Financial Resource Online

Trump explores U.S. purchase of Greenland

Sorry, United States, but Greenland doesn’t want to become part of us.

Yes, the U.S. buying the world’s biggest island is, or rather, was a thing.

Donald J. Trump, true to his real estate development roots, has broached the possibility of Greenland, according to The Wall Street Journal.

People familiar with the discussion, reports the newspaper, said Trump has, “with varying degrees of seriousness, repeatedly expressed interest in buying the ice-covered autonomous Danish territory between the North Atlantic and Arctic oceans.”

Joking ensues: As expected, mocking on social media has been rampant. It would have happened even if, in a weirdly fitting way, Trump’s interest in buying Greenland hadn’t been revealed on the eve of today’s National Tell a Joke Day

Yes, the standard green/golf course greens connection has been made. Repeatedly

The White House lawn mower meme was invoked.

David Priess@DavidPriess


View image on Twitter

82611:34 PM – Aug 16, 2019Twitter Ads info and privacy184 people are talking about this

A Democratic presidential nominee wannabe bought a Greenland-for-sale related websiteand turned Trump’s interest in the independent Danish island into a fundraising website for his long-shot effort at the chance to unseat 45.

Lars Løkke Rasmussen, Denmark’s former prime minister, even chimed in, characterizing Trump’s inquiry as “an April Fool’s Day joke … but totally out of sesson!

Real reasons for Greenland interest: But the idea, once you sign off Twitter, isn’t as far-fetched as it first seems.

United States has long considered Greenland to be a strategic military location.

Thule Air Base on the island’s northwestern coast is the U.S. Air Force’s northernmost facility — it’s less than 1,000 miles from the north pole — and provides America with missile warning, space surveillance and a constant view of both military and for commercial air space.

And while this summer’s historic heat wave has chipped away at Greenland’s ice at alarming rates, the exposure of land has made access easier to the island’s vast quantities of metals and energy sources, including iron ore, lead, zinc, diamonds, gold, copper, uranium and oil.

Joking aside, a possible U.S. purchase of Greenland, whose 836,330 square miles are almost precisely the combined size of Alaska and California, has been explored seriously twice before.

However, it looks like Trump isn’t going to get, whatever his reasons, Greenland.

Greenland’s tax system: Still, since heretofore unthinkable things seem to happen in connection with the current Oval Office occupant, I decided to take a look at Greenland’s taxes. 

Here’s an overview from PwC of Greenland’s personal income tax system. Just in case.

An individual may be taxed in Greenland on the basis of full or limited tax liability.

An individual who is resident in Greenland is subject to full tax liability on one’s worldwide income unless the individual is considered a resident of another country according to a double residence clause in a relevant double taxation treaty (DTT).

An individual who is fully tax resident in Greenland will, as a main rule, be taxed at up to 44%, depending on the municipality of taxation. Some deductions are applicable.

An individual not fully tax liable may have limited tax liability to Greenland. Limited tax liability is restricted to income from Greenlandic sources, listed in the Greenlandic Tax Act Section 2, including:

  • Salary for work performed in Greenland, unless the employment is exercised during stays not exceeding 14 consecutive days and the employee is employed by an employer who is neither resident nor has a permanent establishment (PE) in Greenland. An allowance (deduction) of the lesser of 10% of the income taxable to Greenland and DKK [Danish krones] 1,000 is available.
  • Certain other types of personal income, including income as an artiste or sportsman, director’s fees, pension distributions, economic education support from sources in Greenland, etc.  
  • Income arising from a business enterprise with a PE.
  • Income from independent personal services performed either from a fixed base in Greenland or during a stay of 90 days or more.
  • Income from shipping or air traffic within, or, in case of regular traffic, to or from Greenland.
  • Income from real estate located in Greenland, including sale.
  • Dividends from Greenlandic companies.
  • Royalty income from Greenland.

An individual with limited tax liability to Greenland will, as a main rule, be taxed at up to 44% on income from sources in Greenland.

