12 Things You Should Know About the New Tax Law

January 22, 2018

New Year 2018 with TaxThe long-debated changes to America’s tax code are now law. President Trump closed out 2017 by signing the Tax Cuts and Jobs Act, bringing sweeping changes to how much individuals and companies will pay in tax beginning this year.

What does the new tax law mean for you? Here are some key take-aways.

  1. You’ll probably pay less in taxes

There’s been a lot of debate about who benefits the most from the new tax law, but what’s clear is that just about everyone will see at least some decrease in how much they pay. At the very least, your personal tax bracket is likely lower. The new tax brackets are: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent. (They were previously 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent, and 39.6 percent). A tax reform calculator can help you grasp how much tax you’ll pay under the new law.

  1. Corporations will pay less tax, too

The new tax law greatly simplifies and lowers taxes for companies. Corporations will now pay a flat rate of 21 percent on all profits, down from as much as 35 percent under the previous law. This brings the United States’ corporate tax rate below the global average. The new law also eliminates the alternative minimum tax (AMT) for corporations.

  1. You’ll get more money back if you have kids

One of the final provisions added to the new tax bill was an increase in the child tax credit. This is a credit you receive if you have a dependent aged 17 or under. The credit was doubled, from $1,000 to $2,000 per child. The refundable portion of the credit was also increased to $1,400.

  1. You can (probably) still deduct mortgage interest

Under the new tax law, the deduction for mortgage interest was capped at $750,000, but if you bought your house before December 15, 2017, it’s still $1 million. So for most people, mortgage interest will still be deductible. It’s important to note that this only applies to your primary residence; interest on vacation homes is not deductible. (The previous law allowed for a tax break on second homes.)

  1. You can deduct property and local taxes, up to a point

There was some debate in Congress about whether property taxes, state taxes, and local taxes would be deductible, and they ultimately will be. However, these deductions will be capped at $10,000. This could mean higher taxes for those people living in certain places, such as California and New York. Some state and local lawmakers are exploring ways to offset that burden.

  1. Many deductions are now gone

Under past tax law, you could deduct moving expenses from your taxes. You could deduct many work-related expenses that were not reimbursed from your employer. You could even deduct any costs you incurred when you did your taxes. These deductions and many others are gone. However, it is unclear whether taxpayers will feel the need to itemize deductions in the future anyway.

  1. Itemizing may no longer make sense

As we indicated above, the new tax bill does allow for some itemized deductions, but it may not matter. That’s because the standard deduction has been doubled, to $12,000 for single filers, $18,000 for heads of household, and $24,000 for married couples filing jointly. For many people — especially those who don’t own homes — it may be hard to collect the amount of deductions to make itemizing worthwhile. The Joint Committee on Taxation said that 94 percent of taxpayers may now choose to take the standard deduction, up from 70 percent under the previous law.

  1. There are no more personal exemptions

Under the previous tax law, the IRS allowed you to reduce your tax liability by claiming a personal exemption. This exemption was $4,050 during the last two years. The new tax law eliminates personal exemptions and instead significantly boosts the standard deduction ($12,000 for singles and $24,000 for married couples). For most people, this still will result in lower taxes.

  1. Investment income will be treated roughly the same

There were some adjustments to how investment income is treated, but dividends and capital gains will generally be taxed as they were under the previous law. Long-term capital gains — investments held for more than a year — will still be taxed at 15 percent for most people and 20 percent for the highest earners. Short-term capital gains will still be taxed as normal income, though that means the taxation will be less, since income tax brackets are lower under the new law.

  1. The “marriage penalty” is almost gone

Under the previous tax law, it was possible for people to be stung by higher taxes if they got married. That’s because in some instances, a couple with similar incomes filing jointly would jump to a higher tax bracket. Under the new law, the thresholds for filing jointly are exactly double those for single filers, except for married couples earning more than $300,000.

  1. The health care individual mandate may be eliminated

Under the Affordable Care Act, anyone who did not purchase health insurance was subject to a penalty of 2.5 percent of your income or $695, whichever was higher. That penalty will go away in 2019 under the new tax law.

  1. None of the changes apply to 2017

It’s important to know that when you file your tax return over the next few months, you won’t be working with the new tax law. Any money you earned in 2017 is taxed under the previous tax structure. This is important to remember when claiming deductions and trying to figure out proper tax rates for your income. You won’t have to worry about the 2018 tax law until you file your tax return in 2019.

 

Source: Wisebread

Is 2018 the Right Year to Buy a Home?

January 15, 2018

Smiling couple with mortgage agentIf buying your first home is among your New Year’s resolutions for 2018, you might be viewing the current real estate landscape with equal parts hopeful wonder and anxious dread.

