Data Entry: Expenses
This is where you enter in specific expenses. For a brief overview of entering expenses within a financial plan watch this short video.
RightCapital will automatically create two cards for you to review: one for monthly pre-retirement living expenses and the other for taxes.
In the Pre-retirement Living Expenses card, estimate the current monthly expenditures that have not already been captured.
This expense number should not include taxes or expenses that you have previously captured, such as mortgages, loan payments, or insurance premiums.
You can either enter a single lump-sum number or break out pre-retirement expenses by category. To enter expenses by category, select the 'A detailed worksheet' option in the Living Expenses card:
This will now give you the ability to break out expenses into different categories. Categories are shared between the pre-retirement and retirement expense entry and the Budget screen. You can add additional categories if you wish.
You can see the total expenses at the bottom of the card, and the total will also be displayed as the 'Monthly expenses' number.
Expenses starting with retirement can be entered on the Goals screen
To enter additional expenses, click the green Add Expense button to create additional cards.
Different types indicate different tax treatment. Charitable Giving and Medical expenses will be reflected appropriately as itemized deductions. Alimony will be an adjustment to income on Schedule 1.
If you have entered a credit card or loan with a non-zero balance, you will see the option to input an Extra Debt Payment expense. That expense will allow you to enter a one-time or recurring payments to pay off debt.
You can use the Other expense card to customize expenses, including start/end dates and inflation and tax assumptions.
Tax Deductible Expense Options
Taxable: Normal outflows in a financial plan that are funded by after-tax income or liquidating assets. This expense will not reduce the client's AGI.
Miscellaneous itemized deduction: Deductible expenses that will be factored into tax calculations after the TCJA sunset in 2025 or immediately when using 2017 tax law. If using TCJA no sunset tax law, the miscellaneous itemized deductions will not affect taxation within the plan. Tax law can be adjusted in the Profile > Expenses > Taxes and Fees Card.
W2 deduction: An expense that will reduce clients AGI seen on line 1 of the sample 1040 tax form.
Self-employed health care premium: Self-employed health care expenses that are funded pre-tax from self employment income cards and lower the client's AGI.
Above the line deduction: Above-the-line deductions are expenses subtracted from income before the adjusted gross income (AGI) is calculated for tax purposes. These expenses can be factored into tax calculations along with the Standard Deduction.
Above the line deduction - non cash: This option can be used to reflect a tax deduction without impacting cash flow.
Goal Based cash flow method
If you're using the Goal Based calculation method, you are unable to enter expenses as they are not factored into the calculation.
Taxes & Fees
The Tax and Fees card illustrates personalized values for taxes and fees, including:
- Local (municipal / city) taxes (note: state taxes will be calculated automatically; you should not include state taxes here)
- Any miscellaneous itemized deductables not previously captured
- The percentage of dividends assumed to be qualified
- The percentage of capital gains assumed to be short term / long term
- Any long term capital loss carryover
- Assumed portfolio turnover, used for calculating annual gains / losses in taxable accounts
- Asset-based fees: under 'Average AUM fees' you can indicate a fee percentage that will reduce all investment returns.