Generally, individuals are subject to state taxes (national income tax) and municipal tax.

The tax percentages may be adjusted every year, and the 2017 percentages are as follows:

 Municipality Municipality 
 tax (%)
 tax (%)
 Joint local 
 municipality tax (%)
 tax (%)
 Kujalleq 28 10 6 44
 Sermersooq 26 10 6 42 
 Qeqqata 26 10 6 42
 Qaasuitsup 28 10 6 44
 Outside municipal areas 26 10 N/A 36

Individuals working in Greenland in relation to oil, gas, and mineral activities or construction activities outside existing towns and settlements are taxed at a flat rate of 35% with no deductions allowed, provided that they have not been taxable to a local Greenlandic municipality for six months prior to the commencement of the activities.

Treasury and IRS tax auctions offer bargains

I’ve seen a lot of estate sale signs lately. Either it’s an indication of the changing demographics of my part of Austin or folks are trying to fancy up their garage sales.

An estate (or renamed garage) sale basically is a way to dispose of most of an owner’s property either because family doesn’t want their deceased relative’s items or the goods need to be sold to make a move easier.

Uncle Sam regularly holds his own versions, but in many instances these government sales are to settle tax debts.

Nationwide asset auctions: Each year, says the U.S. Treasury’s auctions website, 300 or so public auctions are conducted throughout the United States and Puerto Rico.

Upcoming auctions on the Internal Revenue Service’s seizures-for-sale online page primarily feature real estate and you can get some bargains.

Tax auction Prescott AZ home IRS tax auction walkway to pool

The Arizona home pictured at the top of this post and the view from the back of the house at right, for example, has almost 3,400 square feet of living space parceled out among four bedrooms, three full baths, a living/dining room, den and family room (not sure the difference in the last two …), along with a three-car garage and pool on just more than three acres.

The minimum bid on the home built in 2005 is $230,000.

That’s almost enough to make me put a for sale by owner sign in my current Austin front yard and start packing.

It’s also enough (or little) to earn this week’s By the Numbers recognition.

More locations, more items: Not a fan of the desert? No problem.

The IRS also is looking to sell homes in Alabama, California, Colorado, Florida, Georgia, Iowa, Illinois, Kansas, Louisiana, Minnesota, North Carolina, North Dakota New Hampshire, New Jersey, Nevada, New York, Ohio, Oregon, Pennsylvania, Utah, Wisconsin and West Virginia.

There also are federal tax auctions on homes here in the Lone Star State. There are a couple in towns not far from Austin, including one that’s closer to my mother.

In addition, the IRS is looking to unload commercial property and a selection of vehicles.

Treasury’s other auction items: The Department of the Treasury, under the auspices of the Treasury Executive Office for Asset Forfeiture (TEOAF), also is in charge of other auctions of property seized or forfeited due to violations of federal laws enforced by Treasury and the U.S. Department of Homeland Security.

At these additional auctions you might be able to pick up for some spare pennies such things as high-speed watercraft, like the hydrofoils shown below, or a private plane.


Check out the links on Treasury’s main auctions page. They provide details on the property on the block, as well as locations of the sales and those in which you can participate online.

I live close enough to several lakes for some of the watercraft to pique my interest, especially with Texas’ new tax break for yacht owners. Then I remember that a boat is a hole in the water into which you pour your money. I’m already doing enough of that with my house maintenance!

So for the time being I’ll probably stick with in-person perusal of nearby local estate sale tchotchkes that folks are selling of their own volition, not because they have to pay Uncle Sam.

But if you’re interested in some of the feds’ items up for auction, have at ’em. The U.S. Treasury would appreciate your contribution. 

Wealth taxes are losing appeal everywhere except on the Democratic presidential campaign trail

Many of the folks trying to become the Democrat to challenge Donald J. Trump in 2020 support raising taxes on the wealthy.

It’s a popular U.S. campaign rallying cry, but globally, such taxes on net worth are vanishing.

