Lebel & Harriman LLPRebecca Burchill, ChFC®, CLU®Managing Director366 US Route 1Falmouth, ME 04105207-773-5390(207) 773-3814 (fax)rebecca@lebelharriman.comwww.lebelharriman.com

February 2018Deducting 2017 Property Losses from YourTaxes

Key Retirement and Tax Numbers for 2018

What can I learn from looking back on myfinancial situation in 2017?

What financial resolutions should I considermaking as I look ahead to 2018?

Lebel & Harriman NewsletterInsurance DivisionWhat's Your Money Script?

See disclaimer on final page

Money is power. Afool and his moneyare soon parted. Apenny saved is apenny earned.Money is the root ofall evil.

Do any of theseexpressions ringtrue for you?

As it turns out, the money beliefs our familiesespoused while we were growing up may havea profound effect on how we behave financiallytoday — and may even influence our financialsuccess.

Beliefs drive behaviorsIn 2011, The Journal of Financial Therapypublished a study by financial psychologistBrad Klontz et al., that gauged the reactions of422 individuals to 72 money-relatedstatements.1 Examples of such statementsinclude:

• There is virtue in living with less money• Things will get better if I have more money• Poor people are lazy• It is not polite to talk about money

Based on the findings, Klontz was able toidentify four "money belief patterns," alsoknown as "money scripts," that influence howpeople view money. Klontz has described thesescripts as "typically unconscious,trans-generational beliefs about money" thatare "developed in childhood and drive adultfinancial behaviors."2 The four categories are:

1. Money avoidance: People who fall into thiscategory believe that money is bad and is oftena source of anxiety or disgust. This may resultin a hostile attitude toward the wealthy.Paradoxically, these people might also feel thatall their problems would be solved if they onlyhad more money. For this reason, they mayunconsciously sabotage their own financialefforts while working extra hours just to makeends meet.

2. Money worship: Money worshippers believethat money is the route to true happiness, andone can never have enough. They feel that theywill never be able to afford everything theywant. These people may shop compulsively,hoard their belongings, and put work ahead ofrelationships in the ongoing quest for wealth.

3. Money status: Similar to moneyworshippers, these people equate net worthwith self-worth, believing that money is the keyto both happiness and power. They may livelavishly in an attempt to keep up with or evenbeat the Joneses, incurring heavy debt in theprocess. They are also more likely than those inother categories to be compulsive gamblers orto lie to their spouses about money.

4. Money vigilance: Money vigilants arecautious and sometimes overly anxious aboutmoney, but they also live within their means,pay off their credit cards every month, and savefor the future. However, they risk carrying alevel of anxiety so high that they cannot enjoythe fruits of their labor or ever feel a sense offinancial security.

Awareness is the first stepAccording to Klontz's research, the first threemoney scripts typically lead to destructivefinancial behaviors, while the fourth is the oneto which most people would want to aspire. Ifyou believe you may fit in one of theself-limiting money script categories, considerhow experiences in your childhood or thebeliefs of your parents or grandparents mayhave influenced this thinking. Then do somereality-checking about the positive ways to buildand manage wealth. As in other areas ofbehavioral finance and psychology in general,awareness is often the first step towardaddressing the problem.1 "Money Beliefs and Financial Behaviors," TheJournal of Financial Therapy, Volume 2, Issue 1

2 Financial Planning Association, accessed October24, 2017

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Deducting 2017 Property Losses from Your TaxesHurricanes, wildfires, tornadoes, floods,earthquakes, winter storms, and other eventsoften cause widespread damage to homes andother types of property. If you've sufferedproperty loss as the result of a natural orman-made disaster in 2017, you may be able toclaim a casualty loss deduction on your federalincome tax return.

What is a casualty loss?A casualty is the destruction, damage, or lossof property caused by an unusual, sudden, orunexpected event. Casualty losses may resultfrom natural disasters or from other eventssuch as fires, accidents, thefts, or vandalism.You probably don't have a deductible casualtyloss, however, if your property is damaged asthe result of gradual deterioration (e.g., along-term termite infestation).