As a first-time buyer, you can expect plenty of company at open houses and a lot of headwinds in your search. Experts predict 2018 will be another seller’s market, with demand far outpacing the available inventory of homes for sale.

But that doesn’t mean you have to sit on the sidelines. Here are some signs it could still be your year to buy a home.

This might be your year to buy if…

  1. You expect to stay put for the foreseeable future

For homeownership to make sense financially, most experts say you should be prepared to live in the home for five years or more. A longer time frame is more forgiving of market fluctuations and gives you time to build enough equity to cover the considerable costs of selling a home later.

That’s especially true now, when home prices have been climbing for years and we could be nearing a market top (though it’s impossible to say). Time heals most wounds, and that includes buying overpriced real estate: Even people who purchased a home at the peak of the mid-2000s housing bubble and spent the last decade underwater on their mortgages are, in many places, finally back in the black — if they were able to wait it out.

If you’ve officially “settled down” — you like your job and it’s on solid footing, and you’re ready to stay in one spot for at least five but ideally 10 or more years — then buying a home can make sense, even in an inflated housing market.

  1. Your city is still affordable (or you’re geographically flexible)

Plenty of smaller, fun cities around the country are still relatively affordable to home buyers. Cities such as Madison, Wisconsin; Columbus, Ohio; Austin, Texas; or Grand Rapids, Michigan, combine affordability with growing job markets and lots of young people.

So if your area is still affordable — or if you’re able and willing to relocate to a place that is — 2018 can absolutely be your year to buy a home.

  1. You want to buy a new home in the suburbs

Single family housing starts — the official term used for new home construction projects getting underway — hit their highest levels since 2007 last month. With a lack of inventory pushing up prices, any new housing for sale can relieve some of that pressure.

And while new development in recent years has largely focused on the luxury market, Zillow chief economist Svenja Gudell expects developers to start building more starter homes this year — but in cheaper areas farther from urban centers.

So if you’d rather own a newly built home than an old one, and you don’t mind living an hour’s commute from the city, you might have more to choose from this year.

  1. Your city is in the midst of a building boom

While a lot of that single family construction will happen outside urban centers, some big cities are also seeing a surge in new development.

The National Association of Realtors forecasts a flood of new inventory to hit the market in the second half of 2018, and perhaps sooner in places like Boston, Detroit, Kansas City, Nashville and Philadelphia. Meanwhile, Realtor.com expects more homes to change hands this year in fast-growing but relatively affordable areas like Las Vegas, Dallas, Salt Lake City, Nashville, Charlotte, and Colorado Springs.

  1. You qualify for first-time homebuyer grants

Without an existing home to sell into the market, first-time buyers are at a distinct disadvantage. That’s one reason cities and states try to make it a little easier on young home buyers by offering low-down-payment mortgages, or even down payment assistance and grants worth thousands of dollars toward the purchase price.

If your first-time buyer status and current income levels qualify you for free money or attractive financing from your state or city, it might be worth taking the plunge this year.

Another thing to consider: If you or your partner got a raise next year, would you still qualify for a first-time homebuyer program? If you’re already bumping up against the income limits, you might do better to buy a home now, while you still qualify.

Home Buying Options>> 

 

Source: ApartmentTherapy.com

How Long Do You Need to Keep All This Financial Paperwork?

January 8, 2018

Shredding DocumentsWith tax season right around the corner, you’ll likely find yourself wondering how long you should keep some of your paperwork. Well, here’s a handy primer.

When you no longer need any of the documents listed below make sure to dispose of them properly by shredding to keep personal information confidential—contact your credit union to ask when their next shred event is scheduled.

2 months to a year

Credit Card receipts/ statements and pay check stubs are information that should be kept up to a year.

Receipts and statements should be kept to review with your monthly statements, if their correct shred the receipts. Exceptions include: keeping receipts if you’re disputing a bill, covering a warranty or possibly returning an item.

With pay stubs, make sure they match your annual W-2 when received, then shred the stubs. If the information doesn’t match, notify your employer.

At least One Year

Retirement/ savings plan statements, Credit card records and bills are records that should be kept for at least a year.

Keep quarterly retirement/ savings statements until you receive your annual summary. If your annual summary is correct shred the quarterly statements, it’s best to hold on to annual statements until you retire or close an account.

Credit card statements should be gone through at the end of the year. Keep the statements related to taxes, business expenses, and housing or mortgage payments.

Bills of major purchases—cars, jewelry, furniture, computers, and so on—should be kept permanently or until sold in case of loss to show proof of their value. Other bills should be kept until they have cleared your account or the return and refund period has expired, then shred the bills.

Six years or longer

House records, tax records, IRA contributions, and other miscellaneous records should be kept for at least 6 years, if not permanently.

House Records such as purchase price information and the costs of improvements to your property, like remodeling should be kept the duration of ownership. Also, if you buy or sell property, keep the records of legal fees for six years after you sell your house.