All for taking from the rich: The Democratic Party is bucking the global dying wealth tax trend. One of its top goals remains raising the top ordinary income tax rate, which the Tax Cuts and Jobs Act (TCJA) cut from 39.6 percent to 37 percent.

Former Vice President Joe Biden wants to go back to that pre-tax reform top rate for individuals, as well as the 28 percent corporate income tax rate.

South Bend, Indiana Mayor Pete Buttigieg is more vague, simply calling for a wealth tax.

But there are some specific tax proposals to get more from the rich.

Sen. Elizabeth Warren was the first to talk in detail about a wealth tax. The Massachusetts Democrat wants, among other taxes on the rich, an Ultra-Millionaire Tax. Warren’s wealth tax would be 2 percent on net worth of more than $50 million and 3 percent on net worth of more than $1 billion.

Former Housing and Urban Development Secretary Julián Castro’s plan would boost taxes on the wealthy and expand or create a host of federal programs for low- and middle-income families, including universal child care, paid family leave and a $15-per-hour minimum wage.

New York City Mayor Bill de Blasio says he wants to “tax the hell out of the wealthy.” Among the ways he proposes are a 1 percent added wealth tax on assets between $10 million and $25 million, a 2 percent tax on assets of $25 million to $100 million and a 3 percent tax for those with assets of more than $100 million. This would be in addition to a 40 percent top ordinary income tax rate.

Bernie Sanders focuses on what the rich leave behind. The Vermont Independent (he’s only a Democrat during primary season) would tax estates valued from $3.5 million to $10 million at a 45 percent rate. The rate would be 50 percent for estates worth $10 million to $50 million, 55 percent for estates valued from $50 million to $1 billion and 77 percent on estates exceeding a valuation of more than $1 billion.

You can read more on the 2020 Democratic primary contenders’ tax plans in overviews put together by Kiplinger and the Tax Foundation.

Waning wealth taxes: You also can find out more on what wealth taxes entail and how they [are supposed to] work in the paper by the Washington Center for Equitable Growth’s paper on net worth taxes.

It’s a section of that Washington, D.C.-based think tank’s analysis that gets this weekend’s Sunday Shout Out .

Authors Greg Leiserson, director of Tax Policy and senior economist at the Washington Center for Equitable Growth (WCEG), and WCEG research assistants Will McGrew and Raksha Kopparam note in their paper’s section on net worth taxes around the world that such levies are declining globally.

Twelve countries that are part of the Organisation for Economic Co-operation and Development (OECD) had net worth taxes in 1990. In 2000, only nine countries were collecting these taxes.

By 2018, the number had dropped to just three: Norway, Spain and Switzerland.

OECD net worth tax declines_Washington Center for Equitable Growth

The trend away from net worth taxes has been part of a broader trend of reduced taxation of the wealthy around the world. The only change came for a short period during the Great Recession, when Iceland and Spain restored their net worth taxes.

Opposite route in America: So why are the Democratic candidates bucking the global trend? The obvious answer is that economic inequality in the United States has been getting more and more attention since the first Occupy Wall Street protests in 2011.

The TCJA benefits that are skewed more toward the wealthy than middle class taxpayers has exacerbated this complaint, at least on the campaign trail.

Plus, and critically important as Uncle Sam’s deficit crosses the $1 trillion mark, the potential tax take is appealing.

The WCEG paper notes that “the revenue potential of these [net worth] taxes remains large in absolute terms. The Swiss tax raised about 1 percent of [gross domestic product] GDP in 2017 and the Norwegian tax 0.4 percent of GDP. Applied to the U.S. economy, revenues at these levels would correspond to about $80 billion to $200 billion in 2018. “

There’s also the sheer amount money in the United States, albeit concentrated in a few hands.

“Regardless of measure, U.S. aggregate wealth is large. In conjunction with the highly skewed nature of the wealth distribution, this suggests that the revenue potential of a net worth tax in the United States is large, even if applied only to the very wealthiest families,” write WCEG analysts. “The wealthiest 1 percent of families holds $33 trillion in wealth, and the wealthiest 5 percent holds $57 trillion.”

