Same-Sex Marriage and Tax Return Filing Status in North Carolina

The Internal Revenue Service (IRS) now allows same-sex married couples to file a "married filing jointly" tax return.  However, many states do not allow these couples to file using the "married filing jointly" status.  My home state of North Carolina recently released a directive for these couples outlining how to file.  You can read the full directive by clicking here. 

These couples will file their federal tax return using the "married filing jointly" tax status, but will also need to recalculate a separate "pro forma" federal tax return under the single status for each individual (or head of household as the case may be).  Both will need to file separately with North Carolina and attach a "pro forma" federal tax return to their state tax return.  

Thus, these couples will need to fill out a total of 5 income tax returns:

1 - Federal income tax return submitted to the IRS (Married)
2 - Federal income tax returns submitted to the North Carolina Department of Revenue (Single)
2 - State income tax returns submitted to the North Carolina Department of Revenue (Single)

Please feel free to send me your questions on this or any other topic at:  InvestorCookbooks(at)gmail.com

The North Carolina Tax Deduction for 529 Plan Contributions Expires 12/31/2013

When the new Republican-controlled North Carolina State Legislature overhauled our state's income tax, they removed the deduction for 529 plan contributions after 2013. 

See page 5 of the updated NC 529 Plan Program Description.  However, you still have six weeks to save up to $387 for 2013 contributions ($5,000 contribution for married couple filing jointly in the top income tax bracket).  See how much you can reduce your 2013 North Carolina state income taxes by clicking here.     

See my 529 plan post from last year for more general info on 529 education savings plans.

State Pension Fund Returns Ranked for 10-years Ending 6/30/13

As a follow up to my previous three posts on September 22, October 12, and October 18 I've ranked our US states by pension fund investment returns.  I found 10-year investment returns for 34 of 50 state pension funds and ranked them as of June 30, 2013.  

The Wilshire TUCS median return for public pensions for ten years is 7.4%.  

As is typical, my home state of North Carolina can be found near the bottom of the table with a 6.6% 10-year annualized return.  Using a basic time value financial calculator, I estimate North Carolina's under-performance versus the median public pension return has cost tax payers approximately $6 billion the past 10 years.

		10-yr
Rank	State	Return
1	WA	8.3%
2	LA	8.2%
3	MA	8.1%
4	KS	7.9%
5	ID	7.9%
6	IA	7.8%
7	PA	7.7%
8	IL	7.7%
9	VA	7.6%
10	NY	7.5%
11	WV	7.5%
12	FL	7.4%
13	RI	7.4%
14	AZ	7.4%
15	MI	7.4%
16	NJ	7.3%
17	TX	7.2%
18	CA	7.2%
19	NH	7.2%
20	NE	7.2%
21	MS	7.2%
22	VT	7.1%
23	ND	7.1%
24	ME	6.9%
25	NV	6.8%
26	MO	6.7%
27	KY	6.7%
28	MD	6.6%
29	MT	6.6%
30	NC	6.6%
31	NM	6.4%
32	TN	6.2%
33	IN	5.9%
34	SC	5.0%

State Pension Fund Returns Ranked for 3-years Ending 6/30/13

As a follow up to my previous two posts on September 22 and October 12, I've ranked our US states by pension fund investment returns.  I found 3-year investment returns for 39 of 50 state pension funds and ranked them as of June 30, 2013.  

The Wilshire TUCS median return for public pensions for three years is 11.5%.  

As is typical, my home state of North Carolina can be found 4th from last in the table.

Rank	State	3-yr Return
1	MN	13.0%
2	MS	12.7%
3	IL	12.6%
4	AZ	12.6%
5	NH	12.4%
6	KS	12.2%
7	MT	12.1%
8	DE	12.1%
9	NE	12.0%
10	GA	12.0%
11	NY	11.9%
12	LA	11.9%
13	MI	11.9%
14	OR	11.9%
15	MO	11.8%
16	NV	11.8%
17	CO	11.7%
18	TN	11.6%
19	FL	11.5%
20	TX	11.4%
21	NM	11.4%
22	WA	11.3%
23	ND	11.3%
24	MA	11.3%
25	CA	11.3%
26	IA	11.1%
27	ME	11.0%
28	RI	10.6%
29	NJ	10.6%
30	VA	10.5%
31	VT	10.5%
32	PA	10.4%
33	ID	10.2%
34	AK	10.2%
35	MD	10.0%
36	NC	9.9%
37	KY	9.8%
38	SC	9.3%
39	IN	8.4%

State Pension Fund Investment Rankings 2013

As a follow up to my previous post on September 22, I've ranked our US states by pension fund investment returns.  I found 1-year investment returns for 47 of 50 state pension funds and ranked them as of June 30, 2013.  

In the table below, you can click on the state abbreviation to link to the pension fund website. You can also click on the return figure to reach the source document for the reported returns. 

Rank	State	Return
1	SD	19.5%
2	AR	15.6%
3	NH	14.5%
4	MN	14.2%
5	KS	14.0%
6	OH	13.7%
7	ND	13.5%
8	MS	13.4%
9	GA	13.3%
10	NM	13.3%
11	IL	13.2%
12	FL	13.1%
13	AZ	13.1%
14	MT	13.0%
15	WV	12.8%
16	MA	12.7%
17	NE	12.7%
18	OR	12.7%
19	LA	12.6%
20	MO	12.6%
21	CA	12.5%
22	NV	12.4%
23	WA	12.4%
24	NY	12.3%
25	MI	12.2%
26	HI	12.0%
27	OK	12.0%
28	VA	11.8%
29	NJ	11.8%
30	CT	11.5%
31	WI	11.2%
32	DE	11.1%
33	ME	11.1%
34	RI	11.1%
35	KY	11.0%
36	AK	10.9%
37	CO	10.6%
38	MD	10.6%
39	TX	10.2%
40	IA	10.1%
41	SC	10.0%
42	TN	9.9%
43	NC	9.5%
44	ID	9.1%
45	VT	8.8%
46	PA	8.0%
47	IN	6.0%

Returns for Alabama, Utah, and Wyoming were no where to be found. 

North Carolina Retirement System Returns Lag Median Pension Returns BADLY

The North Carolina Retirement System (NCRS) return of just 9.5% for the fiscal year ending June 30, 2013 lagged the median pension plan very badly according to an analysis by Pensions & Investments Magazine and Wilshire's Trust Universe Comparison Service (TUCS).  The median large public pension earned returns of 12.6% for the year ending June 30, 2013, or 3.1% higher than NCRS.  Considering the NCRS plan is approximately $81 billion, the 3.1% of under-performance translates into $2.5 billion in lost returns for 2013.  

Median Pension Return = 12.6%
NCRS 2013 Return = 9.5%
Difference = -3.1%
NC Tax Payer Cost = $2.5 Billion 

Fido Bites The Hand That Feeds Him

Fidelity Investments EMPLOYEES are suing FIDELITY for breach of fiduciary duty by repeatedly adding "high-fee, actively-managed Fidelity mutual funds" with "little or no track record" to the Fidelity 401(k) plan.  Do I really need to explain how funny this is?  

The lead plaintiff and former employee, Lori Bilewicz, invested in the Fidelity Freedom 2040 fund within the Fidelity 401(k).  The class-action complaint by 26 current and former employees relates closely to my most popular blog post of all time from 2/15/2012: Fidelity Freedom Funds Aren't "Free" But Are "Dumb".  I would suppose any 401(k) plan using the Fidelity Freedom Funds will be interested in the outcome of this lawsuit. 

You can find more information about the lawsuit by clicking here.  
You can read the actual lawsuit complaint by clicking here.