Tax records should be kept for up to seven years, the IRS has three years to audit your returns, and you have three years to amend a return if you made a mistake. The IRS has six years to challenge if you underreported gross income by 25% or more.

IRA contribution records should be kept permanently in case you need to prove you paid taxes on money when you withdraw it.

The following miscellaneous records should be kept permanently: birth and death certificates, marriage license, divorce papers, military papers, insurance claims, accident reports and claims, proof of ownership and major debt repayment, legal correspondence.

 

Source: Financial Resource Center

How to Improve Your Finances in One Year

It's a happy moment when the home books balanceSaving for your kids’ college and retirement, reaping the rewards of the stock market—all of these things take years to accomplish. But there are financial goals you can accomplish in one year that can make a big difference, too.

First, figure out exactly what it is you want to accomplish over the course of the next 12 months. For me, it’s building up my emergency fund and saving separately for a vacation. For you, it could be increasing your credit score, or saving for retirement, or just generally becoming more knowledgeable about your finances. Whatever it is: Write it down, put it in your Google calendar, or leave it in the comments.

Once that’s done, you can actually take the steps to accomplishing it. Here are some starting points.

Increase Your Credit Score

Good credit can get you better mortgage interest/auto loan rates, which can save you thousands over a lifetime (or simply get you better interest rates on your credit cards).

Increasing your score in a year won’t be easy (especially if you have a higher score), but it’s possible. To do so, you need to understand how your score is determined:

Payment history: 35%

Amount owed: 30% amount owed

Length of history: 15%

New Credit: 10%

Types of credit used: 10%

This means the most important factor is whether or not you paid on time. And you should pay the full balance, not the minimum balance that they recommend (which can get you into debt and cost you more money). If you don’t already pay your bill on time, you could see a boost in your score if you do so for at least six months.

The second factor—amount owed—is a bit more complicated. It’s based on your credit utilization, or how much of your credit limit you use. Experts recommend using up no more than 30% of your limit—regardless of whether or not you pay it all off each month—in a given credit cycle to maximize your score. So, for example, if your limit is $1,000, you should try not to put more than $300 on your credit card(s) at any one time. If you have more than one card, you should aim for 30% (or better still, 10%) of the cumulative credit available. You can do this either by being frugal, by making small payments throughout the month to keep you under the limit, or by asking your creditor for an increased limit.

Length of history is fairly self-explanatory: It’s the average age of your accounts, and how long it’s been since you used them. This is one you can’t really change, though it is one reason why parents might consider adding their teenagers or college-aged kids as authorized users on their credit cards.

The fourth factor listed above measures how many cards you open at once (opening multiple accounts—particularly store credit cards—hurts your credit) and the fifth measures your mix of credit: mortgage, student loans, car loan, etc. It’s good to have a mix, but don’t apply for a mortgage to boost your credit.

Beyond understanding your score, you should check your credit report (you are entitled to a free report from each of the credit bureaus—Equifax, Experian and TransUnion—every 12 months) for errors, and dispute them by contacting the bureaus. You can use this letter format provided by the Federal Trade Commission. The bureaus must respond to you within 30 days.

Save More

Particularly if you work in the gig economy, accumulating cash is a necessity to give yourself more freedom. You may need a cushion if you decide to move across the country for a job opportunity, or open your own business, or you lose your job. Now is the time to actually do it.

You could set an automated weekly transfer (or one each paycheck) and forget about it. If you already have that, increase it by $5. You won’t miss the money.

Save More—Specifically for Retirement

If you have a company sponsored 401(k), increase how much you’re contributing by 1 or 2% this year (up to $18,500 in 2018, plus an additional $6,000 if you’re over 50). If you’re self-employed, open an IRA (or a Roth). If you already have one, again, increase the amount you’re contributing.

Check your fees. NerdWallet has a great tablet on how seemingly small fees add up over time. For example, NW found in a different story that paying 1% in fees could cost a theoretical 25-year-old more than $590,000 over 40 years of saving. You want to start saving young so your money compounds, but remember fees compound, too.

Protect Your Identity

If you haven’t taken steps to protect your personal information and identity from theft, what are you waiting for—an even more massive data breach?

You can’t afford to wait any longer. Here are some basic things you can do:

  • Put a fraud alert on your accounts
  • Freeze your credit (at all three bureaus) unless you’re going to buy a home, car, etc. soon
  • Consider paying for identity theft protection services, which track loan applications made in your name as well as activity on the dark web

 

Argent Investments & Retirement >>

 

Source: TwoCents.com

Salvation Army

January 3, 2018

The Salvation Army is an international movement.  In the Central Virginia area, its vision is to be a focused service provider and advocate for people seeking a path to self-sufficiency.  More Info