Monetary and political appeal: Bottom line, says the paper’s authors, those looking for “a highly progressive tax instrument that raises substantial revenue would find a net worth tax appealing.”

And even more appealing to politicians looking to energize a diverse and less-than-rich electorate, is that wealth taxes, according to WCEG, “would thus generally shift the tax burden not only from low-wealth families to high-wealth families, but also from younger families to older families and from families of color to white families.”

Better tax deduction apples for teachers proposed

Classes are back in session in many communities across the United States. And part of the supplies that are being used to help educate our youngsters were paid for by their teachers.

Every year, studies by both private groups and federal agencies report that most public school teacher pay for products they need to get their lessons across to the students.

The amounts vary, ranging from nearly $500 in a U.S. Department of Education survey from several years ago to nearly twice that (or more) in some of today’s classroom situations.

Easy to claim: The good news for these dedicated teachers is that they can claim some of those expenses on their tax returns. Even better, they can do so without itemizing, claiming the classroom costs as an above-the-line deduction on their annual form 1040.

A single filing teacher can claim $250 spent toward classroom supplies. For married educators, their joint filing allows for $500 in personal payment of school supplies to be deducted or, as it’s officially counted on the return, subtracted from filers’ gross income to get to a lower adjusted gross income (AGI) amount.

The deduction amounts are adjusted annually for inflation. It wasn’t enough to kick up the amount for 2019, so it’s still at $250 or $500.

But not big enough: However, even with inflation, the harsh fiscal and tax reality for teachers is that most of them shell out more to help enhance their students’ learning experiences than they can claim on their taxes.

Plus, the Tax Cuts and Jobs Act (TCJA) did away with one way that teachers had to claim the excess.

Before the new tax law took effect, teachers who itemized had the option to claim any classroom expenses that exceed the $250 (or $500) amount by claiming the costs as an employee business expense. It the school-related costs and other eligible miscellaneous expenses exceeded 2 percent of their AGI, it provided an additional Schedule A claim amount.

Under the TCJA, however, itemized employee business expenses are gone.

That part of why some members of Congress are calling for an increase in the teachers’ expenses tax deduction.

Doubling the teacher expense claim: Back in January, Rep. Anthony Brown (D-Maryland) introduced the Educators Expense Deduction Modernization Act.

H.R. 878 as it’s officially known would double the current $250 allowable claim for a single filer to cover certain elementary and secondary school out-of-pocket expenses. The new level still would be indexed for inflation.

Brown’s bill is identical to one he introduced in previous Congressional sessions.

Doubling and expanding the teacher tax break: Then this month, just as classes were getting ready to start, two Missouri Representatives, Republican Sam Graves and Democrat William Lacy Clay, introduced their own teachers’ deduction bill.

H.R. 4180, dubbed the Teacher Tax Deduction Enhancement Act of 2019, also would increase the annual limit on the expenses that a single taxpaying teacher may deduct from $250 to $500. It, too, would require the limit to be adjusted for inflation after 2019.

Reps. Graves and Clay also would expand the tax break to more educators.

H.R. 4180 would make a $250 deduction available to part-time teachers and preschool teachers in state-recognized schools.

Extenders are best passage bet: It’s unlikely that either of these bills will pass on their own. But, and admittedly it’s a bit but right now (insert your own 12-year-old double entendre joke here), they could be added to any tax extenders legislation.

The extenders, those technically temporary tax breaks that must be periodically renewed, are stalled for the moment.

However, there’s been some movement on the Senate side, where the Senate Finance Committee last week released three extenders tax force reports (more on these in an upcoming post).

If the extenders are finally put on a fast track, look for Brown, Graves and Clay to try to hop aboard with their teacher tax breaks.

7 common 401(k) FAQs

Trump’s recent campaign rally exhortation that people had to vote for him in 2020 or their 401(k)s will tank got me thinking a lot of things, most of which aren’t applicable to a tax blog.

But one is. It deals with the workplace retirement plan known as a 401(k).