How do you calculate the amount ofyour loss?To calculate a casualty loss on personal-useproperty, like your home, that's been damagedor destroyed, you first need two importantpieces of data:

• The decrease in the fair market value (FMV)of the property; that's the difference betweenthe FMV of the property immediately beforeand after the casualty

• Your adjusted basis in the property before thecasualty; your adjusted basis is usually yourcost if you bought the property (different rulesapply if you inherited the property or receivedit as a gift), increased for things likepermanent improvements and decreased foritems such as depreciation

Starting with the lower of the two amountsabove, subtract any insurance or otherreimbursement that you have received or thatyou expect to receive. The result is generallythe amount of your loss. If you receiveinsurance payments or other reimbursementthat is more than your adjusted basis in thedestroyed or damaged property, you mayactually have a gain. There are special rules forreporting such gain, postponing the gain,excluding gain on a main home, andpurchasing replacement property.

After you determine your casualty loss onpersonal-use property, you have to reduce theloss by $100. The $100 reduction applies percasualty, not per individual item of property.Two or more events that are closely relatedmay be considered a single casualty. Forexample, wind and flood damage from thesame storm would typically be considered asingle casualty event, subject to only one $100reduction. If both your home and automobile

were damaged by the storm, the damage isalso considered part of a single casualty event —you do not have to subtract $100 for each pieceof property.

You must also reduce the total of all yourcasualty and theft losses on personal propertyby 10% of your adjusted gross income (AGI)after each loss is reduced by the $100 rule,above.

Keep in mind that special rules apply for thoseaffected by Hurricanes Harvey, Irma, andMaria. The Disaster Tax Relief Act of 2017increased the threshold for claiming a casualtyloss deduction to $500, waived the requirementthat the loss is deductible only to the extent itexceeds 10% of AGI, and allowed a deductioneven for those who do not itemize.

Also note that the rules for calculating loss canbe different for business property or propertythat's used to produce income, such as rentalproperty.

When can you deduct a casualty loss?Generally, you report and deduct the loss in theyear in which the casualty occurred. Specialrules, however, apply for casualty lossesresulting from an event that's declared a federaldisaster area by the president.

If you have a casualty loss from a federallydeclared disaster area, you can choose toreport and deduct the loss in the tax year inwhich the loss occurred, or in the tax yearimmediately preceding the tax year in which thedisaster happened. If you elect to report in thepreceding year, the loss is treated as if itoccurred in the preceding tax year. Reportingthe loss in the preceding year may reduce thetax for that year, producing a refund. Yougenerally have to make a decision to report theloss in the preceding year by the federalincome tax return due date (without anyextension) for the year in which the disasteractually occurred.

Casualty losses are reported on IRS Form4684, Casualties and Thefts. Any lossesrelating to personal-use property are carriedover to Form 1040, Schedule A, ItemizedDeductions.

Where can you get more information?The rules relating to casualty losses can becomplicated. Additional information can befound in the instructions to Form 4684 and inIRS Publication 547, Casualties, Disasters, andThefts. If you have suffered a casualty loss,though, you should consider discussing yourindividual circumstances with a taxprofessional.

New rules for 2018 andbeyond

Recent tax reform legislationeliminates deductions forcasualty losses that occur in2018 through 2025, except forlosses in federally declareddisaster areas.

The legislation also makeschanges that applyretroactively to 2016 and 2017for net disaster losses arisingfrom 2016 federally declareddisaster areas.

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Key Retirement and Tax Numbers for 2018Every year, the Internal Revenue Serviceannounces cost-of-living adjustments that affectcontribution limits for retirement plans,thresholds for deductions and credits, andstandard deduction and personal exemptionamounts. Here are a few of the keyadjustments for 2018.*

Employer retirement plans• Employees who participate in 401(k), 403(b),

and most 457 plans can defer up to $18,500in compensation in 2018 (up from $18,000 in2017); employees age 50 and older can deferup to an additional $6,000 in 2018 (the sameas in 2017).

