaton Vance Management, a subsidiary of Eaton Vance Corp. (NYSE: EV), based in Boston, one of the oldest investment management firms in the United States, with a history dating back to 1924. Eaton Vance and its affiliates managed $293.6 billion in assets as of September 30, 2014, offering individuals and institutions a broad array of investment strategies and wealth management solutions. The Companys long record of providing exemplary service, timely innovation and attractive returns through a variety of market conditions has made Eaton Vance the investment manager of choice for many of todays most discerning investors.For more information about Eaton Vance, visit www.eatonvance.com.

‘Buying a Home’ Still a Major Part of the ‘Great American Dream’

Just months after a CNN Money poll showed that the Great American Dream of owning a home was fading away, a new study buy Country Financial – one of the leading investment and insurance firms in the US – found that Americans are super optimistic about the housing market and owning a home is still a great part of the dream.

Of the 1,000 Americans that Country Financial surveyed, 89 percent said owning a house was a major part of the American dream. Also, 64 percent of the respondents thought that owning a home was an attainable goal in the near future. The figure was just 41 percent in 2013.

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Were very encouraged that so many Americans feel optimistic about home ownership and view it as a realistic and achievable goal, Joe Buhrmann, manager of financial security support at Country Financial, said in a statement.

This is a dramatic increase from last year, when less than half felt like home ownership was attainable for a middle-income family. An improving economy and labor market might be helping to lift Americans spirits and place buying a home closer within reach, Buhrmann added.

The report also highlighted some major barriers that Americans felt are holding them back from buying a home. Fourteen percent of the people said a low credit score was a major hurdle to homeownership while 13 percent said they currently cant afford a down payment.

Only 12 percent of the respondents thought price was a problem. Indeed, the pace of growth of home prices in the US has temporarily stalled and although the mortgage rates spiked this week, they are still at record lows.

But the jobs and wages scenario hasnt been doing very well for the housing market. More people are opting to rent because of the financial obstacles. Earlier this month, the Federal Bank of New York released a report that highlighted some major financial burdens for todays Americans that is stopping them from taking the property plunge.

The real estate market has shifted dynamically through the years. Experts at Zillow explain that while local markets performed uniformly earlier, every area is posting different figures in terms of house values today.

Real estate has always been local, but as we continue to put the housing recession further in the rearview mirror, the largely uniform performance of local markets is also fading, Dr.Stan Humphries, chief economist at Zillow, said in a news release.

We now have several different types of markets emerging, including markets that are still muddling along the bottom; markets that shot up immediately after the recession ended and are now cooling quickly; and markets that are still very hot. Each of these environments presents unique challenges and opportunities for buyers and sellers, and what works in one area wont necessarily work in another, he added.

Below are the seven best markets for buying a home as per Zillows August 2014 rates:

1. Providence, RI

2. Cleveland, Ohio

3. Philadelphia, Pa.

4. Milwaukee, Wis.

5. Chicago, Ill.

6. Pittsburgh, Pa.

7. Tampa, Fla