Just how many people across the United States, not just at Trump’s rally, have these tax-deferred retirement savings accounts?

401(k) growth: As of March 31, total 401(k) plans held an estimated $5.7 trillion in assets and represented more than 19 percent of the $29.1 trillion in U.S. retirement assets, according to the Investment Company Institute (ICI).

US retirement market 1Q 2019_Investment Company Institute

See Investment Company Institute, “The US Retirement Market, First Quarter 2019.” 
Sources: Investment Company Institute, Federal Reserve Board, and Department of Labor

That’s an increase from 2010 when, says ICI, 401(k) assets were $3.1 trillion and represented 17 percent of the U.S. retirement market in 2010.

Data from ICI also shows that in 2016, about 55 million American workers were active 401(k) participants and there were nearly 555,000 401(k) plans.

I’m impressed. To be honest I thought the figures would be lower, since surveys typically show that way too many Americans are savings only minuscule amounts for their retirement years.

If you’re one of the 55 million or so 401(k) owners putting money regularly into your plan, good for you!

But even if you have an account, you still might have some questions.

So here are some frequently asked questions and answers to help you maximize both your retirement and tax savings.

As for all y’all who’ve yet to open a 401(k) plan, check out these FAQ, too. The info might be just what you were looking for to help you decide to open one.

OK, Let’s start this questions and answers session with the most basic of basics.

1. What is a 401(k)?
It’s a defined contribution retirement plan offered by your boss where you, the worker, contributes and, in most cases, your boss puts in a percentage, too.

Quick digression. In case you ever here the retirement phrase defined benefit plan, that’s the old-school pension where the boss takes care of all the funding of workers’ retirement plans. Good luck finding any of those nowadays. Now back to 401(k)s.

The 401(k) gets its name from the section of the tax code which authorized the accounts back in 1978.

2. Why is it in the tax code?
Because it offers a tax-saving component.

A traditional 401(k) plan lets you put money in your account, generally through direct payroll deposits from your paycheck. That money goes in before your income taxes are figured, meaning there’s less money from which Uncle Sam gets a cut.

Here’s an example from ICI on how that pays off over the years:

For a worker in a 25 percent tax bracket*, a $1,000 contribution to a 401(k) plan over 20 years will generate $2,405 in distributions and $802 in federal taxes. The same $1,000 contribution to a taxable account over 20 years will generate $1,809 in distributions and $603 in federal taxes. (Investment Company Institute, The Tax Benefits and Revenue Costs of Tax Deferral, September 11, 2012)
*This tax result example was created before the Tax Cuts and Jobs Act (TCJA) changed the tax rates for tax years 2018-2025, but you get the idea.

Meanwhile, your 401(k) money grows tax-deferred. You don’t pay tax on it until your take it out if the account.

One quick note about those taxes. They are at the ordinary income tax rates, not the usually lower capital gains rates even though your 401(k) plan is invested in, say, a stock fund. Be aware of that difference so that you’re not shocked at a tax bill when you’re enjoying your golden years sipping mojitos on a beach.

You can avoid those ordinary taxes in retirement if your company offers a Roth 401(k) plan. Many now are.

Like Roth IRAs, you put money into these workplace plans after it’s been taxed. But that means you don’t owe tax on the money you take out later.

3. How much can or must I contribute?
There are limits on how much you can put into a 401(k) plan and they are adjusted annually for inflation.

You can get the full scoop in my 2019 update of retirement-related inflation adjustments.

For 401(k)s in 2019, workers younger than 50 can put in up to $19,000 into their 401(k). Folks older than the big 5-Oh(no!) get an extra $6,000 catch-up amount, meaning they can max out at $25,000 by the end of this year.

Few of us will be able to hit those amounts, but we should put in as much as we can without jeopardizing our daily living expenses needs.

And you definitely should put in at least as much as your employer is willing to match. That’s typically 50 cents on your plan contribution dollar up to 6 percent, giving you an added 3 percent of money to grow tax-deferred.

Employer matching of 401(k) contributions is free money. Don’t pass it up and, if possible, maximize it.

