Lantern Wealth Advisors, LLC
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Melville, NY 11747
(631) 454-2000
info@lanternwealth.com
https://lanternwa.com/


Major Indexes For Week Ended 9/7/2018

Index Close Net Change % Change YTD YTD %
DJIA 25,916.54 -48.28 -0.19 +1,197.32 4.84
NASDAQ 7,902.54 -207.00 -2.55 +999.15 14.47
S&P500 2,871.68 -29.84 -1.03 +198.07 7.41
Russell 2000 1,713.18 -27.57 -1.58 +177.67 11.57
International 1,905.44 -56.61 -2.89 -145.35 -7.09
10-year bond 2.94% +0.09% +0.53%
30-year T-bond 3.10% +0.09% +0.36%
International index is MSCI EAFE index. Bond data reflect net change in yield, not price. Indices are unmanaged and you cannot directly invest in an index.


Good Economic Surprises Happening Now

Forward-looking data on the broad economy, along with new reports on employment and wages, indicate the U.S. economy is in the midst of an unexpected surge.

Managers at manufacturing companies responsible for purchasing reported orders were up in August, over July. The Institute of Supply Management, a trade group for professional purchasing managers at large companies, said its index of manufacturing order activity hit a 14-year high of 61.3%, up sharply from July's 58.1%.

The index is based on 10 components and the key one— the forward-looking new orders sub-index— hit 65.1%. After second quarter growth surged to 4.2%, the economy was expected to slow down. The new orders figure is the first confirmation a good surprise is under way.

Meanwhile, purchasing managers at non-manufacturing companies, which account for about 86% of U.S. economic activity, also shot up in August to 58.5%, up from July's 55.7%, and the forward-looking new-orders sub-index rose from July's 57% to 60.4%.

The economy created 201,000 new jobs in August, more than the 190,000 expected.

Growth in job creation is more persistent than in the last expansion. This is another good surprise.

In the 12 months through July, average hourly earnings of employees grew 2.7% over the growth rate of July 2017.

A month later, in the 12 months through August 2018, average hourly earnings grew by 2.9%.

Wage growth acceleration was not expected. This too is another good surprise.

In early August, the 57 economists surveyed by The Wall Street Journal predicted average quarterly growth over the five quarters ahead of 2.7%.

That was a month ago, before the surprisingly good wage, employment, and broad forward-looking data was known.


This article was written by a veteran financial journalist based on data compiled and analyzed by independent economist, Fritz Meyer. While these are sources we believe to be reliable, the information is not intended to be used as financial advice without consulting a professional about your personal situation. Indices are unmanaged and not available for direct investment. Investments with higher return potential carry greater risk for loss. Past performance is not an indicator of your future results.


Qualifying For The New Business Owner Tax Break

Under the new tax law, business owners are entitled to deduct 20% of "qualified business income." The test for qualifying for a tax break on 20% of business income is defined in the Tax Cuts and Jobs Act (TCJA) and summarized here along with a simple illustration.

If you formed your BUSINESS as a sole proprietorship, S corporation, partnership, LLC or similar pass-through entity, you are entitled to the deduction. C corporations don't qualify for the 20% deduction. Only businesses generating income not taxed at the company level, but directly to the owner.

Qualified business income is the business' day-to-day, non-investment income. It's revenue the business generates minus expenses.

QBI doesn't include interest, dividend income or capital gains on a property sale. Nor does QBI include salary or wages paid either as W-2 wages from an S corporation or guaranteed payments from a partnership.

However, the 20% deduction is limited to the lesser of:

  • 20% of qualified business income, or
  • 50% of the total W-2 wages paid by the business.

A separate limit based on the unadjusted basis of certain business assets could also apply, a rare situation.

More important: The 50% W-2 wage cap kicks in when a couple filing jointly has a total taxable income of more than $315,000 ($157,500 for singles).

Here's an illustration of a couple who owns a business with $200,000 in qualified business income, with no real assets, such as vehicles or real estate, and with one employee who was paid $50,000 in 2018. The couple would be entitled to QBI deduction of $40,000. That's 20% of $200,000.

Because the couple's taxable income is less than $315,000, the wage limitation - 50% of wages paid to their employee - is equal to $25,000 and would not apply.

Some business owners with more than $315,000 in QBI may want to consider reducing their W-2 wages or guaranteed payments to qualify for the deduction, but this requires careful planning and personal consulting beyond this simple illustration. The rules are new and technical, and before changing how your business pays you to qualify for the 20% QBI deduction, it's prudent to contact us and plan properly.


The above referenced information was obtained from reliable sources, however Lantern Investments, Inc. and Lantern Wealth Advisors, LLC cannot guarantee its accuracy. Opinions expressed herein are subject to change. Past performance is no guarantee of future results. Asset allocation and diversification do not assure a profit or protect against losses in declining markets. Any information given on the site is informational and illustrative but does not recommend actions as the information may not be appropriate to all situations. It is important that you consider your tolerance for risk and investment goals when making investment decisions. Investing in securities does involve risk and the potential of losing money. Links to other sites are provided for your convenience. Lantern Wealth Advisors, LLC and Lantern Investments, Inc. do not endorse, verify or attest to the accuracy of the content of the web sites that are linked and accept no responsibility for their use or content. Lantern Wealth Advisors, LLC and Lantern Investments, Inc. do not provide tax, accounting or legal advice.