• Employees participating in a SIMPLEretirement plan can defer up to $12,500 in2018 (the same as in 2017), and employeesage 50 and older can defer up to anadditional $3,000 in 2018 (the same as in2017).

IRAsThe limit on annual contributions to an IRAremains unchanged at $5,500 in 2018, withindividuals age 50 and older able to contributean additional $1,000. For individuals who arecovered by a workplace retirement plan, thededuction for contributions to a traditional IRAis phased out for the following modifiedadjusted gross income (AGI) ranges:

2017 2018

Single/headof household(HOH)

$62,000 -$72,000

$63,000 -$73,000

Married filingjointly (MFJ)

$99,000 -$119,000

$101,000 -$121,000

Married filingseparately(MFS)

$0 - $10,000 $0 - $10,000

Note: The 2018 phaseout range is $189,000 -$199,000 (up from $186,000 - $196,000 in2017) when the individual making the IRAcontribution is not covered by a workplaceretirement plan but is filing jointly with a spousewho is covered.

The modified AGI phaseout ranges forindividuals to make contributions to a Roth IRAare:

2017 2018

Single/HOH $118,000 -$133,000

$120,000 -$135,000

MFJ $186,000 -$196,000

$189,000 -$199,000

MFS $0 - $10,000 $0 - $10,000

Estate and gift tax• The annual gift tax exclusion for 2018 is

$15,000, up from $14,000 in 2017.• The gift and estate tax basic exclusion

amount for 2018 is $11,200,000, up from$5,490,000 in 2017.

Personal exemptionThere is no personal exemption amount for2018; it was $4,050 in 2017. For 2018, there isno phaseout of personal exemptions or overalllimit on itemized deductions once AGI exceedscertain thresholds.

Note: For 2017, personal exemptions werephased out and itemized deductions werelimited once AGI exceeded $261,500 (single),$287,650 (HOH), $313,800 (MFJ), or $156,900(MFS).

Standard deduction

2017 2018

Single $6,350 $12,000

HOH $9,350 $18,000

MFJ $12,700 $24,000

MFS $6,350 $12,000

Note: The additional standard deductionamount for the blind or aged (age 65 or older)in 2018 is $1,600 (up from $1,550 in 2017) forsingle/HOH or $1,300 (up from $1,250 in 2017)for all other filing statuses. Special rules apply ifyou can be claimed as a dependent by anothertaxpayer.

Alternative minimum tax (AMT)

2017 2018

Maximum AMT exemption amount

Single/HOH $54,300 $70,300

MFJ $84,500 $109,400

MFS $42,250 $54,700

Exemption phaseout threshold

Single/HOH $120,700 $500,000

MFJ $160,900 $1,000,000

MFS $80,450 $500,000

26% rate on AMTI* up to this amount, 28%rate on AMTI above this amount

MFS $93,900 $95,750

All others $187,800 $191,500

*Alternative minimum taxable income

*The Tax Cuts and Jobs Actmade significant changes tothe estate and gift tax, thepersonal exemption, thestandard deduction, and thealternative minimum tax,which are included here.

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Lebel & Harriman LLPRebecca Burchill, ChFC®,CLU®Managing Director366 US Route 1Falmouth, ME 04105207-773-5390(207) 773-3814 (fax)rebecca@lebelharriman.comwww.lebelharriman.com

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2018

IMPORTANT DISCLOSURES

Broadridge Investor CommunicationSolutions, Inc. does not provide investment,tax, or legal advice. The informationpresented here is not specific to anyindividual's personal circumstances.

To the extent that this material concerns taxmatters, it is not intended or written to beused, and cannot be used, by a taxpayer forthe purpose of avoiding penalties that may beimposed by law. Each taxpayer should seekindependent advice from a tax professionalbased on his or her individual circumstances.