4. When can or do I have to take out 401(k) funds?
You can access your 401(k) and not face any penalty if you wait until you turn 59½.

If you take the money out before that age, you’ll generally owe a 10 percent early distribution penalty in addition to the taxes due on the amount withdrawn

At the other end of the distribution spectrum, you must start taking money out of 401(k)s when you turn 70½.

These are known as required minimum distributions (RMDs) and are calculated based on your age and the amount of tax-deferred retirement savings you have. You can find more on this in my 10 RMD FAQ post.

5. Are there exceptions to the 10 percent early withdrawal penalty?
Yes, there are some instances, generally classified as hardship withdrawals, where you won’t face a penalty on the early distribution from a retirement plan.

But they tend, for the most part to be rather specific and in some cases involved situations we don’t want to happen.

They include:

  • You must pay unreimbursed medical expenses.
  • You buy medical insurance when you’re out of work.
  • You need the money to buy your primary residence.
  • You need the funds to prevent eviction from or foreclosure on your principal residence.
  • You need to pay college tuition and related educational costs for the next 12 months for you, your spouse, dependents or children who are no longer dependents.
  • You have a permanent disability, either physical or mental, that prevents you from getting a job.
  • You are a reservist called to active duty.
  • You have a court-ordered Qualified domestic Relations Order (QDRO) that mandates funds from your account go to a former spouse, child, or dependent.
  • You are facing an IRS levy.
  • You have died and your beneficiary gets the money.

Note, too, that while penalty-free hardship withdrawals are allowed by law, your employer is not required to provide for them in your plan. Most do, but double check.

And even if you do have an allowable penalty-free withdrawal circumstances, you’ll still owe the tax on the tax-deferred funds you take early.

Rather than take an outright distribution, you might want to consider a 401(k) loan. You’ll have to pay the money back, but at least you avoid the 10 percent penalty as long as you continue to work for your company during the loan repayment period.

Retirement savings street signs

6. Can I contribute to both a 401(k) and an IRA?
Good for you for wanting to double down on retirement savings. The IRS thinks it’s a good idea, too.

That’s why it says it’s OK for an active 401(k) participant to also contribute up to the maximum to a traditional IRA. Note, however, that your contributions to a traditional IRA may not be fully deductible depending on your income and marital status.

7. What are my options if I leave the job where I have a 401(k)?
You have several.

If you employer allows it, you can leave the account there. Some reasons to do so is that you like the fund your money is in. Your new company doesn’t have a 401(k) option. You haven’t had time to research where you want to move your account.

When you are ready to move an old 401(k) you can have it transferred to your new company (if, unlike in the reason above, it offers such plans) or to an IRA.

In moving an old retirement account, make sure you do so via a called a trustee-to-trustee transfer. This will ensure that you never get your hands on the money. That’s important because if you do and you’re younger than 59½ you’ll have to pay the penalty and tax on the money.

Where you do take the money, even if you eventually put it into another qualified retirement account, known as a rollover, your old account holder must take 20 percent off the top for federal taxes (and more for state taxes, too) before giving you the money.

If you put the remainder into a qualified retirement plan within the required 60-day transfer period, you can get the taxes back when you file your tax return the next year, but you’ll have lost the earning power of that amount.

A trustee-to-trustee transfer, however, means the money goes from one retirement plan to another, sidestepping potential penalties and taxes.

If you want to move your 401(k), first talk with your former employer and the place where you’re sending the money to ensure the process goes smoothly.

Finally, if you move a 401(k) don’t freak out the next year when you get a Form 1099-R. The former account administrator has to file this document with the IRS letting them know you took the tax-deferred money.

But it doesn’t mean you owe taxes. Note the code in box 7. If you completed a direct trustee-to-trustee transfer the letter G will let the IRS know that the money was never in your hands so you don’t owe any taxes.

These common 401(k) FAQ should answer the most common questions about these workplace retirement plans. If you have more, talk to your company’s plan administrator, as well as your financial and/or tax adviser.