These materials are provided for generalinformation and educational purposes basedupon publicly available information fromsources believed to be reliable—we cannotassure the accuracy or completeness ofthese materials. The information in thesematerials may change at any time andwithout notice.

Securities offered through ValMarkSecurities, Inc. Member FINRA, SIPC.Investment Advisory Services OfferedThrough ValMark Advisers, Inc. a SECRegistered Investment Advisor. 130Springside Drive, Suite 300, Akron, OH44333-2431. Telephone: (800) 765-5201.Lebel & Harriman, LLP is a separate entityfrom ValMark Securities, Inc. and ValMarkAdvisers, Inc.

What financial resolutions should I consider making asI look ahead to 2018?A new year is right around thecorner, bringing with it a freshstart for you and yourfinances. What will you do this

year to help improve your financial situation?

Evaluate your savings goals. The beginningof the year is a great time to examine youroverall financial plan. Maybe you want to buy anew vehicle this year or save money toward aCaribbean cruise next year. Perhaps you wantto focus less on material items and more onlong-term goals, such as your retirementsavings. Regardless of what you are settingmoney aside for, make sure you come up witha realistic savings plan that will help youachieve your goals and avoid the risk ofsignificant loss.

Pay down debt. Whether you owe money onyour credit cards or have student loanpayments to make, the start of a new year is agood time to develop a strategy to reduce youroverall level of debt. Reducing your debt canhelp create opportunities to contribute towardother goals throughout the year. But unless youcan definitely afford it, don't plan to pay off all

your debts in one fell swoop. Set a smaller goalthat you'll be more likely to achieve over thecourse of the year.

Automate as much as you can. Your plan topay down debt can be accomplished moreeasily if you automate your bill paying, saving,and investing. Most banks, credit card issuers,retirement plan providers, and investmentcompanies offer services that make paymentsautomatic — allowing you to worry less aboutpayment dates. The best part is that it mightonly take a few taps on your smartphone tomake these processes automatic.

Think about organizing your financialdocuments. If your overall financial situation isalready in good shape for the new year,consider taking time now to clear out andorganize your financial records. Do you haveimportant documents, such as your tax returnsor passport, in a safe place? Are you holding onto records that you no longer need? Organizingyour financial records now can save you timeand frustration later if you need to locate aparticular document.

What can I learn from looking back on my financialsituation in 2017?If your financial plan for 2017didn't work out the way youwanted it to, don't beatyourself up. Instead, ask

yourself the following questions to determinewhat you can learn from reflecting on yourfinancial situation in the last year.

Did you meet your financial goals andexpectations for 2017? Perhaps you startedthe year with some financial goals in mind. Youwanted to establish a budget that you couldstick to, or maybe you hoped to build up youremergency savings fund throughout the year. Ifyou fell short of accomplishing these or othergoals, think about the reasons why. Were yourgoals specific? Did you develop a realistictimeframe for when they would be achieved? Ifnot, learn to set attainable and measurablegoals for your finances in the new year.

How did your investments perform? Ayear-end review of your overall portfolio canhelp you determine whether your assetallocation is balanced and in line with your timehorizon and goals. If one type of investmentperformed well during the year, it couldrepresent a greater percentage of your portfolio

than you initially wanted. As a result, you mightconsider selling some of it and using thatmoney to buy other types of investments torebalance your portfolio. Keep in mind thatselling investments could result in a tax liability.And remember, asset allocation does notguarantee a profit or protect against loss; it is amethod to help manage investment risk. Allinvesting involves risk, including the possibleloss of principal, and there is no guarantee thatany investment strategy will be successful.

Are your retirement savings on track? Didyou contribute the amount you wanted in 2017?Or did unexpected financial emergencies forceyou to borrow or withdraw money from yourretirement savings? In that case, you can helpyour savings recover by contributing the mostyou can to your employer-sponsored retirementplan and taking advantage of employermatching (if it's available to you). Contributingto a 401(k) or 403(b) plan can help you savemore consistently because your contributionsare automatically deducted from your salary,helping you avoid the temptation to skip amonth now and then.

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